MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
TO: Oliver Mackenzie, Responsible Partner, M&A Rebecca Talmadge, Jonah Whitfield, Ryan Kowalski, Megan Chu — Harrowgate Deal Team
FROM: Elaine Forsythe, Specialist Partner, Antitrust & Competition, Calderwood & Harkness LLP
DATE: April 1, 2025
RE: Hart-Scott-Rodino Act Filing Obligations — Acquisition of Pennfield Holdings, Inc. (Nasdaq: PNFD) by Harrowgate Private Equity Fund IV LP (Project Summit)
MATTER NO.: 1003-00004
I. Executive Summary
Calderwood & Harkness LLP has been engaged as buyer's counsel to Harrowgate Private Equity Fund IV LP ("HPE Fund IV") in connection with the proposed take-private acquisition of Pennfield Holdings, Inc. ("Pennfield"), a Delaware corporation whose shares are listed on the Nasdaq Global Select Market under the ticker symbol PNFD. The aggregate merger consideration is approximately $980,000,000, representing $15.95 per share on a fully diluted basis across 61,450,000 shares of Pennfield common stock.
The transaction is structured as a reverse triangular merger pursuant to Section 251 of the Delaware General Corporation Law ("DGCL"), in which Pinnacle Merger Sub, Inc. ("Merger Sub"), a newly formed, wholly owned subsidiary of HPE Fund IV, will merge with and into Pennfield. Following the consummation of the merger, Pennfield will survive as an indirect wholly owned subsidiary of HPE Fund IV and will be delisted from the Nasdaq.
This memorandum analyzes the parties' filing obligations under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), 15 U.S.C. § 18a, and the rules promulgated thereunder by the Federal Trade Commission (the "FTC"), codified at 16 C.F.R. Parts 801–803. In particular, this memorandum addresses: (i) whether the proposed transaction triggers the HSR Act's pre-merger notification requirements; (ii) the identity of the filing parties and the determination of their respective ultimate parent entities; (iii) the applicable filing fee; (iv) the timing and mechanics of the filing process; and (v) certain ancillary considerations, including the co-investor's potential filing obligation, gun-jumping risks, and non-U.S. merger control requirements.
Conclusion: Both Harrowgate (as the acquiring person) and Pennfield (as the acquired person) are required to file pre-merger notification forms under the HSR Act. We recommend that the parties submit their respective filings on or about April 8, 2025, which is the business day immediately following the anticipated execution and public announcement of the definitive Agreement and Plan of Merger (the "Merger Agreement") on April 7, 2025. The applicable filing fee, payable solely by the acquiring person, is $280,000 under the 2025 fee schedule. Upon filing by both parties, a 30-calendar-day initial waiting period will commence, with an expected expiration date of approximately May 8, 2025, absent early termination or the issuance of a second request for additional information.
Based on the separate antitrust risk assessment prepared by this office (see memorandum from E. Forsythe dated April 2, 2025), the likelihood that the reviewing agency will issue a second request in connection with this transaction is assessed as low. The specialty retail market in which Pennfield operates is highly fragmented, and we have identified no material horizontal overlap between Pennfield and any of Harrowgate's existing portfolio companies.
II. Background on the Transaction
A. Parties
1. Acquiring Person — Harrowgate Private Equity Fund IV LP
The acquiring person is Harrowgate Private Equity Fund IV LP, a Delaware limited partnership formed for the purpose of making private equity investments. Key details are as follows:
• Entity Name: Harrowgate Private Equity Fund IV LP
• Jurisdiction of Formation: State of Delaware
• Entity Type: Limited Partnership
• General Partner: Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company
• Investment Manager: Harrowgate Capital Partners LLC ("HCP")
• Principal Office: 1200 Market Street, Suite 3100, Wilmington, Delaware 19801
• Employer Identification Number (EIN): 87-2263148
• Fund Size: Approximately $4.8 billion in committed capital (vintage 2023)
• Firm-Wide Assets Under Management: Approximately $14.2 billion, managed by HCP across four flagship funds and affiliated co-investment vehicles
HPE Fund IV is the fourth flagship buyout fund managed by HCP. The fund targets middle-market and upper-middle-market control transactions in the consumer products, retail, healthcare services, and business services sectors, with typical equity commitments ranging from $200 million to $750 million per transaction.
2. Merger Sub — Pinnacle Merger Sub, Inc.
Pinnacle Merger Sub, Inc. is a Delaware corporation newly formed as a wholly owned subsidiary of HPE Fund IV for the sole purpose of effecting the merger transaction contemplated herein. Merger Sub has no assets, liabilities, or operations other than those incidental to its formation and the execution of the Merger Agreement. Key details are as follows:
• Entity Name: Pinnacle Merger Sub, Inc.
• Jurisdiction of Incorporation: State of Delaware
• Entity Type: Corporation
• EIN: 93-4081562
• Sole Incorporator: Jonah Whitfield
3. Target / Acquired Person — Pennfield Holdings, Inc.
The acquired person is Pennfield Holdings, Inc., a Delaware corporation whose common stock is listed on the Nasdaq Global Select Market. Key details are as follows:
• Entity Name: Pennfield Holdings, Inc.
