February 18, 2011
Skadden on Airgas
Skadden's client memo on Airgas is here.
Gibson Dunn has their own long client memo on Airgas here.
Where J Crew leaves us
David Faber at CNBC tells us what he really thinks about J Crew's "process" and the attempts to make it all right:
The bottom line: go-shops are a waste of time. Fairness opinions are barely worth the paper they are written on when there's bigger fee on the line and management led buyouts are a very tricky thing to get right.
He might be right, but then where does that leave us? These conflicts might well be inherently unresolvable. It would be nice if the go-shop or fairness opinion were a magic wand that we could wave over conflict transactions and make them go away, but it doesn't look like it's that easy. I guess the shareholders could still vote no. That's a possibility...not likely...but a possibility.
February 17, 2011
Genzyme's top-up option
The Genzyme-Sanofi transaction is being structured as a tender offer with a back end short form merger (merger agreement). To accomplish the short merger, they are employing a top-up option. The top-up option language is below. The option is triggered when the purchaser owns 75% of the outstanding shares. I love the math of these things. Right now, Genzyme has about 300,000,000 261,778,425 shares issued and outstanding on a base of 690,000,000 authorized shares. If Sanofi gets 75% of the shares in the tender, then Genzyme will have to issue an additional 300,000,000 390,000,000 shares (essentially all of the authorized stock) to bring Sanofi up to 90% so they can accomplish the short form merger. The Delaware courts have passed on even more dilutive top-up option – provided they don’t adversely affect the appraisal rights stockholders who haven’t tendered, etc (see In re Cogent). Massachusetts hasn’t though. I suspect that if they look at this, they’ll conclude no-harm, no-foul. In any event, Genzyme reminds us that when we start talking about top-up options, we had better make sure the seller has sufficient authorized shares – as Genzyme does - to make it work
Section 1.5 Top-Up Option.
(a) Subject to the terms and conditions set forth herein, the Company hereby grants to Purchaser an irrevocable option (the “Top-Up Option”) to purchase, at a price per share equal to the greater of (i) the closing price of a Share on Nasdaq the last trading day prior to the exercise of the Top-Up Option or (ii) the Cash Consideration, that number of newly issued Shares (the “Top-Up Shares”) equal to the lowest number of Shares that, when added to the number of Shares owned by Purchaser at the time of exercise of the Top-Up Option (after giving effect to the issuance of the Top-Up Shares but excluding from Purchaser’s ownership, but not from the outstanding Shares, Shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered in settlement or satisfaction of such guarantee), constitutes one Share more than ninety percent (90%) of all outstanding Shares (assuming the issuance of the Top-Up Shares). The Top-Up Option will only be exercised one time by Purchaser in whole but not in part, and only if clauses (x) and (y) of the following sentence are satisfied. The Top-Up Option will be exercised by Purchaser, and Parent will cause Purchaser to exercise the Top-Up Option, promptly (but in no event later than one (1) Business Day) after the Acceptance Time or the expiration of a Subsequent Offering Period, as applicable, if (x) at the Acceptance Time or the expiration of such Subsequent Offering Period, as applicable, Purchaser owns in the aggregate at least seventy-five percent (75%) of all Shares then outstanding (excluding from Purchaser’s ownership, but not from the outstanding Shares, Shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered in settlement or satisfaction of such guarantee) and (y) after giving effect to the exercise of the Top-Up Option, Purchaser would own in the aggregate one Share more than ninety percent (90%) of the number of outstanding Shares (after giving effect to the issuance of the Top-Up Shares but excluding Shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered in settlement or satisfaction of such guarantee); provided, however, that the obligation of Purchaser to exercise the Top-Up Option and the obligation of the Company to deliver Top-Up Shares upon the exercise of the Top-Up Option is subject to the conditions that (A) no provision of any applicable Law and no applicable order, injunction or other judgment shall prohibit the exercise of the Top-Up Option or the delivery of the Top-Up Shares in respect of such exercise, (B) Purchaser irrevocably commits upon acquisition of the Top-Up Shares to effect the Merger pursuant to Section 2.7, and (C) the number of Top-Up Shares to be issued pursuant to the Top-Up Option does not exceed the number of authorized and unissued shares of Company Common Stock less the maximum number of shares of Company Common Stock potentially necessary for issuance with respect to outstanding Company Equity Awards or other obligations of the Company. The parties will cooperate to ensure that the issuance of the Top-Up Shares is accomplished consistent with all applicable Laws, including compliance with an applicable exemption from registration under the Securities Act. The Top-Up Option shall terminate concurrently with the termination of this Agreement. Purchaser may assign the Top-Up Option and its rights and obligations pursuant to this Section 1.5, in its sole discretion, to Parent.
February 16, 2011
J Crew go-shop ends ... again
Once again ... no bidders and no one is surprised.
Genzyme gets its CVR
The Sanofi-Genzyme deal was announced this morning: $74/share cash plus a tradeable CVR:
Terms of the CVR agreement call for additional cash payments under certain circumstances. The CVR will be publicly traded. The agreement is structured such that the economic upside at each milestone is shared between sanofi-aventis and Genzyme shareholders. The CVR terminates on December 31, 2020 or earlier if the fourth product sales milestone has been achieved.
The one-time milestones and payments can be summarized as follows:
* $1.00 per CVR if specified Cerezyme®/Fabrazyme® production levels are met in 2011
* $1.00 per CVR upon final FDA approval of Lemtrada™ for multiple sclerosis (MS) indication
* $2.00 per CVR if net sales post launch exceed an aggregate of $400 million within specified periods per territory
* $3.00 per CVR if global net sales exceed $1.8 billion
* $4.00 per CVR if global net sales exceed $2.3 billion
* $3.00 per CVR if global net sales exceed $2.8 billion.
Sanofi will be filing a registration statement to register the CVRs with the SEC in the next couple of weeks.
February 15, 2011
158 page Airgas opinion
Download it, get a cup of coffee, close the door, and start reading this primer on the pill, Unocal, and "just say no" defense. Spoiler alert: Airgas wins and Air Products drops its bid and moves on. So, looks like no appeal in the works.
This opinion is a very thorough primer on the Unocal and takeover defenses. I expect it will quickly make its way into casebooks. Chandler makes it clear early on that he doesn't believe inadequate price is a threat, but that the Supreme Court in its wisdom has decided that inadequate price is a legally cognizable threat, so there isn't much more he can do.
There's a whole other post to be written on what Kraakman and Gilson really meant by "substantive coercion" in their paper on the Unocal intermediate standard and what half lessons the Delaware Supreme Court took from that paper, but I'll leave that for another day. For the time being, substantive coercion - my stockholders are too stupid to know what's good for them - survives. And Interco, well, Interco remains bypassed like an intellectually interesting sideshow.
Anyway, Chandler notes that "Just Say No" isn't "Just Say Never". It's just "Just Say No" for a really long time. I'll have to give this a longer more detailed read and will likely post more later. In the meantime, download and enjoy!