March 24, 20162017 the FOUR-RING CIRCUS
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THE FOUR-RING CIRCUS - ROUND TWENTYTWENTY-ONE; A FURTHER UPDATED VIEW OF THE MATING DANCE AMONG ANNOUNCED MERGER PARTNERS AND AN UNSOLICITED SECOND OR THIRD BIDDER By: Robert E. Spatt, Esq. Eric M. Swedenburg, Esq. March 24, 20162017 _______________ Copyright © 20162017 Robert E. Spatt & Eric M. Swedenburg. All rights reserved. Special thanks to Lauren M. Colasacco, Jonathan G. Stradling, Paul Bennett and Christian E. WitzkeJake M. Phillips, associates at Simpson Thacher & Bartlett LLP (and to Jennifer J. Levitt, senior counsel at Simpson Thacher & Bartlett LLP, and Lauren M. Colasacco, associate at Simpson Thacher & Bartlett LLP, with respect to prior versions), 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 authors or their colleagues. A downloadable version of this article can be found on the Simpson Thacher & Bartlett LLP website (www.stblaw.com/FourRingCircus20162017.pdf), along with a marked version showing changes from the prior “Round NineteenTwenty” of this article (www.stblaw.com/FourRingUpdates20162017.pdf) to facilitate the identification of updated data. Simpson Thacher & Bartlett LLP The Four-Ring Circus - Round TwentyTwenty-One; 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, which 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 (with increasingly important foreign deal-jumps listed beginning on page 5) from 2011from 2012 through the beginning of 20162017 (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 includes:2is included below. In addition, beginning on page 93 is a list of notable foreign deal jumps, which are becoming an increasingly important and high-profile part of the deal-jump landscape. As will be readily apparent when perusing the below list of U.S. deal jump transactions, it was a relatively quiet year on this front in 2016. Overall M&A activity for the year was moderately down from the prior year ($3 trillion of announced U.S. deals in 2016 vs. $3.8 trillion of announced U.S. deals in 2015, according to Bloomberg), likely due to a number of factors, including the uncertainty created by the mid-year Brexit vote and the particularly contentious presidential election year in the United States. These factors among others undoubtedly contributed to the lower than usual incidence of deal-jumps.2 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 of 2013 “not quite deal- jumps,” mention goes to (1) 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; and (2) 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. What may earn the same label for 2016 is; and (3) the rumored interest in 2015 of BASF SE in jumping the giant Dow/Dupont “merger of equals” transaction announced in late 2015 on the Dupont side.(Mmere media reports of the rumor caused Dupont stock to shoot up roughly 5 percent, while sending BASF stock down over 2 percent). Only time will tell whether this becomes an actual deal-jump, notwithstanding a great deal of skepticism by media commentators. 2 A similar list of notable U.S. deal-jump transactions from 1994 through 2010 is included on Annex A. 2 A similar list of notable U.S. deal-jump transactions from 1994 through 2011 is included on Annex A. Page 2 2017 • Euronet Worldwide, Inc.’s announced unsolicited bid for MoneyGram International, Inc. in an attempt to wrest MoneyGram from its pending acquisition by Alipay (UK) Limited (the announcement of Euronet’s bid came just days before this article went to press—details on further developments, if any, to come in “Round Twenty-two”); 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 pendingfailed attempt to disrupt Thermo Fisher Scientific Inc.’s announced purchaseacquisition of Affymetrix Inc.; • an Anbang Insurance Group Co., Ltd.-led consortium’s pending attemptedunsuccessful deal-jump of Marriott International Inc.’s acquisition of Starwood Hotels & Resorts Worldwide Inc. (as of the date this article is going to press, Marriott has, for now, successfully countered Anbang’s unsolicited bid with a higher deal—details on further developments, if any, to come in “Round Twenty-one”); • Microchip Technology’s successful deal-jump of Dialog Semiconductor PLC’s announced acquisition of Atmel Corporation; 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 pending 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 and& Technology Co.’s pending attempt at jumpingdisruption of Konecranes Plc’s proposed 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; Page 3 • 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.; • The Cutrale-Safra Group’s successful deal-jump of Chiquita International, Inc.’s and Fyffes PLC’s announced “merger of equals”; 2013 • Silver Lake’s successful acquisition of Dell Inc. at an increased price in spite of competing proposals submitted by Blackstone and Icahn Enterprises consortiums during the “go-shop” process; • Dish Network Corporation’s