From creative lawyering to novel issues of law, these are the deals that mattered most in 2017 and the attorneys who made them happen.
Eli Whitney Debevoise II, Arnold & Porter Kaye Scholer
A former U.S. executive director at the World Bank, Eli Whitney Debevoise II is plenty familiar with sovereign financing deals involving developing countries. Still, he covered new ground with his work for the Nigerian government in a landmark offering of diaspora bonds that raised $300 million for infrastructure projects in the country.
With Debevoise’s help, the Federal Republic of Nigeria became just the second country in sub-Saharan Africa to register bonds with the U.S. Securities and Exchange Commission, and the first sovereign ever to secure registration for tradable diaspora bonds offered to retail investors on both sides of the Atlantic.
The deal’s novelty and intended audience—Nigerian citizens now living in the United States and United Kingdom, rather than institutional investors—required Debevoise and his team to simultaneously satisfy American and U.K. regulators, while making sure the bond offering materials could be understood by Nigerian expatriates.
“It took some creative lawyering because in some cases there are almost directly conflicting requirements,” Debevoise says. “Part of the secret here was coming up with a marketing plan that would thread the needle: How do we get to our target audience, and how do we satisfy the suitability requirements?”
The transaction, Debevoise adds, “opens a door” for similar bond offerings, not just by Nigeria and other African countries, but throughout the rest of the world.
“This is a global story,” Debevoise says. “This is, for development finance, a real innovation. How do you capture some of this money that is outside and put it to use?”
—Scott Flaherty
Camille Abousleiman, Dechert
Egypt had been absent from the global market for nearly five years following the Arab Spring when it decided to make ambitious economic reforms on the way to a return. Guided by Camille Abousleiman, the nation secured a loan from the International Monetary Fund in late 2016 and devalued its currency, a politically challenging decision for a country where more than one-quarter of residents live in poverty.
“In hindsight it was the right decision,” Abousleiman says, “but at the time it was quite bold and quite difficult.”
The government came up with “an ingenious scheme” to issue bonds to its own central bank in 2017, allowing the bank to borrow against them in market transactions, then turned to Abousleiman to ensure the move passed constitutional muster. Egypt needed to build up its dwindling reserves, find international partners for financing and encourage foreign investment. It succeeded on all fronts. In just six months, Abousleiman helped the country list $11 billion in bonds. Along the way, Egypt has more than doubled its reserves.
“These bond issues have established market confidence in the measures taken by the government,” Abousleiman says. “It’s a recognition that this was the right thing to do.”
For Abousleiman, who is from Lebanon and has advised governments throughout the Middle East, the deal carried added significance.
“It’s always satisfying to be able to help, however modestly, a country get back on track,” Abousleiman says. “The benefits really flow to the entire population.”
—Ben Seal
Harvey Eisenberg, Weil, Gotshal & Manges
There was no precedent for Harvey Eisenberg to rely on in guiding SoftBank Group through its $3.3 billion acquisition of Fortress Investment Group. It marked the first time a publicly traded U.S. private equity and asset-management firm was taken private, and it didn’t happen without some considerable challenges.
Because of Fortress’ complicated structure, in which 60 percent of the firm was owned by a publicly traded partnership and the other 40 percent was owned by its founders in lower-tier subsidiaries, Eisenberg had to coordinate two separate but interconnected deals that treated all shareholders similarly. He also had to navigate nearly two dozen regulatory approvals across the United States, Asia and Europe, including Italy’s central bank, the U.S. Securities and Exchange Commission, the Delaware courts and the Committee on Foreign Investment in the United States.
“Every place we went, every regulator, we were introducing a new concept and we had to educate people,” Eisenberg says.
SoftBank made it work by insisting that Fortress’ founders reinvest a substantial portion of their proceeds in Fortress funds—“a good proxy for being an equity investor in the business without actually being an equity investor,” Eisenberg says.
Keeping everyone happy—investors, founders and employees alike—while also meeting regulators’ expectations took some creativity without any examples to fall back on.
“You can’t just color by numbers,” Eisenberg says. “Instead of thinking about what worked before and how to adapt it, you have to go back and think about why the rules are here in the first place.”