• Jurisdiction of Incorporation: State of Delaware
• Entity Type: Corporation
• Stock Exchange: Nasdaq Global Select Market
• Ticker Symbol: PNFD
• CUSIP: 708234109
• Principal Office: 4500 Commerce Boulevard, Suite 800, Charlotte, North Carolina 28202
• EIN: 82-4917305
• Industry: Specialty retailer — outdoor lifestyle, sporting goods, and adventure apparel
• Store Count: 209 total store locations (187 company-owned stores and 22 outlet locations) across 34 states
• Employees: Approximately 8,400 full-time and part-time employees
• FY 2024 Revenue: $1.62 billion
• FY 2024 EBITDA: $142 million
Pennfield is a well-established specialty retailer serving outdoor enthusiasts and adventure-lifestyle consumers. The company's product assortment includes hiking, camping, and climbing gear; technical outerwear and sportswear; cycling and water-sports equipment; and a growing private-label apparel line marketed under the "Summit Trail" and "Iron Creek" brands. In addition to its brick-and-mortar footprint, Pennfield operates a direct-to-consumer e-commerce platform that accounted for approximately 22% of FY 2024 revenue.
4. Co-Investor — Ashford Growth Partners LP
Ashford Growth Partners LP ("Ashford") is committing $60,000,000 of equity capital to the transaction as a co-investor alongside HPE Fund IV. Ashford is a growth-oriented private equity fund with approximately $2.3 billion in assets under management, headquartered in Greenwich, Connecticut. The principal contact for Ashford is David Nakamura, Partner. The analysis of whether Ashford has an independent HSR filing obligation is addressed in Section IV.C below.
5. Debt Financing Sources
The acquisition is being financed in part by committed debt facilities totaling $640 million, arranged by the following financial institutions:
• Falconer National Bank, N.A. — Lead Arranger and Administrative Agent
• Dunmore Capital Markets LLC — Co-Arranger and Joint Bookrunner
The committed debt consists of: (i) a $490 million Senior Secured Term Loan B (the "Term Loan"); and (ii) a $150 million Senior Secured Revolving Credit Facility (the "Revolver"). The debt commitment letter was executed on March 25, 2025 and remains subject to customary conditions. The debt financing sources themselves do not trigger independent HSR filing obligations, as they are lending institutions that will not acquire voting securities or assets of Pennfield.
B. Transaction Structure
The proposed transaction is structured as a reverse triangular merger under DGCL § 251. Specifically:
1. Merger Sub, a newly formed, wholly owned subsidiary of HPE Fund IV, will merge with and into Pennfield (the "Merger").
2. Following the effective time of the Merger, Pennfield will survive as the surviving corporation and will become an indirect wholly owned subsidiary of HPE Fund IV. Merger Sub will cease to exist as a separate entity.
3. At the effective time of the Merger, each outstanding share of Pennfield common stock (other than shares held by Pennfield as treasury stock, shares owned by Merger Sub, HPE Fund IV or any of their respective affiliates, and shares held by stockholders who properly exercise and perfect their appraisal rights under DGCL § 262) will be converted into the right to receive $15.95 per share in cash, without interest.
4. The aggregate merger consideration is $980,000,000, calculated as follows: $15.95 per share multiplied by 61,450,000 fully diluted shares of Pennfield common stock (comprising 58,200,000 basic shares outstanding plus 3,250,000 shares underlying outstanding stock options and restricted stock units).
5. Certain members of Pennfield's senior management team will roll over a portion of their existing equity into the post-closing entity. Specifically:
• Catherine Langford, Chief Executive Officer — $12,500,000
• Derek Simmons, Chief Financial Officer — $5,000,000
• Maxwell Dunn, Chief Operating Officer — $4,000,000
• Total Management Rollover: $21,500,000 (approximately 2.2% of total equity value)
6. The definitive Agreement and Plan of Merger is expected to be executed on or about April 7, 2025, with a public announcement to follow on the same date.
C. Timeline Context
The anticipated transaction timeline is as follows:
The filing timeline described herein is designed to ensure that HSR clearance is obtained well in advance of the anticipated stockholder vote and closing, while also providing a substantial buffer under the Outside Date in the unlikely event that the reviewing agency issues a second request.
