M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Saturday, December 19, 2009

GM: 0 for 4?

When GM came out of bankruptcy the plan was pretty simple.  It would shut a number of divisions and then shed four of others - Opel, Saturn, Saab and Hummer.   GM balked at the Opel sale after walking most of the way down the aisle.  The Saturn deal collapsed after Penske walked away.  GM then announced that it would shutter Saturn rather than try to find another buyer.  The proposed deal to sell Saab to Koenigsegg Group in Sweden, but that deal fell through.  Then, GM entered into discussions with Spyker Cars also in Sweden.  After those talks fell apart yesterday GM announced that Saab, too, would be shuttered. 

0 for 3 is a pretty poor batting average.  At least the Hummer sale went through, right?   Right?  I mean, GM announced the deal to sell the Hummer brand to some company no one ever heard of before not once, but twice.  So, that sale went through, didn't it?  Oh, that's right.  The deal was contingent upon getting approval from the Chinese government.   Guess who hasn't approved the deal, yet?   Don't hold your breath.  


December 19, 2009 in Transactions | Permalink | Comments (1) | TrackBack (0)

Friday, November 20, 2009

eBay/Skype: RIP

eBay announced on Thursday that it closed its sale of Skype.  

The buyer, who will control an approximately 70 percent stake, is an investor group led by Silver Lake and includes Joltid Limited and certain affiliated parties, the Canada Pension Plan Investment Board and Andreessen Horowitz.

eBay received approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million [valuing the business at 2.75 billion]. The company retained an approximately 30 percent equity investment in Skype. The company also purchased senior debt securities with a face value of $50 million as part of a Skype debt financing.

eBay purchased Skype in September 2005 for $2.6 billion in cash and stock plus the mother-of-all-earnouts (up to $1.5billion). In the end, Skype was a dud for Bay - though personally, I'm a big fan of the technology.  It just wasn't right for eBay.  Why would you want to talk to people selling stuff on eBay anyway?  Also, more generically, the earnout didn't live up to its potential as an incentive device and only about a third of it was reportedly paid out. As we've noted here in the past, earnouts seem like an elegant way to bridge a valuation gap, but they're really, really hard. 

As this deal moves quickly into everyone's rear-view mirror, there remain two lingering questions from this deal:  1) why earnouts?; and  2) why her


November 20, 2009 in Transactions | Permalink | Comments (1) | TrackBack (0)

Thursday, November 5, 2009

Takeover Panel and Arsenal

I think I've said before that I love takeovers of sports teams - mostly because it let's me read the sports pages on company time.  Well, there's a bit of a to-do brewing in the Uk over Denver-based businessman Stan Kroenke's potential takeover of the Arsenal football club (that's soccer).  Of course, Kroenke is no stranger to the sports business.  In fact, he's a "sports mogul".  He reportedly has ownership stakes in the Colorado Rapids (MLS), the Denver Nuggets (NBA), the Colorado Avalanche (NHL) as well as a 40% stake in the St. Louis Rams (NFL).  Okay, so that's not the most impressive list of professional sports teams, but any one of them is certainly better than any team I own.  (If you don't count amateur youth league, I don't presently own any.) 

Well, if you had $3 billion to your name and you were looking to improve on that line-up, what better way to do that than acquiring a large stake in a venerable UK football club?  Over the past summer, Kroenke reportedly purchased 25% of the club's shares.  In recent weeks, he has been buying shares in small blocks, 427 shares here, 10 shares there and another 200 shares here.  He now controls 29.6% of the shares of Arsenal.  The Times of London provides a nice Q&A on what would happen should Kroenke acquire 30% of the shares of Arsenal:

What could happen next?
As soon as Stan Kroenke hits 30 per cent of Arsenal’s shares, he will have to launch a takeover bid for the whole company.
What would the Takeover Panel make of this?
The City regulator that monitors dealings in UK companies would expect Kroenke to have enough cash to launch a fully funded bid immediately if he hit 30 per cent. He would have to bid for the rest of the shares at the highest price he had paid in the preceding 12 months. On May 1, he paid £10,500 each in a 4 per cent block. That has to be his bid price.
Suppose Kroenke did not have the available funds?
The panel has been keeping an eye on the situation and would be angry with Kroenke if he hit 30 per cent without having the cash to buy the club. Kroenke’s only option would be to apologise to the panel, which would make him sell the shares to get back below 30 per cent.
How closely is the American being watched?
The panel has looked at Kroenke’s stake-building to see if he is “acting in concert” with other Arsenal shareholders, which includes Danny Fiszman, from whom he bought shares for which he still owes £50 million. “Acting in concert” means you have teamed up with other shareholders to gain control without telling the panel, which is against City rules. However, the panel decided this year that Kroenke had not teamed up with other shareholders, despite arguments to the contrary from Alisher Usmanov, the Russian, who owns 25 per cent of the club. 

