CALDERWOOD & HARKNESS LLP Attorneys at Law 600 Lexington Avenue New York, NY 10022
Howard Bellamy Partner, Antitrust & Competition Practice Group Direct Dial: (212) 458-7120 Direct Fax: (212) 458-7001
Email: hbellamy@calderwoodharkness.com
March 11, 2024
Matter No. 1001-00001
Via Email (kyardley@bracewellthornton.com) and Sundial Data Systems
Catherine "Kate" Yardley, Esq. Partner Fendowell Thornton LLP 227 West Trade Street, Suite 2800 Charlotte, NC 28202
Re: Satisfaction of Regulatory Closing Condition — Section 6.1(c) of the Equity Purchase Agreement dated January 31, 2024, by and among Ardent Capital Partners III LP, Veltrano Equity Holdings LLC, Veltrano Equity Partners Fund V LP, certain other sellers party thereto, and Pinnacle Health Systems, Inc.
Dear Kate:
We write in our capacity as antitrust counsel to Ardent Capital Partners III LP ("Ardent Capital" or the "Acquirer") in connection with the Acquirer's proposed acquisition of one hundred percent (100%) of the outstanding equity interests of Pinnacle Health Systems, Inc. ("Pinnacle" or the "Company"), pursuant to that certain Equity Purchase Agreement dated as of January 31, 2024 (the "EPA"), by and among Ardent Capital Partners III LP, Veltrano Equity Holdings LLC, Veltrano Equity Partners Fund V LP, certain other sellers party thereto (collectively with Veltrano Equity Holdings LLC and Veltrano Equity Partners Fund V LP, the "Sellers"), and Pinnacle Health Systems, Inc. We understand that Fendowell Thornton LLP serves as transaction counsel to the Sellers in connection with the foregoing transaction.
The purpose of this letter is to formally confirm, for the benefit of the Sellers and their counsel, the satisfaction of the mutual condition to closing set forth in Section 6.1(c) of the EPA, which requires the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. §§ 18a et seq. (the "HSR Act"), and the rules and regulations promulgated thereunder by the Federal Trade Commission (the "FTC"), 16 C.F.R. Parts 801–803. As set forth in detail below, the FTC has granted early termination of the initial waiting period applicable to the transaction, and we are pleased to report that no further antitrust regulatory approvals, consents, or waiting periods under the HSR Act remain outstanding.
I. HSR Act Filing Summary
As you are aware, on February 16, 2024, both the acquiring person and the acquired person filed their respective Premerger Notification and Report Forms (each, a "Notification and Report Form") pursuant to Section 7A of the Clayton Act, 15 U.S.C. § 18a, and the implementing regulations set forth at 16 C.F.R. Parts 801–803, with the FTC and the Antitrust Division of the U.S. Department of Justice (the "DOJ"). Specifically:
(a) The acquiring person filing was made by Ardent Capital Partners III LP, with Ardent Capital Management LLC identified as the Ultimate Parent Entity of the acquiring person within the meaning of 16 C.F.R. § 801.1(a)(3). The filing was prepared and submitted by this firm on behalf of the Acquirer.
(b) The acquired person filing was made by Pinnacle Health Systems, Inc. in its capacity as the issuer whose equity interests are the subject of the transaction. We understand that the acquired person's filing was prepared and submitted by Greenvale Durneval LLP, antitrust counsel to the Company, under the supervision of Jonathan Felder.
The FTC assigned Transaction Number 20241487 to the filings. Both filings were accepted as substantially compliant by the FTC Premerger Notification Office, and the initial thirty (30)-day statutory waiting period prescribed by Section 7A(b)(1)(B) of the Clayton Act, 15 U.S.C. § 18a(b)(1)(B), commenced upon the receipt by the FTC and the DOJ of both completed Notification and Report Forms on February 16, 2024.