III. HSR Act Applicability Analysis
A. Statutory Framework
Section 7A of the Clayton Act, as added by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a, requires that persons contemplating certain mergers, acquisitions, or transfers of voting securities or assets file pre-merger notification with both the Federal Trade Commission and the Antitrust Division of the United States Department of Justice (the "DOJ") and observe a statutory waiting period before consummating the reported transaction. The purpose of the HSR Act is to provide the federal antitrust enforcement agencies with advance notice of potentially anticompetitive transactions so that the agencies may investigate and, if appropriate, seek injunctive relief to prevent consummation of a transaction that would substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
The HSR Act and the rules promulgated thereunder by the FTC at 16 C.F.R. Parts 801–803 establish three jurisdictional tests, all of which must be satisfied for the pre-merger notification obligation to apply: (1) the commerce test, (2) the size-of-transaction test, and (3) the size-of-person test (which is applicable only for transactions valued between $119.5 million and $478.0 million under the 2025 adjusted thresholds). When the aggregate value of the transaction exceeds the higher dollar threshold ($478.0 million for 2025), the size-of-person test is inapplicable, and only the commerce test and size-of-transaction test must be met. Each of these jurisdictional tests is addressed below as applied to the proposed acquisition.
B. Commerce Test
The HSR Act applies to acquisitions that are "in or affecting commerce" within the meaning of Section 1 of the Clayton Act, 15 U.S.C. § 12. This jurisdictional requirement is construed broadly and is readily satisfied where, as here, both the acquiring person and the acquired person are engaged in substantial commercial activities that affect interstate commerce in the United States.
HPE Fund IV, through its investment manager HCP, manages a portfolio of investments in companies operating across multiple states and industries. Pennfield, the target, is a national specialty retailer operating 209 retail locations across 34 states, employing approximately 8,400 individuals, and generating $1.62 billion in annual revenue from the sale of sporting goods, outdoor lifestyle products, and adventure apparel to consumers throughout the United States. Pennfield's operations plainly involve interstate commerce, including the procurement of merchandise from domestic and international suppliers, the sale of goods through physical retail locations in dozens of states, and the operation of a direct-to-consumer e-commerce platform that ships products nationwide.
Conclusion: The commerce test is satisfied.
C. Size-of-Transaction Test (2025 Thresholds)
Under 15 U.S.C. § 18a(a)(2) and 16 C.F.R. § 801.1(h), the size-of-transaction test is met when, as a result of the acquisition, the acquiring person will hold an aggregate total amount of voting securities and assets of the acquired person valued in excess of the applicable threshold. The FTC adjusts the HSR Act thresholds annually based on changes in the gross national product, pursuant to Section 7A(a)(2)(A) of the Clayton Act. For calendar year 2025, the minimum size-of-transaction threshold is $119.5 million.
In the proposed transaction, HPE Fund IV (through Merger Sub) will acquire 100% of the outstanding voting securities of Pennfield Holdings, Inc. for aggregate merger consideration of $980,000,000. This amount significantly exceeds the $119.5 million minimum threshold.
Moreover, the transaction value of $980,000,000 also exceeds the $478.0 million higher threshold established under the 2025 adjusted filing thresholds. As discussed in Section III.D below, when the size-of-transaction threshold exceeds $478.0 million, the size-of-person test does not apply, and the filing obligation arises irrespective of the size of the acquiring or acquired person.
Conclusion: The size-of-transaction test is satisfied. The aggregate merger consideration of $980,000,000 exceeds both the $119.5 million minimum threshold and the $478.0 million higher threshold under the 2025 HSR Act jurisdictional thresholds.
D. Size-of-Person Test
The size-of-person test, set forth in 15 U.S.C. § 18a(a)(2)(B) and the implementing regulations, imposes an additional jurisdictional requirement for transactions valued between the minimum threshold and the higher dollar threshold. Specifically, for transactions in 2025 valued between $119.5 million and $478.0 million, the filing obligation arises only if one person involved in the transaction has total assets or annual net sales of at least $23.9 million and the other person has total assets or annual net sales of at least $239.0 million (or, alternatively, the transaction is valued at more than $239.0 million and one person has total assets or annual net sales of at least $23.9 million).
However, for transactions in which the aggregate value of the voting securities and assets to be held as a result of the acquisition exceeds $478.0 million (the 2025 higher threshold), the size-of-person test is inapplicable. Because the proposed transaction is valued at $980,000,000, which substantially exceeds $478.0 million, no separate size-of-person analysis is required, and the filing obligation exists without regard to the sizes of the acquiring and acquired persons.
Notwithstanding the inapplicability of the size-of-person test, we note for completeness that both parties would readily satisfy any applicable size-of-person requirement in any event. HPE Fund IV's total committed capital is $4.8 billion, and HCP's firm-wide assets under management are approximately $14.2 billion. Pennfield's FY 2024 annual net sales were $1.62 billion, and its total assets as reported in its most recent Annual Report on Form 10-K were approximately $1.1 billion. Both of these figures far exceed any applicable size-of-person threshold.
Conclusion: The size-of-person test does not apply to this transaction because the transaction value exceeds $478.0 million. Even if it did apply, both parties would satisfy the applicable thresholds.
