THE FOUR-RING CIRCUS - ROUND TWENTY- THREE; A FURTHER UPDATED VIEW OF THE MATING DANCE AMONG ANNOUNCED MERGER PARTNERS AND AN UNSOLICITED SECOND OR THIRD BIDDER By: Eric Swedenburg, Esq. March 15, 2019 _______________ Copyright © 2019 Simpson Thacher & Bartlett LLP. All rights reserved. The author would like to acknowledge and thank Robert Spatt, who authored the first twenty-one versions of this article during his time as a leading M&A partner of Simpson Thacher & Bartlett LLP—his invaluable leadership, guidance and years of dedication to this article will be long remembered! Also, as a renowned scholar, Mr. Spatt has published various articles on M&A subjects and regularly serves as a faculty member for leading M&A seminars and institutes, including as the Co-Chairman Emeritus of the Tulane Corporate Law Institute, one of the country’s leading M&A institutes. Special thanks also goes to Jonathan G. Stradling, Sung Jin and Ben Carson, associates at Simpson Thacher & Bartlett LLP, for their invaluable assistance in updating this article. All or part of this article (or earlier versions thereof) may have been or be used in other materials published by the author or his colleagues. A downloadable version of this article can be found on the Simpson Thacher & Bartlett LLP website (www.stblaw.com/FourRingCircus2019.pdf). Simpson Thacher & Bartlett LLP The Four-Ring Circus - Round Twenty-Three; A Further Updated View Of The Mating Dance Among Announced Merger Partners And An Unsolicited Second Or Third Bidder Congratulatory handshakes and champagne toasts often accompany the execution and announcement of a merger agreement between a public company and its chosen merger partner. All too often, though, the celebration is premature. In the U.S., the incidence of unsolicited second and even third bidders surfacing after two companies have announced a definitive friendly merger agreement (or in the case of some foreign jurisdictions, a target-endorsed friendly offer) has become a standard execution risk of getting a deal done and tends to reflect the ebb and flow of hostile acquisition activity. Such disruptive activity has been branded with its own jargon—“deal-jumping.”1 This article endeavors to provide a retrospective of deal-jump transactions and certain deal mechanics and structures that have helped to shape the current state of play in the market for corporate control. ***** A list of some of the notable U.S. transactions from 2014 through the beginning of 2019 (listed from later years to earlier years by the year of the announcement of the original signed deal) in which a signed merger agreement (or in the case of certain foreign deals where there are no merger agreements, an endorsed or recommended bid) was disrupted (or attempted to be disrupted) by a second bidder is included below. In addition, beginning on page 95 is a list of notable foreign deal-jumps, which are an increasingly important and high-profile part of the deal-jump landscape. U.S. deal-jump activity did not increase appreciably in 2018, continuing a trend of relatively moderate activity from the prior year compared to historical incidence of deal-jump activity as a percentage of overall M&A activity. Overall M&A activity in 2018 continued strongly, showing only a slight downtick on a year-over-year basis in terms of dollar value of announced transactions ($3.2 trillion of announced U.S. deals in 2018 vs. $3.3 trillion of announced U.S. deals in 2017, according to Bloomberg). 1 Note that for purposes of this article “deal-jumping” does not include the continuation or raising by a hostile bidder of its bid in the face of a target attempting to escape by entering into a “white-knight” merger agreement with a third party. As further described in this article, while CF Industries had its hostile bid for Terra outstanding for a year, it had withdrawn its offer a month before Terra and Yara entered into their merger agreement, making CF Industries’s subsequent overbid qualify in our view as a “deal-jump.” In what we would categorize as a couple of notable instances “not quite deal-jumps,” mention goes to (i) a Finnish entity named “Nokita” (meaning “to increase a bid” in Finnish), which was created and led by a former Nokia employee to publicly see if it could compete with Microsoft in its $7 billion acquisition of Nokia’s devices and services business in 2013—with no resulting bid; (ii) activist Starboard Value Fund, which until days before the 2013 shareholder meeting for Smithfield Foods’ $7 billion sale to China’s Shuanghui International, insisted that it was trying to put together a consortium to split up Smithfield at substantially higher value than the deal (notwithstanding the fact that Smithfield had investigated that route at the public instigation of its largest shareholder prior to the sale), only to call off its opposition the Friday before the meeting; and (iii) the rumored interest in 2015 of BASF SE in jumping the giant Dow/Dupont “merger of equals” transaction (mere media reports of the rumor caused Dupont stock to shoot up roughly 5 