SOCIAL ISSUES IN SELECTED RECENT MERGERS AND ACQUISITIONS TRANSACTIONS 2004-2020 SUPPLEMENT By: Michael T. Holick, Esq. Jun Won Kim, Esq. Justin Stone May 5, 2020 ____________ Copyright © 2020 Simpson Thacher & Bartlett LLP. All Rights Reserved. Mr. Holick is a member, Mr. Kim is an associate and Mr. Stone is a law clerk, of the firm of Simpson Thacher & Bartlett LLP. The authors would like to acknowledge Robert E. Spatt, who authored eight versions of this memorandum during his time as a leading M&A partner of Simpson Thacher & Bartlett LLP—his invaluable leadership, guidance and years of dedication to this memorandum 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 as the Co- Chairman Emeritus of the Tulane Corporate Law Institute, one of the country’s leading M&A institutes. All or part of this article may have been or may be used in other materials published by the authors or their colleagues. Simpson Thacher & Bartlett LLP Social Issues In Selected Recent Mergers And Acquisitions Transactions 2004-2020 Supplement This memorandum is a supplement of an earlier memorandum (the “April 2004 Memorandum”), attached as Exhibit I, prepared by attorneys at Simpson Thacher & Bartlett LLP, that addressed social issues in selected 2003 and early 2004 mergers and acquisitions transactions (and which in turn updated a prior memorandum covering earlier periods). Readers should review the April 2004 Memorandum for a substantive review of the issues and concepts applicable to this analysis. In announced, high profile stock-for-stock deals with a value above $1 billion involving U.S. public targets (including but not limited to those labeling themselves as “mergers of equals”), a number of different governance structures, involving varying degrees of “power sharing”, are used to address social issues that arise between the combining companies. True “power sharing”, which is rarely observed, results when a target and acquirer’s CEOs equally share power, serving as co-CEOs of the combined company. However, where the parties determine there is a need for some form of “power sharing”, we more typically see a form of modified “power sharing”, whereby the positions of CEO and chairman are split between the parties. A less common variation of “power sharing” is where the parties agree to share power chronologically with a defined succession provision, pursuant to which representation in the combined company’s leadership structure is split between the parties for specified periods of time. One interesting phenomenon that we occasionally observe is where the target CEO assumes a greater role than the acquirer CEO in the combined company. This memorandum explores trends related to governance structures implemented to address social issues in transactions involving an acquirer’s stock as consideration within the last sixteen years, in particular those structured as “mergers of equals”. Mergers of Equals Transactions structured as “mergers of equals” generally include little or no premium and cosmetic provisions like joint names and split headquarters to accentuate the equality, but also often contain provisions addressing certain governance-related social issues — namely that the board of directors of the successor is split more evenly between the constituent companies, the roles of CEO and executive or non-executive chairman are often divided between the acquirer’s CEO or chairman and the target’s CEO or chairman and/or there can be a clear succession plan with respect to the position of CEO or chairman. In the past sixteen years, parties have only occasionally described a transaction as a “merger of equals” regardless of the post-merger structure of the combined company, however, the period between 2009 through early January 2020 generally saw a relative increase in the use of the label, with 41 announced transactions in our sample pool. This increasing trend of labeling transactions as a “merger of equals” stalled in 2012, during which there were no such announced transactions.1 The 2012 stall in the trend of “merger of equals” transactions was short lived, as 2013 and 2014 were relatively active years for such transactions2, and 2015 was an exceptional year with 7 announced “merger of equals” transactions, including some of the year’s largest transactions. The trend subsided in more recent years, with 5, 3 and 2 announced “merger of equals” transactions in 2016, 2017 and 2018, respectively, before surging in 2019, which saw an impressive 9 transactions announced as “mergers of equals”. 1 Even still, while none of the announced strategic transactions in 2012 were described by the parties as a “merger of equals” and a premium was paid in every instance, a number of these transactions did have certain power sharing characteristics typical of a “merger of equals”, as discussed further below. 