E. Exemption Analysis
The HSR Act and the FTC's rules provide a number of exemptions from the pre-merger notification requirements, codified principally at 16 C.F.R. § 802. We have reviewed each of the potentially applicable exemptions and conclude that none applies to the proposed acquisition of Pennfield by HPE Fund IV. Our analysis is as follows:
(i) Exemptions for Acquisitions of Less Than a Specified Percentage. Certain exemptions under 16 C.F.R. § 802 apply where the acquiring person will hold less than a specified percentage of the acquired person's voting securities following the acquisition. These exemptions are inapplicable here because HPE Fund IV will acquire 100% of the outstanding voting securities of Pennfield as a result of the Merger, and Pennfield will become a wholly owned subsidiary of HPE Fund IV.
(ii) Foreign-Commerce Exemptions. The exemptions for acquisitions of voting securities of foreign issuers (16 C.F.R. § 802.50) and for acquisitions of assets located outside the United States (16 C.F.R. § 802.51) do not apply. Pennfield is a Delaware corporation, its shares are listed on the Nasdaq, and all of its operations are located within the United States. Pennfield does not generate revenue outside the United States and has no foreign subsidiaries.
(iii) Intraperson Exemption. The intraperson exemption under 16 C.F.R. § 802.30 exempts certain transactions between entities that are already within the same "person" (i.e., under common control). This exemption is inapplicable because HPE Fund IV and Pennfield are entirely unaffiliated, and HPE Fund IV holds no existing interest in Pennfield.
(iv) Ordinary Course / Investment Only Exemptions. The exemption for acquisitions of voting securities made solely for the purpose of investment under Section 7A(c)(9) of the Clayton Act does not apply because HPE Fund IV intends to acquire control of Pennfield and to participate actively in its management through board representation and operational involvement. This is not a passive investment.
(v) Other Exemptions. We have reviewed the remaining exemptions under 16 C.F.R. § 802 (including exemptions for certain institutional investors, acquisitions by estate executors, and acquisitions in the ordinary course of business) and have determined that none is applicable to the facts of this transaction.
Conclusion: No exemption from the HSR Act pre-merger notification requirements applies to the proposed transaction. A filing by both the acquiring person and the acquired person is required.
IV. Filing Obligations and Parties
A. Acquiring Person — Ultimate Parent Entity Determination
Under the HSR Act and its implementing rules, the "person" required to file a pre-merger notification is identified by reference to its "ultimate parent entity" or "UPE." The UPE is defined as the entity that is not controlled by any other entity. 16 C.F.R. § 801.1(a)(3). For purposes of the HSR rules, "control" of a corporation means holding 50% or more of its outstanding voting securities; "control" of a limited liability company, limited partnership, or other unincorporated entity means having the right to 50% or more of the profits of the entity, or having the right in the event of dissolution to 50% or more of the assets of the entity. 16 C.F.R. § 801.1(b).
The acquiring entity in this transaction is Pinnacle Merger Sub, Inc., a wholly owned subsidiary of HPE Fund IV. HPE Fund IV is a Delaware limited partnership. Its general partner is Harrowgate Capital Partners IV GP LLC ("HPE IV GP"), a Delaware limited liability company. The investment manager of HPE Fund IV is Harrowgate Capital Partners LLC ("HCP"), also a Delaware limited liability company.
The determination of the UPE for the acquiring person requires a tracing exercise through the control chain:
1. Pinnacle Merger Sub, Inc. — 100% owned by HPE Fund IV. Merger Sub is controlled by HPE Fund IV.
2. Harrowgate Private Equity Fund IV LP — HPE Fund IV is a limited partnership. Under the FTC's Premerger Notification Office informal interpretations and standard practice, the general partner of a limited partnership is typically treated as the entity that controls the partnership for HSR purposes, because the general partner manages the affairs of the partnership and holds the right to manage its assets. Accordingly, HPE IV GP controls HPE Fund IV.
3. Harrowgate Capital Partners IV GP LLC — HPE IV GP is a Delaware LLC. The controlling member or members of the GP LLC must be identified. Based on the organizational documents reviewed by this office, HCP (Harrowgate Capital Partners LLC) is the sole managing member of HPE IV GP and holds 100% of the membership interests in HPE IV GP. Accordingly, HCP controls HPE IV GP.
4. Harrowgate Capital Partners LLC — HCP is itself a Delaware LLC. The final step in the UPE determination requires identifying whether any natural person or entity controls HCP. If Nathaniel Cross (Managing Partner and Co-Founder of HCP) holds 50% or more of the membership interests (or 50% or more of the rights to profits or dissolution assets) of HCP, then Mr. Cross would be the UPE as a natural person. If no single individual holds 50% or more, then HCP itself would be the UPE.
The final UPE determination will be confirmed with the deal team before the filing is submitted. We understand from our preliminary review that HCP's membership structure involves multiple partners, and it is possible that no single natural person holds 50% or more of HCP's membership interests, in which case HCP would be the UPE. We will need to review the current HCP LLC Agreement and any amendments thereto to make a definitive determination. This review should be completed no later than April 3, 2025.