In accordance with Section 5.4(a) of the EPA, which allocates responsibility for the payment of HSR Act filing fees to the Acquirer, the applicable filing fee in the amount of Two Hundred Eighty Thousand Dollars ($280,000) was timely paid by the Acquirer on February 16, 2024. The fee amount corresponds to the transaction value tier applicable to transactions valued at $500 million or greater but less than $1 billion, as set forth in the 2024 FTC fee schedule promulgated pursuant to the Merger Filing Fee Modernization Act of 2022, Pub. L. No. 117-328, and the FTC's implementing notice published in the Federal Register. The enterprise value of the transaction, as reflected in the EPA and the Notification and Report Forms, is Nine Hundred Fifty-Two Million Dollars ($952,000,000).
Contemporaneously with the submission of both Notification and Report Forms on February 16, 2024, each of the acquiring person and the acquired person submitted a request for early termination of the initial thirty (30)-day waiting period, as permitted under Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2), and 16 C.F.R. § 803.11.
II. Grant of Early Termination of the HSR Waiting Period
We are pleased to confirm that on March 8, 2024, the FTC granted early termination of the HSR Act waiting period applicable to the proposed transaction. The FTC issued Early Termination Notice No. 20240683 (Transaction No. 20241487), a copy of which is enclosed with this letter. The grant of early termination was received by this firm on the afternoon of March 8, 2024, and we promptly communicated the same to the Acquirer, to Whitfield & Crane LLP (transaction counsel to the Acquirer), and to Greenvale Durneval LLP (antitrust counsel to the Company).
For the avoidance of doubt, the original thirty (30)-day statutory waiting period, which commenced on February 16, 2024, upon the FTC's and DOJ's receipt of both completed filings, would have expired at 11:59 p.m. Eastern Time on March 17, 2024. The FTC's grant of early termination on March 8, 2024, mooted the remainder of the initial waiting period, and the parties are free to consummate the transaction at any time following such grant, subject to the satisfaction or waiver of all other conditions to closing as set forth in Article VI of the EPA.
We note several additional facts of relevance to your review:
(a) At no point during the waiting period did either the FTC or the DOJ issue a request for additional information or documentary material pursuant to Section 7A(e) of the Clayton Act, 15 U.S.C. § 18a(e) (commonly referred to as a "Second Request"). The absence of a Second Request is consistent with the competitive analysis of the transaction that we provided to the Acquirer and that informed the parties' assessment of antitrust risk in connection with the negotiation and execution of the EPA.
(b) Clearance of the transaction was handled by the FTC Bureau of Competition, consistent with the interagency clearance process between the FTC and the DOJ Antitrust Division pursuant to which the two agencies allocate review responsibility for reported transactions based on subject-matter expertise and prior familiarity with the relevant markets. Given the Company's operations in the healthcare services sector, the FTC's assumption of clearance responsibility was anticipated and is consistent with the FTC's longstanding oversight of competition matters in the healthcare industry.
(c) The FTC's early termination notice with respect to the transaction is expected to be published in the Federal Register on or about March 12, 2024, consistent with the FTC's standard practice of publishing early termination grants in the Federal Register on a periodic basis. Publication in the Federal Register is a ministerial act and does not affect the legal efficacy of the early termination grant, which became effective upon the FTC's issuance of Early Termination Notice No. 20240683 on March 8, 2024.
III. Confirmation of Satisfaction of Section 6.1(c) of the EPA
Section 6.1(c) of the EPA provides, in relevant part, that the obligation of each of the Acquirer, the Sellers, and the Company to consummate the transactions contemplated by the EPA is subject to the satisfaction (or waiver by each of the Acquirer and the Sellers) of the following condition:
"Any applicable waiting period (including any extension thereof) under the HSR Act relating to the Transactions shall have expired or been terminated."
Section 6.1(c) is structured as a mutual condition to closing — that is, it is a condition that must be satisfied (or waived) for the benefit of both the Acquirer, on the one hand, and the Sellers and the Company, on the other hand, before the parties are obligated to proceed to closing.
Based upon the foregoing, we hereby formally confirm that by virtue of the FTC's grant of early termination of the HSR Act waiting period on March 8, 2024, as evidenced by Early Termination Notice No. 20240683 (Transaction No. 20241487), the mutual condition to closing set forth in Section 6.1(c) of the Equity Purchase Agreement dated as of January 31, 2024 has been fully and unconditionally satisfied. No further antitrust regulatory approvals, consents, filings, notifications, or waiting periods under the HSR Act or any other federal antitrust statute remain outstanding or are required in order for the parties to consummate the transactions contemplated by the EPA.