—Ben Seal
Brian Hermann, Paul, Weiss, Rifkind, Wharton & Garrison
When the French oil-services giant CGG emerged from its bankruptcy in February—just over a year since it faced a default—it had shed $2 billion in debt and gained operational liquidity. For Brian Hermann, who represented the company and coordinated its prebankruptcy negotiations in the United States and France, that conclusion came only after four or five (he lost count) trips to Paris—trips with little sightseeing and lots of sticky dealmaking.
Hermann is no newcomer to bankruptcy, or to helping energy companies file one. He has represented the oil and gas servicing company Preferred Sands and the electrical power company Bicent Holdings. But before CGG’s proposed prearranged U.S.-style Chapter 11 filing, coordinated with a French proceeding, he had remained unexposed to the French ways of bankruptcy.
“There was a difference in perspectives about restructuring among the stakeholders,” intensified by procedural and cultural distinctions, Hermann says.
The “geographic scope” of CGG’s operations also presented challenges—he was “trying to restructure a company that does business all over the world and keep it operating,” Hermann says.
French bankruptcy laws, unlike those in the United States, bar any so-called cramdown of terms on equity shareholders, so CGG had to get the shareholders’ buy-in as well. French courts appoint a mediator (known as a mandataire ad hoc) to oversee hashing-out sessions among all stakeholders at the very beginning of a proceeding, rather than following an impasse.
“Candidly, I was initially a little skeptical,” Hermann concedes about the early intervention by a mediator. But of the mandataire, he says, “She got people to a deal.”
—Miriam Rozen
George S. Cary, Cleary Gottlieb Steen & Hamilton
Two years laboring on the same deal sounds daunting, but George Cary thrived when he served as the lead global antitrust counsel to Dow Chemical in its prolonged $130 billion merger of equals with DuPont.
It helped that Cary had decades under his belt as Dow’s lawyer.
“We have done pretty much every deal for them for the last 20 years,” Cary says.
The merger, finalized in February after the U.S. Department of Justice gave its nod of approval, ranks “among the most challenging I’ve done in my career,” Cary says.
In structuring the deal, he had to help his client overcome dozens of overlaps on products and industries. The deal also required merger clearances from regulators in over 20 jurisdictions, including the United States, the European Union, China, Brazil, South Africa and India.
“One of the big threats was that agricultural is so local that each jurisdiction would seek a separate remedy,” Cary says.
In the end, he wanted to control “the scope of the divesture” required by all those regulators. Also overshadowing the transaction were U.S. lawmakers’ concerns, expressed at hearings, about a pattern of three proposed mergers of big agricultural chemical companies, including the Dow-DuPont deal, that were all announced at roughly the same time.
To prevent any regulatory roadblocks, Cary followed a strategy aimed at avoiding inconsistent and cumulative remedies that might undermine the economics behind the merger. What ultimately happened with all those attentive regulators spread worldwide?
“At the end of the day, they came to agree,” Cary says, “but they did slow things down.”
—Miriam Rozen
Matthew Guest, Wachtell, Lipton, Rosen & Katz
Matthew Guest has been working with Thermo Fisher Scientific since 2006, and in that time he’s seen the company become “extraordinarily accomplished at M&A,” he says. It’s wrapped up deals domestic and international, public and private. But he hadn’t seen anything quite like Thermo Fisher’s acquisition of Patheon, the Dutch-based, New York-listed pharmaceutical company it snapped up for $7 billion last year.
Three-quarters of Patheon’s shares were held by two firms, meaning that any deal required their approval. And because it was a Dutch transaction, the only structure available was a tender offer under Dutch law, Guest says. Meanwhile, Patheon’s board wanted to avoid a deal that could pass with approval from only the two shareholders that represented the majority, so a tender offer with a 75 percent minimum condition was unacceptable.
“The board has a commitment to all their shareholders,” Guest says. “They were resistant to the idea of a truly locked-up deal, where there was, from the moment you announce it, no possibility that it cannot be completed from a shareholder perspective.”
Ultimately, Patheon’s board was given a fiduciary termination right, subject to a 4 percent break fee, and a deal was struck with the major shareholders, giving Thermo Fisher certainty that it would get 75 percent of the stock plus the break fee, at the very least.
“Taken together, while not 100 percent certainty, there was functional certainty that we’d achieve the requisite level of support,” Guest says. “And it worked out exactly as you’d expect.”
In the end, 99 percent of shares were tendered in.