Regardless of whether the UPE is determined to be HCP or Mr. Cross, the acquiring person's HSR notification form must include information about the entire control group — that is, all entities controlled, directly or indirectly, by the UPE. This includes HPE Fund IV, HPE IV GP, Merger Sub, and all other entities controlled by the UPE (including, potentially, Harrowgate Private Equity Funds I, II, and III and their respective general partner entities, and any co-investment vehicles controlled by HCP). Revenue and NAICS code data for all entities within the acquiring person's control group must be reported on the notification form.
B. Acquired Person — Pennfield Holdings, Inc.
Pennfield Holdings, Inc. is the acquired person in the proposed transaction. As a publicly traded corporation whose shares are listed on the Nasdaq, the determination of Pennfield's UPE requires an assessment of whether any single stockholder controls the company (i.e., holds 50% or more of Pennfield's outstanding voting securities).
Based on publicly available information (including Pennfield's most recent proxy statement filed with the SEC on March 14, 2025), no single stockholder holds 50% or more of Pennfield's outstanding common stock. The largest institutional holder is Stonebridge Asset Management LP, which owns approximately 9.2% of outstanding shares (5,354,400 shares). The second-largest holder is Everhart Capital Advisors LLC, which owns approximately 6.8% of outstanding shares (3,957,600 shares). No other stockholder holds 5% or more. Accordingly, Pennfield itself is its own UPE.
Under the HSR Act, the acquired person is also required to file a pre-merger notification form. Pennfield's obligation to file is independent of, and in addition to, the filing obligation of the acquiring person. Pennfield's filing will need to include information about Pennfield and its subsidiaries (if any), revenue data by NAICS code, and other required disclosures.
We will coordinate with Pennfield's outside counsel, Calloway, Briggs & Harmon LLP (the firm advising the Pennfield Board's Special Committee), and with Patricia Okafor, Pennfield's General Counsel and Corporate Secretary, to ensure that the acquired person's filing is prepared and submitted contemporaneously with the acquiring person's filing. The principal contact at Calloway, Briggs & Harmon is Janet Alcorn, Partner. We recommend initiating this coordination no later than April 3, 2025.
C. Co-Investor Filing Obligation — Ashford Growth Partners LP
Ashford Growth Partners LP is committing $60,000,000 of equity capital to the transaction. The total equity capitalization of the post-closing entity is expected to be approximately $340,000,000 ($980,000,000 aggregate merger consideration less $640,000,000 in debt financing). Ashford's $60 million commitment therefore represents approximately 17.6% of total equity.
The question of whether Ashford has an independent HSR filing obligation depends on the nature of the interests that Ashford will acquire in the post-closing entity:
(i) If the post-closing holding company structure involves a Delaware limited partnership or limited liability company, and Ashford receives limited partnership interests or non-voting LLC membership interests, then Ashford would not be acquiring "voting securities" within the meaning of the HSR Act and the FTC's rules. Under 16 C.F.R. § 801.1(f), "voting securities" means securities that entitle the holder to vote for the election of directors of a corporation (or, in the case of an unincorporated entity, interests that confer comparable rights). Limited partnership interests that do not confer such rights are generally not considered voting securities for HSR purposes.
(ii) If, however, Ashford's interest in the post-closing entity is structured in a manner that confers voting rights or control rights equivalent to those associated with voting securities — for example, if Ashford receives a membership interest in a managing LLC with the right to elect or appoint managers — then Ashford may be deemed to be acquiring voting securities or control, and a separate HSR filing may be required.
(iii) Additionally, if Ashford is deemed to be acquiring an "interest" in a non-corporate entity (i.e., a limited partnership or LLC interest) that confers the right to 50% or more of the profits or dissolution assets, then a filing would be required. Given Ashford's 17.6% equity stake, this scenario appears unlikely, but the specific terms of the limited partnership or operating agreement governing the post-closing entity must be reviewed.
Recommendation: We recommend coordinating with David Nakamura (Partner, Ashford Growth Partners LP) and the Harrowgate structuring team (Jonah Whitfield and Ryan Kowalski) to confirm the legal form and governance structure of the post-closing entity and the specific rights to be conferred by Ashford's equity interest. This analysis should be completed by April 4, 2025, so that any required Ashford filing can be prepared and submitted concurrently with the Harrowgate and Pennfield filings.
D. Management Rollover Participants
As noted in Section II.B above, three members of Pennfield's senior management team will roll over a portion of their existing equity into the post-closing entity, with an aggregate rollover value of $21,500,000:
• Catherine Langford (CEO): $12,500,000
• Derek Simmons (CFO): $5,000,000
• Maxwell Dunn (COO): $4,000,000
Each of these rollover amounts is well below the $119.5 million minimum size-of-transaction threshold under the 2025 HSR Act jurisdictional thresholds. Accordingly, even if the rollover interests were treated as an acquisition of voting securities by each management participant, the dollar value of each such acquisition would fall below the reporting threshold, and no independent HSR filing obligation would be triggered for any of the management rollover participants individually.
