Fri 06/05/2020 06:00 AM
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Relevant Documents:
Hawaii Application
FCC Application

Takeaways
 
  • The FCC is expected to wait for Team Telecom approval before issuing a decision on Macquarie’s acquisition of Cincinnati Bell Inc., or CBB. A practitioner familiar with Team Telecom proceedings said that transactions requiring both CFIUS and Team Telecom approvals, such as CBB/Macquarie, and that involve “a normal buyer from a friendly country” could receive both Team Telecom and FCC clearance in less than six months.
  • In Hawaii, although CBB’s previous acquisition of Hawaiian Telcom Holdco Inc. took approximately eight months to review, the review of CBB’s acquisition of Macquarie may take significantly less time if the Hawiian public utilities regulator reviews the transaction under a different statute, as requested by the companies.
  • While many state regulators told Reorg that they have not yet seen any filings from the companies, CBB and Macquarie filed an application for approval with both the Hawaiian Public Utilities Commission and the FCC on May 15.

The FCC is expected to wait for Team Telecom approval before issuing a decision on Macquarie Infrastructure Partners’ acquisition of Cincinnati Bell Inc., or CBB, and the companies have asked the Hawiian public utilities regulator to review the transaction under a statute that may ensure a shorter timeline for its review.

The companies have said they expect to close their transaction in the first half of 2021.

Deals that require both CFIUS and Team Telecom approvals, such as CBB/Macquarie, and that involve “a normal buyer from a friendly country” can receive both Team Telecom and FCC clearance in less than six months, according to a practitioner familiar with Team Telecom proceedings. During recent merger cases that have undergone Team Telecom review, including Sprint/T-Mobile and the acquisition of Zayo Group Holdings, the panel has requested that the FCC defer action until after it has completed its assessment.

CBB and Macquarie filed their application with the FCC on May 15, according to the agency’s website. Team Telecom will likely make a similar request for deferral of action once the FCC issues a public notice on the transaction, the practitioner said, adding that the agency usually publishes the public notice about one to two weeks after companies file their application.

After the Team Telecom process was criticized for years for its opacity and lengthiness, the Trump administration issued an executive order in April establishing a new committee that would have a 120-day shot clock, which could be extended by 90 days, for assessing foreign telecom transactions. However, it is still unclear whether the shot clock would be applied to the CBB transaction, since many of the details laying out the committee’s new procedures will not be published until next month in a memorandum of understanding, or MOU.

According to the executive order, the 120-day clock starts in any given case after the committee has received complete answers to a standard set of questions and requests from the applicants. That standard set of questions will be established in the MOU, “so it’s fair to assume that they’re not going to operate under the clock until the EO lays out some formal procedures on point and they actually have a standard set of question to ask in each case,” another practitioner familiar with Team Telecom proceedings told Reorg.

“With that said, there’s nothing stopping Team Telecom from applying the 120-day deadline using its pre-existing standard triage questions as the clock-starting question set, so they certainly could start operating under the deadline sooner if they chose to (or they felt the EO was requiring them to),” the practitioner added.

Hawaiian Review

While many state regulators told Reorg that they have not received any filings from the companies, CBB and Macquarie did file an application for approval with the Hawaiian Public Utilities Commission, or PUC, on May 15. As Reorg previously reported, the Hawaiian PUC has no statutory time limit to conduct its investigation.

As Reorg previously reported, a previous review conducted by the Hawaiian commission involving CBB’s acquisition of Hawaiian Telcom Holdco Inc. took approximately eight months. However, this transaction’s review may take significantly less time if the PUC reviews the transaction under the HRS 269-7, as requested by the companies.

According to the companies’ application, CBB and Macquarie believe that this transaction is “consistent with the general policy objectives expressed by the Commission” in the prior CBB transaction, docket 2017-0208, which resulted in Hawaiian Telcom becoming wholly owned subsidiaries of CBB. The companies stated in their application that they will continue to abide by all ongoing conditions imposed by the PUC in the previous order laid out in docket 2017-0208.

However, the companies argued that the transaction is more similar to two other transactions, which involved the Hawaii-American Water Co. and were the result of a change of control at the parent level of the organization. Both dockets 02-0041 and 2006-0095 required approval under HRS 269-7. This current transaction, the companies argued, should also require approval under the same statute, HRS 269-7, and not HRS 269-17, HRS 269-17.5 or HRS 269-19, which were required in CBB’s prior transaction of Hawaiian Telcom.

“As a result, based on the above statutory interpretation and prior Commission precedent, the only statutory provision that Applicants believe is triggered by the subject Transaction is HRS § 269-7 (and specifically, HRS § 269-7(a)), and in that connection,” the application stated. “Applicants respectfully seek Commission approval of its requests set forth in this Application pursuant to said statutory provision.”

Both of the aforementioned dockets involving Hawaii-American Water Co. and reviewed under HRS 269-7 took less than two months from the filing of the application to the commission order and approval.

Other Regulatory Updates

As Reorg previously reported, the companies stated they also need approval from the California Public Utilities Commission, the Hawaii Department of Commerce and Consumer Affairs, the Indiana Utility Regulatory Commission, the Kentucky Public Service Commission, the Ohio Department of Commerce and the Ohio Public Utilities Commission.

A spokesperson for the California Public Utilities Commission, or CPUC, said that CBB does not have operations in California when Reorg asked about whether the companies had submitted a filing in California. When pressed further, the spokesperson said that the CPUC had no “further information at this time.”

According to a spokesperson for the Kentucky Public Service Commission, or PSC, the companies have not filed with the PSC yet.

As Reorg previously reported, the companies must file a notice of change with the Indiana Utility Regulatory Commission, or IURC, 30 days prior to the date of the change. The notice of change will be posted on the commission’s website for those 30 days. The IURC did not respond to inquiries about whether the companies have filed with the state regulator.

The Public Utilities Commission of Ohio, or PUCO, told Reorg in April that to the extent that the companies do file a notification with the state, it will be purely information due to significant deregulation of PUCO’s authority over telecom mergers if the transaction is also subject to a review by the FCC. A PUCO spokesperson told Reorg that the companies have not filed anything with the state.

Macquarie declined to comment on the ongoing state reviews. 

Reorg M&A’s previous coverage of this transaction can be found HERE.

--Kathryn Haake and Alex Wilts
 
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