“The legal creativity that went into it—this set of terms was unprecedented for a Dutch deal—was necessary to implement the business objective,” Guest says. “It was a challenge to implement it, but it was a very satisfying result.”
—Ben Seal
Krishna Veeraraghavan, Sullivan & Cromwell
It took a Texas two-step to get one of the year’s biggest deals done.
When e-commerce giant Amazon began moving toward its $13.7 billion acquisition of Whole Foods and its 400-plus grocery stores around the country, the parties encountered a jurisdictional complication: Because Whole Foods was incorporated in Texas, rather than the corporate haven of Delaware, there were questions about how its board should react to a potential higher bidder.
“Texas doesn’t have a prevalence of jurisprudence on the issue, so there was a lot of uncertainty about what would happen if someone did make a topping bid,” says Krishna Veeraraghavan, who advised Amazon on the deal.
The sides went back and forth on the topic, before Veeraraghavan came up with a solution in the middle of a conference call.
“Well, we know what Delaware says,” Veeraraghavan recalls thinking. “Why don’t we just stipulate for purposes of our interactions that that’s the rule? It will give comfort to everyone, so let’s solve the issue by assuming we’re both Delaware corporations.”
By treating the deal as if it were being commenced under Delaware law, both sides were able to carry on with certainty. Timing was still of the essence—as Veeraraghavan points out, a leak could have unsettled the transaction at any point along the way—but his suggestion helped speed along the process of inking a deal that sent ripples throughout the business world.
“It was really a change in how people view the cross-pollination of industries and what can happen next,” Veeraraghavan says.
—Ben Seal
Bonnie Chan, Davis Polk & Wardwell
Bonnie Chan knew much was at stake for client Tencent, a Chinese technology giant, when she started work on a first-of-its-kind initial public offering and spinoff of subsidiary China Literature.
Tencent has about 600 subsidiaries, so it was important that this first IPO be done right, she says.
“It’s accepted that following this particular IPO, there will be a lot more,” Chan says.
Chan, who has represented Tencent since 2012, was well-suited for the project. Before joining Davis Polk in 2010, she was a senior vice president and head of the IPO transaction department of the listing division of the Hong Kong Stock Exchange.
She used that experience to solve two major challenges facing the IPO, which raised about $1.1 billion in November 2017. She obtained precedent-setting waivers from regulators that gave China Literature flexibility in accounting for “connected transactions” with Tencent, which owns WeChat, a messaging app that refers users to China Literature, a Kindle-like business.
“That sets up a very useful example because, frankly, Tencent is so popular, the user base is so huge, that I’m sure the same arrangement could be cloned for future IPOs,” Chan says.
She also convinced regulators that there is little risk that China Literature would violate a proposed Chinese law that governs the amount of foreign investment for companies operating in certain restricted industries, and that risk would be adequately dealt with through disclosures.
Chan says the IPO was a success for investors because the stock price jumped from $55 in Hong Kong to nearly $120 on the first day of trading.
“Everyone made a lot of money,” she says. “Everyone’s happy.”
—Brenda Sapino Jeffreys
Aaron Gruber & Richard Hall, Cravath, Swaine & Moore
Cravath, Swaine & Moore partners Richard Hall and Aaron Gruber faced numerous challenges when representing German client Linde in a share-for-share merger with Praxair, a Connecticut company also in the industrial gas business.
The $70 billion deal was complicated by the need to deal with U.S. and German law, and by post-Brexit uncertainty. But Hall and Gruber, corporate partners in New York, came up with a precedent-setting structure, and the deal was approved by shareholders in 2017.
“In the German legal market, people have looked at this transaction and have said this is a very interesting structure,” Hall says.
The deal calls for a merger through a holding company that would acquire both companies. But because of conflicting U.S. and German laws relating to tender offers, the lawyers came up with a “special tax termination right” that would relieve the parties of the obligation to seek regulatory approval if the offer was completed with less than 74 percent of Linde shareholders tendering their shares.
Hall says a second complication was the uncertainty over how Brexit would play out, and how that would affect the holding company. He and Gruber decided to base the holding company in Ireland and make it a tax resident of the United Kingdom.
“That gives us most of the benefits of being in the U.K. If the British end up not doing much in response to Brexit, and if the British do something dramatic in response to Brexit, that would give us maximum flexibility to restructure,” Hall says.