Notwithstanding the foregoing, the nature of the rollover interests (e.g., limited partnership interests, LLC membership interests, or restricted stock in the surviving entity) should be confirmed by the deal team for purposes of completeness in the acquiring person's HSR filing, which must describe the overall structure of the transaction.
V. Filing Fee Calculation
The HSR Act requires the payment of a filing fee at the time the pre-merger notification form is submitted. The filing fee is determined by a tiered fee schedule based on the "aggregate total amount of voting securities and assets" to be held by the acquiring person as a result of the reported transaction. The fee schedule is adjusted annually pursuant to the Merger Filing Fee Modernization Act of 2022 and subsequent FTC guidance.
Under the 2025 fee schedule, the applicable tiers are as follows:
The aggregate merger consideration for the acquisition of Pennfield is $980,000,000. This amount falls within the tier for transactions valued at $536.5 million or more but less than $1.073 billion.
Applicable Filing Fee: $280,000.
Under the HSR Act, only the acquiring person (HPE Fund IV) is required to pay the filing fee. The acquired person (Pennfield) is not required to pay a separate fee. The $280,000 filing fee is payable to the Federal Trade Commission at the time the notification form is submitted, either by wire transfer or by check, in accordance with the FTC's payment instructions.
The deal team should ensure that payment arrangements are made in advance of the targeted filing date of April 8, 2025. We will provide wire instructions and payment details to Jonah Whitfield and Ryan Kowalski upon confirmation of the filing date.
VI. Notification Form — Key Items
A. Item 4(c) and 4(d) Documents
The HSR notification form requires the production of certain categories of documents as part of the filing. Prompt identification, collection, and review of these documents is critical to meeting the targeted filing date.
Item 4(c) Documents. Item 4(c) of the HSR Notification and Report Form requires the submission of all studies, surveys, analyses, and reports that were prepared by or for any officer(s) or director(s) of the acquiring person (or its UPE) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets. This requirement is broadly interpreted by the FTC, and documents need not use the specific terms "market share" or "competition" to be responsive; any document that substantively discusses the competitive landscape, the target's position relative to its competitors, or the acquiring person's strategic rationale for the transaction as it relates to competitive dynamics may be responsive.
In the context of this transaction, the following categories of documents are likely to be responsive to Item 4(c) and should be collected and reviewed:
• Investment committee memoranda and presentations prepared by HCP investment professionals (including Rebecca Talmadge, Jonah Whitfield, and Nathaniel Cross) analyzing the competitive position of Pennfield within the specialty retail outdoor/sporting goods market
• Confidential information memoranda, banker books, and financial advisor presentations prepared by Ridgepoint Partners LLC (HPE Fund IV's financial advisor) that discuss market dynamics, competitive positioning, or potential for growth
• Board materials and resolutions of HPE IV GP and/or the Advisory Committee of HPE Fund IV relating to the approval of the Pennfield acquisition, to the extent they contain competitive analysis
• Due diligence reports and third-party market studies commissioned by HCP or Ridgepoint that analyze the competitive landscape of the specialty retail sector
• Internal HCP memoranda, emails, or other written communications between deal team members discussing competitive dynamics, market share, or the strategic rationale for the acquisition as it relates to competitive considerations
Item 4(d) Documents. Item 4(d) requires the production of all studies, surveys, analyses, and reports that were prepared by or for any officer(s) or director(s) of the acquiring person (or its UPE) and that analyze or evaluate the products or services of the acquired person with respect to market shares, competition, competitors, or competitive conditions. Item 4(d) differs from Item 4(c) in that it applies to documents analyzing the target's competitive environment generally (not limited to documents prepared for the purpose of evaluating the acquisition itself).
Recommendation: We strongly recommend that document collection commence immediately (April 1, 2025). The following individuals should be contacted and instructed to identify and preserve all potentially responsive documents:
• Jonah Whitfield (HCP — lead deal professional)
• Rebecca Talmadge (HCP — senior deal professional)
• Nathaniel Cross (HCP — Managing Partner and potential officer/director of UPE)
• Marcus Hale (Ridgepoint Partners LLC — lead banker)
• Priya Chandrasekaran (Ridgepoint Partners LLC — associate/analyst)
Ryan Kowalski and Megan Chu of Calderwood & Harkness will coordinate the document collection process and will review all documents for responsiveness and privilege. Any questions regarding the scope of responsive documents should be directed to Elaine Forsythe.
B. Revenue and NAICS Code Data
The HSR notification form requires the reporting of revenue data, broken down by North American Industry Classification System ("NAICS") codes, for both the acquiring person (with respect to the UPE and all entities within its control group) and the acquired person. This data is used by the FTC and DOJ to identify potential competitive overlaps between the parties.
Pennfield's Primary NAICS Codes:
For the acquiring person's filing, we will need revenue data (from the most recent fiscal year) for every entity within the Harrowgate UPE's control group. This includes each portfolio company held by HPE Fund IV (and by HPE Funds I, II, and III, if HCP is determined to be the UPE). Revenue must be reported at the six-digit NAICS code level.