IV. No Ongoing Antitrust Impediments
In addition to confirming the satisfaction of Section 6.1(c), we wish to note for the record that, as of the date of this letter, Calderwood & Harkness LLP is not aware of any pending or threatened antitrust challenge, investigation, proceeding, civil investigative demand, or other enforcement action by the FTC, the DOJ Antitrust Division, or any state attorney general with respect to the proposed transaction. We have not received, and are not aware that any other party to the EPA or their respective counsel has received, any communication from any governmental authority indicating an intention to challenge, investigate, or otherwise take action with respect to the competitive effects of the transaction.
We further confirm that the Acquirer's obligations under Section 5.4(c) of the EPA, which requires the Acquirer to use "reasonable best efforts" to obtain the expiration or early termination of the HSR Act waiting period and to take all actions reasonably necessary to secure antitrust regulatory clearance for the transaction, have been fulfilled in all material respects. Specifically, the Acquirer made timely and complete filings under the HSR Act, cooperated fully with the FTC's review of the transaction, and responded promptly to all inquiries from the FTC Premerger Notification Office during the waiting period. No divestiture, hold-separate arrangement, behavioral remedy, consent decree, or other condition was requested by or agreed to with any governmental authority in connection with the antitrust review of the transaction, nor was any such relief required as a condition to the FTC's grant of early termination.
V. Coordination Going Forward
In anticipation of the closing of the transaction, Calderwood & Harkness LLP will prepare and deliver an HSR clearance certificate at closing, to be executed by an authorized officer of the Acquirer, certifying the expiration or early termination of the HSR Act waiting period and the absence of any pending or threatened governmental antitrust proceeding with respect to the transaction. We expect this certificate to be included among the closing deliverables required under Article VII of the EPA and will circulate a draft of the certificate to all relevant parties in advance of the closing.
We are available to coordinate with your firm, with Whitfield & Crane LLP (transaction counsel to the Acquirer, lead partner David Ostrander), and with Greenvale Durneval LLP (antitrust counsel to the Company, lead partner Jonathan Felder) on any remaining pre-closing regulatory matters, including the preparation of any bring-down representations or certifications relating to antitrust matters that may be required under the EPA.
Calderwood & Harkness LLP will remain fully available and engaged through the anticipated closing of the transaction. We note that the EPA provides for an outside date of June 30, 2024 (the "Outside Date"), as set forth in Section 8.1(b)(i) of the EPA, though we understand from discussions with transaction counsel that the parties anticipate consummating the closing well in advance of the Outside Date. We will continue to monitor the antitrust landscape for any developments relevant to the transaction through closing and will promptly advise all parties in the event of any material change in circumstances.
VI. Contact Information
Should you or your colleagues have any questions regarding the matters addressed in this letter, or should you require any additional information or documentation relating to the HSR Act filing or the antitrust regulatory clearance of the transaction, please do not hesitate to contact me directly at (212) 458-7120 or hbellamy@calderwoodharkness.com. In addition, the following members of the Calderwood & Harkness team are available to assist:
• Monica Reyes, Lead Associate — Direct Dial: (212) 458-7245; Email: mreyes@calderwoodharkness.com
• Elliot Nguyen, Working Associate — Direct Dial: (212) 458-7318; Email: enguyen@calderwoodharkness.com
We look forward to working with you and your team through the successful closing of this transaction.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Howard Bellamy Partner, Antitrust & Competition Practice Group
cc:
Julian Desmond, Co-Founder & Managing Partner, Ardent Capital Management LLC Priya Chandrasekar, Co-Founder & Managing Partner, Ardent Capital Management LLC David Ostrander, Partner, Whitfield & Crane LLP Jonathan Felder, Partner, Greenvale Durneval LLP Monica Reyes, Associate, Calderwood & Harkness LLP Elliot Nguyen, Associate, Calderwood & Harkness LLP
Enclosure:
Copy of FTC Early Termination Grant Notice (Early Termination Notice No. 20240683, Transaction No. 20241487, dated March 8, 2024)