Friday, August 22, 2014
Berkshire Hathaway reminds us that HSR can be tricky business. They just agreed to pay close to $900k in fines to settle a lawsuit from the DOJ in connection with a transaction in which Berkshire converted some notes before cashing out of a stock. The NY Times describes the transaction:
Behind Berkshire’s violation was an old investment in USG, a producer of construction materials like drywall. In 2006, Mr. Buffett’s company owned about 19 percent of USG. Two years later, Berkshire bought $300 million worth of securities known as convertible notes, which allowed the conglomerate to swap out for common stock in the materials maker at a price of $11.40 a share.
Late last year, USG said it would redeem $325 million worth of convertible notes, and Berkshire took advantage by cashing out its holdings, taking its stake up to 26 percent. Yet Berkshire did not file for Hart-Scott before exercising its right to trade in the convertible notes.
Remember for purposes HSR,covered transactions are defined very broadly. This broad definition can trip up even the most sophisticated investors - like Berkshire Hathaway or even Barry Diller last year.