percent, while sending BASF stock down over 2 percent). Page 2 2018 Separate efforts by Eversource Energy and California Water Services Group, each unsuccessful to date, to break up SJW Group’s ongoing efforts to merge with Connecticut Water Service, Inc.; Pebblebrook Hotel Trust’s successful jump of Blackstone Real Estate Partners’s attempt to buy LaSalle Hotel Properties; CACI International Inc.’s attempted jump of General Dynamics Corporation’s acquisition of CSRA Inc.; Randa Accessories Leather Goods LLC’s unsuccessful jump of a joint effort by George Feldenkreis and Fortress Investment Group to acquire Perry Ellis International; Romano’s Macaroni Grill’s failed attempt to disrupt Spice Private Equity Ltd.’s acquisition of Bravo Brio Restaurant Group, Inc.; Comcast Corporation’s failed effort to break up Walt Disney Corporation’s proposed acquisition of Twenty-First Century Fox, Inc.; 2017 The Boaz Group LLC’s unsuccessful attempt to disrupt NRD Capital Management LLC’s acquisition of Ruby Tuesday, Inc.; Ultragenyx Pharmaceutical Inc.’s successful break-up of REGENXBIO Inc.’s deal with Dimension Therapeutics, Inc.; United Rentals, Inc.’s successful deal-jump of H&E Equipment Services, Inc.’s proposed acquisition of Neff Corporation; Verizon Communications, Inc.’s successful disruption of AT&T Inc.’s deal to acquire Straight Path Communications, Inc.; Euronet Worldwide, Inc.’s unsuccessful effort to wrest MoneyGram International, Inc. from its attempted acquisition by Alipay (UK) Limited (the Alipay-MoneyGram transaction was ultimately terminated in early 2018 as a result of failing to receive CFIUS approval); D.R. Horton, Inc.’s successful acquisition of Forestar Group Inc. following a break-up of a signed deal between Forestar and affiliates of Starwood Capital Group; 2016 Siris Capital Group, LLC’s successful deal-jump of Polycom, Inc.’s acquisition by Mitel Networks Corporation; Mill Road Capital’s successful break-up of Incipio, LLC’s deal to acquire Skullcandy, Inc.; Origin Technologies Corp.’s failed attempt to disrupt Thermo Fisher Scientific Inc.’s acquisition of Affymetrix Inc.; an Anbang Insurance Group Co., Ltd.-led consortium’s unsuccessful deal-jump of Marriott International Inc.’s acquisition of Starwood Hotels & Resorts Worldwide Inc.; Microchip Technology’s successful deal-jump of Dialog Semiconductor PLC’s announced acquisition of Atmel Corporation; Page 3 2015 Icahn Enterprises L.P. successful deal-jump, and acquisition, of The Pep Boys – Manny, Moe & Jack as it was being acquired by Bridgestone Corporation; ON Semiconductor Corporation’s acquisition of Fairchild Semiconductor International, Inc., after Fairchild Semiconductor’s rejection of a competing acquisition offer from Hua Capital Management and China Resources Microelectronics Ltd.; Microsemi Corporation’s successful break-up of Skywork Solutions, Inc.’s proposed acquisition of PMC-Sierra, Inc.; Montage Technology Group Limited’s ultimate failure to break up Diodes Incorporated’s acquisition of Pericom Semiconductor Corporation, notwithstanding offering a higher purchase price; Zoomlion Heavy Industry Science & Technology Co.’s disruption of Konecranes Plc’s combination with Terex Corporation, which was ultimately restructured to be the sale of part of Terex to Konecranes; GameStop Corp.’s successful acquisition of Geeknet, Inc., breaking up a signed deal between Geeknet and Hot Topic, Inc.; HC2 Holdings, Inc.’s unsuccessful disruption of PennantPark Floating Rate Capital’s announced acquisition of MCG Capital Corp.; Uphill Investment Co.’s successful acquisition of Integrated Silicon Solution, Inc., in spite of efforts by Cypress Semiconductor Corporation to top Uphill’s offer; Valeant Pharmaceuticals International, Inc.’s successful merger with Salix Pharmaceuticals, Ltd. following Endo International plc’s attempt to wrest the deal away; R.R. Donnelley & Sons Company’s successful deal-jump of Quad/Graphics, Inc.’s attempted acquisition of Courier Corporation; 2014 The successful deal-jump and acquisition of GFI Group, Inc. by BGC Partners LP after GFI’s stockholders failed to adopt a merger agreement between GFI and CME Group, Inc. in light of BGC’s unsolicited acquisition proposal; Dollar Tree, Inc.’s acquisition of Family Dollar Stores, Inc. after a hard-fought attempted deal-jump by Dollar General Corporation; Endo International plc’s successful acquisition of Auxilium Pharmaceuticals, Inc. after breaking up QLT, Inc.’s attempted acquisition of Auxilium; Tyson Foods, Inc.’s successful deal-jump and acquisition of The Hillshire Brands Company as Hillshire was in the midst of acquiring Pinnacle Foods, Inc.; and The Cutrale-Safra Group’s successful deal-jump of Chiquita International, Inc.’s and Fyffes PLC’s announced “merger of equals”. The True Four- (And Sometimes More) Ring Circus Although a majority of the deal-jump transactions described in this article are of the “three-ring” variety, in which a single interloper seeks to disrupt an announced transaction, the deal-jump “big top” is by no means Page 4 limited to three rings.