The rules of the Takeover Panel govern Kroenke's next steps.  So far, he has remained silent on his intentions.  That's likely because he doesn't want to trip a put-up or shut-up offer order from the Takeover Panel pursuant to Rule 2.5.  Fans in the UK aren't taking any of this lightly.  Apparently, a group have already traveled to the US to see Kroenke and assure themselves of his intentions.


Arsenal coach providing sports reporters with a summary of the takeover rules:

November 5, 2009 in Europe, Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, October 22, 2009

Oracle Fiddling While Sun Burns?

MySQL, an afterthought in Oracle's decision to buy Sun last April has turned into a major obstacle with the EU Competition Commission standing in the way over the fate of the technology.  According to PC World representatives from Oracle met with the commission yesterday and, well, it didn't go well. 

In a meeting with Oracle President Safra Catz in Brussels on Wednesday, Competition Commissioner Neelie Kroes "expressed her disappointment that Oracle had failed to produce, despite repeated requests, either hard evidence that there were no competition problems or, alternatively, proposals for a remedy to the competition problems identified by the Commission," a Commission spokesman said.


Meanwhile Sun's sales have been declining as rivals IBM and Hewlett-Packard take advantage of the uncertainty around Sun's business with aggressive migration plans. Oracle CEO Larry Ellison said last month that Sun is losing $100 million a month while it waits for the deal to close.

He has also asserted that Oracle's database competes with Microsoft's SQL Server and IBM's DB2 products, and not with MySQL.

Sun announced a big round of layoffs yesterday, citing the additional time it is taking to close the deal with Oracle. The company said it will lay off 3,000 workers around the world over the next 12 months. Oracle is widely expected to make deeper job cuts if the deal closes.

Although the delay is expensive, short of reaching a deal with the Commission, there's no real end in sight for Oracle.  The Merger Agreement (Sec. 8.01(b)) won't permit Oracle to walk for antitrust reasons until at least April of 2010.  That's six months, or $600 million in losses away. 

In Section 6.10 (below), the parties included what appears to be relatively modest antitrust language. 

(b) Without limiting the generality of the undertakings pursuant to this Section 6.10, the parties hereto shall (i) provide or cause to be provided as promptly as practicable to Governmental Authorities with regulatory jurisdiction over enforcement of any Antitrust Laws (each such Governmental Authority, a “Governmental Antitrust Authority”) information and documents requested by any Governmental Antitrust Authority or necessary, proper or advisable to permit consummation of the transactions contemplated by this Agreement, including preparing and filing any notification and report form and related material required under the HSR Act and any additional consents and filings under any Antitrust Laws as promptly as practicable following the date of this Agreement (but in no event more than fifteen (15) Business Days from the date hereof except by mutual consent confirmed in writing) and thereafter to respond as promptly as practicable to any request for additional information or documentary material that may be made under the HSR Act and any additional consents and filings under any Antitrust Laws; (ii) use their reasonable best efforts to take such actions as are necessary or advisable to obtain prompt approval of consummation of the transactions contemplated by this Agreement by any Governmental Authority; and (iii) use their reasonable best efforts to contest on the merits, through litigation in United States District Court and through administrative procedures in relation to other Government Authorities, any objections or opposition raised by any Governmental Authority;provided, however, that nothing in this Section 6.10 shall require Parent to appeal any Order from a Governmental Authority.

What are "reasonable best efforts" anyway?  The reaction we're hearing from the EU Competition commission suggests that Oracle could be doing something "reasonable" to assuage their concerns, but it's not. "Reasonable best efforts" is one of those ambiguous phrases, like materiality, that people think have meaning, but when one tries to give them meaning, they get harder to actually pin down. One would think that the mounting losses at Sun would be motivation enough for Oracle to give its dealings with the  EU its best effort, but apparently it's not.   I find it hard to believe that Oracle is unable (or unwilling) to respond to EU requests for a report on the marketplace and competition with respect to MySQL.  So, while Oracle digs in its heels over MySQL, Sun is left to suffer.


October 22, 2009 in Antitrust, Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, October 8, 2009

UK Competition Commission Rules Against Ticketmaster-Live Nation Deal

Apparently, The Boss has fans in the UK.  According to the WSJ, the Competition Commission, the UK antitrust regulators, are moving to hold up the Ticketmaster-Live Nation transaction.  The Competition Commission issued a statement today ruling against the merger:

Ticketmaster Entertainment, Inc and Live Nation, Inc will limit the development of competition in the market for live music ticket retailing.

In its provisional findings published today, the CC has concluded that the merger could severely inhibit the entry of a major new competitor (CTS Eventim) into the UK ticketing market. Prior to the announcement of the merger, Live Nation had signed an agreement with CTS to provide ticketing services for its live music events and venues in the UK. The CC believes that this agreement with Live Nation would have provided CTS with a foothold in the UK market from which it would have grown, increasing significantly the degree of competition in a market which is currently dominated by Ticketmaster and one other large ticketing agent. 