2 The years 2013 and 2014 saw 3 and 4 “merger of equals” transactions announced in each of those respective years, consistent with the pre-2012 pace. PAGE 2 The significant transactions described by the parties as a “merger of equals” from the beginning of 2009 through 2019 were the Live Nation, Inc./Ticketmaster Entertainment transaction announced on February 10, 2009, the RRI Energy, Inc./Mirant Corporation transaction announced on April 11, 2010, the UAL Corporation/Continental Airlines, Inc. transaction announced on May 2, 2010, the Northeast Utilities/N STAR Inc. transaction announced on October 16, 2010, the AMB Property Corporation/ProLogis transaction announced on January 31, 2011, the ultimately terminated Deutsche Börse AG/NYSE Euronext transaction announced on February 15, 20113, the Holly Corporation/Frontier Oil Corporation transaction announced on February 22, 2011, the ultimately terminated Allied World Assurance Company Holdings, AG/Transatlantic Holdings, Inc. transaction announced on June 12, 20114, the Office Depot/OfficeMax transaction announced on February 21, 2013, the Inergy Midstream/Crestwood Midstream transaction announced on May 6, 2013, the ultimately terminated Publicis/Omnicom transaction announced on July 28, 20135, the ultimately terminated Applied Materials/Tokyo Electron transaction announced on September 24, 20136, the RF Micro Devices, Inc./TriQuint Semiconductor, Inc. transaction announced on February 24, 2014, the Alliant Techsystems Inc./Orbital Sciences Corporation transaction announced on April 29, 2014, the Cypress Semiconductor Corp./Spansion Inc. transaction announced on December 1, 2014, the Standard Pacific Corp./Ryland Group Inc. transaction announced on June 14, 2015, the Willis Group Holdings Limited/Towers Watson & Co. transaction announced on June 30, 2015, the Chambers Street Properties/Gramercy Property Trust Inc. transaction announced on July 1, 2015, the ultimately terminated Konecranes Plc/Terex Corporation transaction announced on August 11, 20157, the DENTSPLY International Inc./Sirona Dental Systems, Inc. transaction announced on September 15, 2015, the BBCN Bancorp, Inc./Wilshire Bancorp, Inc. transaction announced on December 7, 2015, the Dow Chemical Company/DuPont transaction announced on December 11, 2015, the First Cash Financial Services, Inc./Cash America International, Inc. transaction announced on April 28, 2016, the Quintiles Transnational Holdings, Inc./IMS Health Holdings, Inc. transaction announced on May 3, 2016, the three-way NorthStar Asset Management Group, Inc./NorthStar Realty Finance Corp./Colony Capital, Inc. transaction announced on June 3, 2016, the AMSURG Corp./Envision Healthcare Holdings, Inc. transaction announced on June 15, 2016, the Henderson Group 3 The press release announcing the Deutsche Börse/NYSE Euronext transaction did not categorize it as a “merger of equals”, but on the day the transaction was announced, NYSE Euronext and Deutsche Börse held a joint investor conference call where Duncan Niederauer, the CEO of NYSE Euronext stated, “Reto [the CEO of Deutsche Börse] and I have never called it an acquisition. It is a merger of equals. It is a business combination.” The proposed transaction contained certain of the power-sharing features common in “mergers of equals”, although it appeared that Deutsche Börse would initially be paying a premium for the NYSE Euronext shares and ownership of the combined company would be split 60/40 by the Deutsche Börse and NYSE Euronext stockholders, respectively. Mr. Niederauer was expected to become the CEO of the combined company with Reto Francioni, CEO of Deutsche Börse, becoming the chairman of the combined company. The board would be comprised of 17 members, with the chairman and CEO being joined by nine directors designated by Deutsche Börse and six directors designated by NYSE Euronext. However, on February 1, 2012, almost one-year after the announcement of the transaction, the European Commission announced it was blocking the proposed deal on antitrust grounds. Deutsche Börse AG and NYSE Euronext terminated the merger agreement, leaving NYSE Euronext to continue exploring other possibilities for a potential merger. Eleven months later it announced it was planning to merge with Intercontintal Exchange, Inc., an exchange from Atlanta, Georgia. 4 The Allied World Assurance Company Holdings, AG/Transatlantic Holdings, Inc. transaction was terminated by the parties on September 15, 2011. Pursuant to the terms of the agreement, however, the chairman, president and CEO of Allied World