Overlap Analysis: Based on the antitrust risk assessment prepared separately by this office, we have conducted a preliminary review of the portfolio companies held by HPE Fund IV and the other Harrowgate-managed funds. We have identified no material horizontal overlap between Pennfield and any existing Harrowgate portfolio company in the sporting goods, outdoor retail, or adjacent product markets. However, the NAICS code data collected for the filing will serve as a cross-check against this preliminary analysis. If any overlaps are identified at the six-digit NAICS code level, further analysis will be warranted.
C. Minority Shareholders
The HSR notification form requires identification of any shareholders known to hold 5% or more of the acquired person's outstanding voting securities. Based on Pennfield's most recent Schedule 14A proxy statement (filed March 14, 2025) and public SEC filings, the following shareholders hold 5% or more of Pennfield's outstanding common stock:
Note: Galloway Pension Trust holds approximately 2,386,200 shares, representing approximately 4.1% of outstanding shares. While this holding falls below the 5% reporting threshold, it may be included in the filing for completeness and to provide the reviewing agency with a fuller picture of the target's ownership structure. This is a discretionary decision that we will discuss with the deal team.
Pennfield's fully diluted share count is 61,450,000, consisting of 58,200,000 basic shares of common stock outstanding and 3,250,000 shares issuable upon the exercise or vesting of outstanding stock options and restricted stock units.
VII. Waiting Period
A. Standard Initial Waiting Period
Upon the filing of HSR notification forms by both the acquiring person and the acquired person, a statutory waiting period commences during which the transaction may not be consummated. For cash tender offers and certain other acquisitions described in 15 U.S.C. § 18a(b)(1)(A), the initial waiting period is 15 calendar days. For all other transactions, including mergers, the initial waiting period is 30 calendar days. 15 U.S.C. § 18a(b)(1)(B).
The proposed acquisition of Pennfield is structured as a reverse triangular merger and is not a cash tender offer. Accordingly, the standard 30-calendar-day initial waiting period applies. If both parties file their respective HSR notification forms on April 8, 2025, the initial waiting period will expire at 11:59 p.m. Eastern Time on May 8, 2025 (30 calendar days from filing), absent early termination or the issuance of a second request for additional information.
The transaction may not be consummated prior to the expiration or earlier termination of the waiting period. If the waiting period expires without the issuance of a second request, the parties are free to close the transaction at any time thereafter, subject to the satisfaction of all other conditions to closing set forth in the Merger Agreement.
B. Early Termination
The HSR Act permits the filing parties to request early termination of the waiting period. If the FTC and DOJ grant early termination, the waiting period is terminated before the expiration of the full 30-day period, allowing the parties to consummate the transaction sooner.
We note, however, that the FTC has periodically suspended the granting of early termination requests in the past. In February 2021, the FTC temporarily suspended the early termination program, and the suspension remained in effect for an extended period. Although the FTC subsequently reinstated the program, the availability of early termination is subject to change at any time and is within the agencies' sole discretion.
Recommendation: We recommend that the acquiring person request early termination in its HSR notification form. However, the deal team should not rely on the granting of early termination for scheduling purposes. The transaction timeline should be planned based on the assumption that the full 30-day waiting period will run its course. We will confirm the current status of the FTC's early termination program at the time of filing.
C. Second Request
If the reviewing agency (whether the FTC or the DOJ) determines that it requires additional information to assess the competitive effects of the proposed transaction, it may issue a "second request" — a formal request for additional information and documentary material under 15 U.S.C. § 18a(e). The issuance of a second request has the following consequences:
1. The initial 30-day waiting period is extended indefinitely.
2. A new 30-day waiting period begins only after both parties have certified substantial compliance with the second request.
3. Compliance with a second request is a substantial undertaking, typically involving the production of large volumes of documents and data, the preparation of narrative responses, and the presentation of witnesses for investigational hearings. Depending on the scope of the second request and the volume of responsive materials, the compliance period typically ranges from 3 to 6 months from the date of issuance.
4. The practical effect of a second request is to delay transaction closing by a minimum of approximately 4 to 7 months from the original filing date.
Assessment of Likelihood of a Second Request: Based on the antitrust risk assessment prepared separately by this office (see memorandum from E. Forsythe dated April 2, 2025), the risk that the reviewing agency will issue a second request in connection with the proposed acquisition of Pennfield is assessed as low. This assessment is based on the following factors:
1. Fragmented Market. Pennfield operates in the specialty retail market for outdoor lifestyle, sporting goods, and adventure apparel. This market is highly fragmented, with numerous national, regional, and local competitors — including Quillon Enterprises, Penrose & Co. / Hollowell Corporation, Aldermere Industries, Ridgeline Corporation, Brightwater Group retail locations, Drayton Corporation retail locations, and hundreds of independent specialty retailers. No single retailer holds a dominant share.