Gruber notes the deal awaits regulatory approval.
—Brenda Sapino Jeffreys
Christopher Kiplok & Bruce Zirinsky, Hughes Hubbard & Reed and Zirinsky Law Partners
Most passengers on a Republic Airline flight don’t know they’re on one—the company operates regional flights for American Airlines, Delta Air Lines and United Airlines. That reality added a level of complexity to the Chapter 11 restructuring advised by Bruce Zirinsky and Christopher Kiplok that most bankruptcies don’t face. The attorneys needed to get deals done with each of Republic’s three airline partners, all while rightsizing its fleet of planes—an endeavor comprising dozens of smaller deals in its own right.
“Any one of those moving parts could have been an existential threat to the success of the reorganization,” Kiplok says.
On top of all that, Republic was in the midst of a billion-dollar litigation with Delta before filing for Chapter 11, making it all the more unlikely that it was the first airline to reach a deal, setting the stage for United and American to follow suit. It took “a lot of shuttle diplomacy to make sure all the pieces would fit together as part of the restructuring puzzle,” Zirinsky says, but he and Kiplok helped the process wrap up in just 14 months, staving off concerns that delays could lead to pilot attrition.
Together, the attorneys managed to minimize the turbulence and guide Republic to a safe landing.
“People call bankruptcy a turnaround,” Kiplok says. “To go from a billion-dollar litigation and turn that into a new deal and a new partnership, that really is a turnaround.”
—Ben Seal
Gordon Caplan, Willkie Farr & Gallagher
In the midst of a dramatic downturn ravaging the retail industry, the Hudson Bay Co., which owns and operates retail space in North America and Europe, found an innovative way to improve its future outlook. Last fall, Gordon Caplan guided the company through a series of interlocking cross-border transactions that breathed new life into Hudson Bay by bringing in a capital infusion and repurposing real estate through a joint venture with workspace startup WeWork.
“This was the most innovative and interlocking use of both real estate and retail banners that we’ve seen to date,” Caplan says.
In the deal, Hudson Bay sold to WeWork its Lord & Taylor flagship building on Fifth Avenue in New York for $850 million and, at the same time, leased back the first floor to keep the department store as an anchor tenant; struck a joint venture with WeWork for the use of other Hudson Bay-owned properties in Canada, the United States and Germany; received a $500 million equity investment from Rhone Capital; and fought off an activist investor, all in one 10-week window.
The deal is “a representation to the business world that if you own your own real estate, you can do really transformative things with it,” Caplan says.
It all came together amid the backdrop of another major retailer, Toys R Us, filing for bankruptcy in September 2017, showing that innovative thinking can keep companies such as Hudson Bay humming.
“What all of these companies need is capital, time and retention of their best assets—both the retail banners and the underlying real estate,” Caplan says. “In 10 short weeks, Hudson Bay was able to pull off all three.”
—Ben Seal
Andrew Calder, Kirkland & Ellis
Andrew Calder’s mission in 2017 was simple: Negotiate the $18.8 billion sale of Dallas client Energy Future Holdings to Sempra Energy in a way that would ensure the deal would close.
Calder accomplished that challenge, but not before negotiating three prior agreements that fell through because they lacked regulatory approval or because of a richer competing offer.
“It was the most complicated transaction, or series of transactions, I’ve ever had to deal with,” he says, noting that many lawyers from Kirkland & Ellis had a hand in the work.
In August 2017, Sempra, based in San Diego, announced it would pay $9.45 billion in cash to acquire EFH, the indirect owner of 80 percent of Oncor Electric Delivery Co., operator of Texas’ largest electric transmission and distribution company. The total value is $18.8 billion, including assumed debt.
Earlier deals—with Hunt Consolidated in 2015; NextEra Energy in 2016; and Berkshire Hathaway Energy in 2017—did not close.
The deal came with multiple challenges, Calder says.
“First, it was one of the most complicated structures anyone has seen … with multiple stakeholders,” he says.
Calder also had to balance what was acceptable to the bankruptcy court and the Texas Public Utilities Commission, which declined to approve the first two deals.
There’s a happy ending to the story, though, because the EFH/Sempra deal has been approved by the bankruptcy court and was expected to gain the green light from the PUC.
