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March 11, 2015 the FOUR RING CIRCUS THE FOUR RING CIRCUS - ROUND NINETEEN; A FURTHER UPDATED VIEW OF THE MATING DANCE AMONG ANNOUNCED MERGER PARTNERS AND AN UNSOLICITED SECOND OR THIRD BIDDER By: Robert E. Spatt, Esq. Peter Martelli, Esq. March 11, 2015 _______________ Copyright © 2015 Robert E. Spatt & Peter Martelli. All rights reserved. Special thanks to Lauren M. Colasacco and Paul Bennett (and to K. Jona Lundborg and Jennifer Levitt with respect to prior versions), 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 authors or their colleagues. A downloadable version of this article can be found on the Simpson Thacher & Bartlett LLP website (www.stblaw.com/FourRingCircus2015.pdf), along with a marked version showing changes from the prior “Round Eighteen” of this article (www.stblaw.com/FourRingUpdates2015.pdf) to facilitate the identification of updated data. Simpson Thacher & Bartlett LLP The Four Ring Circus - Round Nineteen; 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 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 6) from 2010 through the beginning of 2015 (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:2 2015 • Endo International PLC’s announced unsolicited bid for Salix Pharmaceuticals Ltd. in an attempt to wrest Salix from its pending acquisition by Valeant Pharmaceuticals International Inc. (which announcement comes on the date of this article going to press – see the future “Round Twenty” for the outcome and details!); • R.R. Donnelley & Sons Company’s successful deal jump of Quad/Graphics, Inc.’s attempted acquisition of Courier Corporation; 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 – with no resulting bid; and (2) activist Starboard Value Fund, which until days before the 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. 2 A similar list of notable U.S. deal-jump transactions from 1994 through 2009 is included on Annex A. Page 2 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 pending 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’s unsuccessful attempt to deal-jump the SoftBank acquisition of Sprint Nextel, potentially to gain leverage in Dish’s quest for Clearwire, but failing after SoftBank increased its price to be paid for Sprint, upping the cash payable to shareholders by $4.5 billion; • Dish Network Corporation’s ultimate failure to break up Sprint Nextel Corporation’s acquisition of the remainder of Clearwire Corporation, notwithstanding pushing Sprint Nextel to a significantly higher price and having been Clearwire’s recommended deal for a brief shining moment; • Minerals Technologies Inc.’s successful breakup of Imerys SA’s acquisition of AMCOL International Corporation, after an intense bidding war; • Teva Pharmaceutical Industries Limited’s successful acquisition of NuPathe, Inc., after breaking up NuPath’s deal with Endo Health Solutions Inc.; • Cascade Bancorp’s successful acquisition of Home Federal Bancorp, after luring Home Federal away from Banner Corporation with a superior proposal made during a 30-day go-shop period; • Jacobs Investments, Inc.’s failed breakup of Eldorado Holdco, LLC’s acquisition of MTR Gaming Group, Inc. after Eldorado increased the merger consideration to rebuff Jacobs’s jump; • Paulson & Co. Inc.’s acquisition of Steinway Musical Instruments, Inc., after successfully jumping Steinway’s definitive agreement with Kohlberg & Company, L.L.C. during the “go-shop” period and beating out a second interloper; • Kroenke Sports & Entertainment’s successful deal-jump acquisition of Outdoor Channel Holdings, Inc., after luring Outdoor away from InterMedia Partners LP with cash, as opposed to InterMedia’s mixed cash-and-stock consideration; • Valeant Pharmaceutical International, Inc.’s valiant (and successful) effort to stave off Merz GmbH & Co. KGaA’s attempted breakup of Valeant’s acquisition of Obagi Medical Products, Inc. by increasing its initial purchase price; Page 3 2012 • Reckitt Benckiser Group plc’s successful acquisition of Schiff Nutrition International, Inc., after luring Schiff away from Bayer HealthCare LLC; • Illumina, Inc.’s failed attempt to break up BGI-Shenzhen’s acquisition of Complete Genomics, Inc.; • Innospec Inc.’s failed attempt to thwart the joint acquisition of TPC Group Inc. by First Reserve and SK Capital Partners; • Apollo Management, L.P.’s acquisition of Great Wolf Resorts despite a series of interloping proposals by KSL Capital Partners; • Dell Inc.’s successful acquisition of Quest Software, Inc. after breaking up a signed deal between Quest and Insight Venture Partners; • Actian Corporation’s successful acquisition of Versant Corporation after breaking up Versant’s agreement with UNICOM Systems, Inc., when UNICOM declined to match the superior proposal Actian made during the “go-shop” period; • Markwins International Corporation’s successful break-up of Swander Pace Capital’s proposed acquisition of Physicians Formula Holdings, Inc., after Swander Pace declined to match Markwins’ superior proposal; • MIPS Technologies, Inc.’s acquisition by its original merger partner, Imagination Technologies Group plc, after an unsolicited proposal from CEVA, Inc. instigated a bidding war that caused Imagination Technologies to twice increase its offered purchase price to secure the deal; • PacWest Bancorp’s successful disruption of Umpqua Holdings Corporation’s announced acquisition of American Perspective Bank; 2011 • Thoma Bravo, LLC-backed Plato Learning Inc.’s failed attempt to break up a deal between Renaissance Learning and a Permira affiliate, in a bidding war that involved an innovative approach to purchase price allocation among controlling and minority shareholders and underscored the often outcome- determinative effect of a controlling shareholder; • GTCR and ACI Worldwide, Inc.’s respective acquisitions of Fundtech Ltd. and S1 Corporation, separately breaking up and snatching away both companies which had been parties with each other to a signed deal; • The Williams Companies, Inc.’s unsuccessful attempt to lure
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