2. No Horizontal Overlap. Harrowgate's existing portfolio of companies across HPE Funds I through IV and affiliated co-investment vehicles does not include any entity operating in the sporting goods, outdoor retail, or closely adjacent product markets. The absence of horizontal overlap between the acquiring and acquired persons significantly reduces the risk of competitive concerns.
3. Valuation Metrics Within Normal Range. The implied enterprise value-to-EBITDA multiple of approximately 6.9x ($980 million ÷ $142 million FY 2024 EBITDA) is within the normal range for mid-market specialty retail acquisitions and does not suggest a transaction premised on the exercise or acquisition of market power.
4. No Vertical Concerns. The transaction does not present vertical integration or input-foreclosure concerns. Pennfield is a downstream retailer and does not manufacture or distribute the products it sells (with the exception of its private-label lines, which are contract-manufactured by third parties). Harrowgate's existing portfolio does not include any manufacturer or distributor of sporting goods, outdoor apparel, or related products.
5. Domestic Transaction. No non-U.S. merger control filings are required, as Pennfield has no foreign operations. The absence of international jurisdictional overlaps further simplifies the regulatory profile of the transaction.
While a second request cannot be entirely ruled out — particularly given the current antitrust enforcement environment and the FTC's focus on private equity roll-up strategies — the specific facts of this transaction make such an outcome unlikely.
D. Merger Agreement Coordination
The definitive Agreement and Plan of Merger between HPE Fund IV, Merger Sub, and Pennfield is expected to include, as a condition to each party's obligation to consummate the Merger, the expiration or earlier termination of the applicable HSR Act waiting period. This is a standard condition in transactions subject to HSR review.
The following timing considerations are relevant to the coordination between the HSR filing and other elements of the transaction timeline:
• Debt Syndication Marketing Period. The committed debt financing from Falconer National Bank, N.A. and Dunmore Capital Markets LLC is subject to a 15-business-day marketing period that begins after the execution and public announcement of the Merger Agreement. Assuming the Merger Agreement is signed on April 7, 2025, the marketing period would conclude on approximately April 28, 2025. The HSR waiting period (expiring approximately May 8, 2025) extends beyond the marketing period, and therefore the HSR timeline is not expected to create a conflict with the debt syndication process.
• Stockholder Vote. The Merger requires the approval of the holders of a majority of the outstanding shares of Pennfield common stock at a special meeting of stockholders. The proxy statement/prospectus is expected to be filed with the SEC in May 2025, and the stockholder meeting is estimated to be held on June 19, 2025. Assuming the HSR waiting period expires on or about May 8, 2025, the antitrust condition will be satisfied well in advance of the stockholder vote.
• Estimated Closing. The estimated closing date is June 30, 2025, which is approximately 53 days after the expected expiration of the HSR waiting period. This provides a comfortable margin.
• Outside Date. The Outside Date under the Merger Agreement is September 30, 2025, which is six months from the anticipated signing date. This Outside Date provides substantial buffer in the unlikely event that a second request is issued. Even assuming a second request on approximately May 8, 2025, a 3- to 4-month compliance period would result in a new waiting period commencing in August or September 2025, which would be tight but feasible under the Outside Date. In the event that a second request is deemed likely, the parties should assess whether to negotiate an extension of the Outside Date.
VIII. Recommended Filing Timeline
The following table sets forth the recommended timeline for the HSR filing process and related action items:
All dates are subject to adjustment based on the actual date of Merger Agreement execution and any developments in the regulatory review process.
IX. Gun-Jumping and Pre-Closing Conduct Considerations
The HSR Act prohibits the consummation of a reportable acquisition prior to the expiration or earlier termination of the applicable waiting period. 15 U.S.C. § 18a(a). A violation of this prohibition — commonly referred to as "gun-jumping" — can result in the imposition of civil penalties of up to $51,744 per day of violation (as adjusted for inflation, 2025 maximum).
In addition to the statutory prohibition on closing prior to waiting period expiration, the antitrust laws more broadly prohibit conduct during the pre-closing period that constitutes premature integration or the exercise of control by the acquiring person over the target's business operations. Gun-jumping concerns arise when the acquiring person takes actions prior to closing that effectively transfer beneficial ownership or control of the target's business, even if the formal closing has not yet occurred.
The following principles should be observed by the Harrowgate deal team and by Pennfield during the period between signing and closing:
1. Independent Operations. Harrowgate and Pennfield must continue to operate as independent, competing (or otherwise separate) entities throughout the pre-closing period. Harrowgate should not direct, influence, or control Pennfield's day-to-day business operations, including pricing decisions, product assortment, vendor negotiations, hiring and termination decisions, store openings or closures, capital expenditures, or competitive strategy.
2. Information Sharing. While certain information sharing between the parties is necessary and appropriate for integration planning and due diligence purposes, competitively sensitive information (such as detailed pricing data, customer lists, supplier terms, and forward-looking competitive strategies) should be shared only on a need-to-know basis and subject to appropriate confidentiality protections and clean-team protocols, where warranted.