The CC believes that, if the merger were to proceed, Live Nation would have the incentive to impede CTS’s entry into the UK ticketing market, in particular by minimizing the supply of its tickets to CTS, and thereby frustrate CTS from becoming an additional effective competitor to Ticketmaster. This could lead to higher net prices (eg due to lower rebates to promoters and venues) and/or lower service quality and/or less innovation in the market than would otherwise be the case.
The Commission is now considering possible remedies.  They include, among others, prohibition of the merger, prohibition of the merger of the UK operations, and divestment of the UK operations of either Ticketmaster or Live Nation.  No word, yet, whether Ticketmaster will cry "No Surrender". 


October 8, 2009 in Antitrust, Transactions | Permalink | Comments (0) | TrackBack (0)

Sunday, October 4, 2009

Federal Judge Reviewing Diebold Sale

Early last month Diebold announced that it had sold its Premier Election Solutions, Inc. sub to Election Systems & Software (links are to their respective press releases announcing that the transaction had closed).  The sale was small - $5 million plus 70% of receivables from sales as of August 31, 2009.  Given that the sale was well under the HSR filing thresholds, the parties likely did not seek pre-merger approval from the FTC.  Now comes word that ES&S's competitors are seeking an injunction from a federal judge in NJ to "unscramble the eggs" and order ES&S to undo the transaction.  McClatchy reports:

A federal judge in Camden, N.J., agreed late Friday to hear a request for an emergency injuction that could halt Election Systems & Software's announced acquisition of Diebold Inc.'s Premier Election Solutions.

The quietly arranged shotgun wedding between the two voting-machine giants would give ES&S control of election systems in use in almost 70 percent of the nation's voting precincts. Federal Judge Robert Kugler agreed to hear Tuesday the request for immediate injunction brought by a small competitorm, Hart InterCivic Inc. 

The basic contention is that ES&S did a "stealth" transaction - as if by not voluntarily making an HSR filing one might impute some sort of bad faith.  That's a tough bet.  I wouldn't take it.   In any event, it's worth noting that ES&S's competitors - and not local governments (customers) - are the ones seeking the injunction.  This might well color the outcome.  


October 4, 2009 in Antitrust, Transactions | Permalink | Comments (0) | TrackBack (0)

Friday, September 18, 2009

Post- Closing Purchase Price Adjustments

Agreements to purchase private companies often include a post-closing purchase price adjustment (generally based on closing working capital versus some agreed upon target). In an effort to ascertain current market practice, White & Case surveyed 87 private company purchase agreements that were publicly filed in 2008 and contained purchase price adjustments.  Full report here.


September 18, 2009 in Asset Transactions, Contracts, Deals, Merger Agreements, Private Transactions, Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, September 17, 2009

Be careful out there

Cautionary tales about catastrophic typos, due diligence errors and the like help focus the senses.  Here’s one from Law Shucks:

One of the primary responsibilities of junior M&A associates in due diligence is to review material contracts for assignability and change-of-control provisions.


Should be simple, right?
Lawyers at Cravath and/or Cahill Gordon misinterpreted an assignment, and it led to a $115 million reduction in purchase price.

Read the whole thing here.



September 17, 2009 in Contracts, Deals, Lawyers, Transactions | Permalink | Comments (0) | TrackBack (0)

Friday, August 21, 2009

Cubs Sold

It’s not news to anyone who loves sports that Sam Zell’s Tribune Co. has been in negotiations to sell the Cubs to the Rickett family since 2007.    Given the obvious White Sox-bias of the current administration in DC there wasn’t much hope that Zell was going to get any bailout money to sweeten the pot, so in the end, he did the deal with the Rickettsfor $845 million.  The deal includes Wrigley Stadium as well as 25% of the local Comcast sports network.

Acquisitions of sports teams are interesting for a couple of reasons.  First, all of the transactions involve change in control conditions with real bite.  The league – i.e. other owners – has to approve any transfer of control of a franchise.  This makes any sale a clubby affair.  If the other owners are unhappy with the identity of the purchaser or if the terms of the sale somehow set a precedent that causes fellow owners to hesitate, the deal can die.  So negotiations with the seller often have to involve the league and other owners very early on. 

Second, all these transactions involve ball parks in one way or another.  Ball parks are large “specific assets.”  Specific assets are assets that have value when used in one way, but then lose all their value if they are put to another use.   Every try to hold an academic conference in a baseball stadium?  Right, it’s not going to happen.  You can’t even play soccer in a baseball stadium.  A baseball stadium, particularly a big one like Wrigley has only one economic use and that’s as a baseball stadium for the Cubs.  Separating ownership of the stadium from the team is hard to do.  In fact, when it happens more often than not ownership passes to a public entity.  Here's a paper by Mildner and Strathman with some data on stadium ownership in baseball and the NBA over the past few decades.