“I learned to never assume deals are going to close,” Calder says. “We basically learned to be very pragmatic.”
—Brenda Sapino Jeffreys
Randi Lesnick, Jones Day
Randi Lesnick’s long relationship with Reynolds American (RAI), dating to when it was R.J. Reynolds Tobacco Holdings, helped her guide the company through a $49 billion acquisition by British American Tobacco (BAT).
Lesnick, a partner in Jones Day in New York, says the firm has worked with the company for decades on both transactions and litigation and understands its business.
In 2004, Lesnick helped form RAI by representing R.J. Reynolds Tobacco Holdings in a merger with BAT subsidiary Brown and Williamson. Among other work for the client — deals that totaled $90 billion—Lesnick helped RAI buy Lorillard Tobacco Co. in a $27 billion deal in 2015. And then, in 2017, she helped RAI negotiate the deal for BAT to acquire the 57.8 percent of RAI it didn’t already own.
Lesnick says the RAI/BAT transaction was complicated by the fact that BAT is based in the United Kingdom and RAI is a U.S. company, and the companies had to pay close attention to disclosures and RAI’s governance agreement. The transaction also had to be approved by independent directors and the boards of both companies, she notes.
Lesnick says she started work on the deal in October 2016, it was announced in January 2017, and it closed six months later. The speed made her long relationship with the client more valuable.
Lesnick says she has been at her client’s side through a business life cycle.
“Helping them get this over the finish line in what really was an expedited time was a great collaborative effort,” she says.
—Brenda Sapino Jeffreys
Mitchell Rabinowitz, Crowell & Moring
Mitchell Rabinowitz, a partner in Crowell & Moring’s Washington, D.C., office, has seen a lot in his 20 years working on bank consortium transactions, but he was intrigued when David Rutter, the founder of R3, hired him in 2015 to help create a business involving banks and blockchain technology.
“It really wasn’t exactly clear where it was going to go at that point,” Rabinowitz says.
Rabinowitz created an initial consortium of nine global banks that entered into a service arrangement. Dealing with the IP of each of the banks was a challenge. Rabinowitz later set up a structure to obtain equity financing for the company, and R3 raised $107 million in 2017 from a total of 42 banks from 15 countries and two companies.
“It was an incredibly complicated transaction,” he says, adding that he had to negotiate things like what the board would look like, and how IP arrangements would work.
R3 is building an operating system for financial markets using a distributed ledger platform—also known as a blockchain—called Corda. Using distributed ledgers, banks can eliminate the need for a middleman in transactions between them, which is cost-effective and allows for faster transactions.
Rabinowitz says he continues to represent R3 as outside general counsel and in connection with future financing.
“This was the absolute highlight of my career, so far,” he says. “To be involved in such a groundbreaking consortium, to have a global investor base of the world’s most sophisticated banks … to be involved with the cutting-edge technology that is on everybody’s lips.”
—Brenda Sapino Jeffreys
David Narefsky, Mayer Brown
David Narefsky is a self-described “transit junkie” who grew up riding the subway around New York City. These days he gets around Chicago on the Red and Purple north-south rail lines—the spine of the transit system—so he was just the right person for the job when the city needed to pull together funding for a $2.1 billion rehabilitation of the right of way and “L” stations stretching from Wrigley Field up to the Evanston, Illinois, border.
To secure a $1.1 billion grant from the federal government, Narefsky’s client, the Chicago Transit Authority, needed to plug a $625 million gap with its own funding, so he put a spin on tax increment financing (TIF), coordinating a new transit-focused TIF that pulls from the increased value of property situated along the rail lines to support the project.
Narefsky led the charge to draft legislation allowing for the transit TIF, moved it through a dysfunctional state Legislature and secured an agreement between CTA and the City Council to implement the new plan. The new TIF has an extended life (35 years to the typical 23), covers an area several miles long and half a mile wide at points, and manages to deliver funds to the Chicago Board of Education as well.
Narefsky and his colleagues were racing against the clock the whole way, faced with the prospect of a new White House administration with uncertain infrastructure priorities. The final agreement was signed less than two weeks before President Barack Obama left office.
“There wasn’t a day to spare,” Narefsky says.
*****
Reprinted with permission from the March 26, 2018 edition of The American Lawyer © 2018 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.”
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