The specificity of the assets involved in sports transactions makes this kind of deal a perfect one for a Deals class.  (I’ll write more about Deals classes next week after the semester starts.)


August 21, 2009 in Deals, Transactions | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 12, 2009

Recent Developments In Private Equity Deals

Wednesday, July 29, 2009

What must a Board do to satisfy its Revlon duties?

Milbank, Tweed reviews the decision of the Delaware Court of Chancery in Police & Fire Ret. Sys. of the City of Detroit v. Bernal, et al. and concludes

 [The Delaware Supreme Court’s recent decision in Lyondell Chemical Company v. Ryan] confirmed that directors may aggressively pursue a transaction that they determine in good faith to be beneficial to shareholders, despite the absence of an auction process, so long as their actions are reasonable and aimed at obtaining the best available price for shareholders. However, . . . the language used by the Court in Bernal certainly suggests that when a company has attracted more than one bidder, the best way for a board to satisfy its Revlon duties and maximize shareholder value is to follow a robust sale or auction process that avoids taking actions that could be perceived as favoring one bidder over another. As Court of Chancery decisions in recent years have demonstrated, when only one bidder exists, Delaware Courts are reluctant to upset the deal and risk losing an attractive opportunity for target company shareholders. In contrast, when more than one bidder is involved, Delaware Courts are more comfortable scrutinizing a deal and taking steps to permit an auction to continue.

Get the full story here.



July 29, 2009 in Asset Transactions, Deals, Going-Privates, Leveraged Buy-Outs, Management Buy-Outs, Merger Agreements, Mergers, Private Equity, Takeovers, Transactions | Permalink | Comments (2) | TrackBack (0)

Friday, July 10, 2009

New GM Press Conference

The GM 363 transaction will close this morning.  Listen in to the webcast/press conference announcing the New GM at 9:00AM (ET).  The call-in number to listen is:

800 230-1093   (U.S.)
+1- 612 332-0107  (international/caller-paid)
No access code is required

The press conference will also be available via webcast (live and archived).


July 10, 2009 in Transactions | Permalink | Comments (0) | TrackBack (0)

Monday, July 6, 2009

GM 363 Sale Approved

Saturday, June 27, 2009

BAC's "MAC-Attack"

I received a couple of questions offline about Lewis’ “MAC-attack” and whether a MAC claim would have plausible (who knew we had readers in Europe?!).  The strength of a potential MAC claim by BAC was well covered by Steven a couple of weeks ago at the Deal Professor (Assessing a MAC Claim: The Lewis Ostrich Defense).   I’d like to address Lewis’ concern.  He apparently told Paulson/Bernanke that he feared shareholders would sue him for not claiming a MAC.  It’s hard to imagine that this was anything other than a threat to get the Fed/Treasury to put up more cash.  Why?  Well, the lawsuit he suggests is one that wouldn’t go very far. 

Alvarez’ assessment of a potential lawsuit was correct.  Any suit for failure to claim a MAC would start with the BAC board enjoying the protection of the business judgment rule, which we all remember is a presumption that “the directors of [the] corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. Thus, the party attacking a board decision as uninformed must rebut the presumption that its business judgment was an informed one.”

That means that any challenge to BAC decision not to invoke a MAC in the agreement would have had to fight a very steep uphill battle.  To succeed, plaintiffs would have had to make the case the BAC board was uninformed/unreasonable.  Since proving a MAC is extremely difficult to do in any event, it’s not clear at all that a board having discussed and considered the circumstances – which it appears clear from the abundance of the e-mails was happening -- would have made an unreasonable or uninformed decision by not attempting to claim a MAC.  Basically, plaintiffs would have to make the case that finding a MAC would have been a “no-brainer” for a court looking at the facts and that the board was somehow absent when it neglected to reach the same conclusion in order to come close to winning on a claim against BAC’s board.  I’m pretty confident that a court would pretty quickly dismiss such a suit. 

So, what was Lewis afraid of beyond the inconvenience/embarrassment of a lawsuit?  Who knows, but he’s got all the inconvenience you can imagine by having to appear in front of Congress on a near regular basis these days.  More likely, the threat of being forced into calling a MAC because of "shareholder pressure" and a potential lawsuit was just a negotiating tactic to get more support from the Fed.


June 27, 2009 in Current Events, Material Adverse Change Clauses, Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, May 28, 2009

Deals from Hell, cont

For the sake of completeness Time Warner announced the spin-off of AOL this morning.  Either the board meeting started really early, or they didn't have much to talk about.  Here's the press release.

- bjmq

May 28, 2009 in Current Affairs, Transactions | Permalink | Comments (0) | TrackBack (0)