September 28, 2017

MONTH-IN-BRIEF: Mergers & Acquisitions

Ryan Thomas, Chauncey Lane

International Law

President Trump Blocks Chinese Acquisition over CFIUS Concerns

By Arooj Nazir, Husch Blackwell

On September 13, 2017, President Trump blocked a proposed $1.3 billion acquisition of Lattice Semiconductor Corporation by Canyon Bridge Investments, a Chinese-owned investment fund based in California, citing national security concerns. This is the fourth transaction to be blocked by a United States president under the rules of the Committee on Foreign Investments in the United States (CFIUS), and the second in the past ten months. President Trump’s decision was based on a review process conducted by CFIUS, which provides the United States President with the authority to investigate, and potentially unwind, foreign investments in the United States where national security concerns are identified. The ultimate foreign parent of Canyon Bridge Investments, China Venture Capital Fund Corporation Limited, is owned by Chinese state-owned entities, triggering heightened scrutiny of Lattice’s technology. This decision reflects growing concerns regarding Chinese investments in the United States.

 

Mergers & Acquisitions Law

Federal Court Requires Insurer to Pay Post-Merger Defense Costs

By Chauncey Lane, Husch Blackwell

On September 18, 2017, a New Jersey federal court granted summary judgment in favor of plaintiffs BCB Bancorp, Inc. (BCB) and the former directors and officers of Pamrapo Bancorp, Inc. (Pamrapo), holding that under the New Jersey Business Corporation Act (NJBCA) Pamrapo’s D&O insurer, Progressive Casualty Insurance Co. (Progressive), was obligated to cover post-merger defense costs incurred in connection with a pre-merger shareholder class-action lawsuit. In reaching its conclusion, the court rejected Progressive’s argument that its duty to defend Pamrapo’s officers and directors extinguished when Pamrapo dissolved and merged into BCB. According to the court, under the NJBCA, the surviving corporation of a statutory merger steps into the shoes of the merged entity for purposes of the merged entity’s rights and liabilities, including rights under insurance policies. The court concluded, “[A]n insurance contract must contain specific exclusionary language to prevent a transfer of rights to the surviving entity under the NJBCA.” No such exclusion existed in Pamrapo’s policy, so the transfer of assets in the merger preserved BCB’s insurance rights.

 

Walgreens and Rite Aid Proceed with $4.4 Billion Acquisition

By Genni Zimmer, Husch Blackwell

Walgreens Boot Alliance, Inc. (Walgreens) and Rite Aid Corporation (Rite Aid) issued a press release on September 19, 2017, announcing that they have Federal Trade Commission (FTC) clearance to proceed with a $4.375 billion acquisition. Under the amended and restated asset purchase agreement, Walgreens will purchase 1,932 stores, three distribution centers, and related inventory from Rite Aid. Walgreens initially planned a troubled takeover of Rite Aid, announcing plans to merge back in October 2015. But, fearing the FTC would block the merger due to antitrust concerns, that plan was terminated. Instead, an agreement to acquire only some Rite Aid stores underwent multiple revisions, finally obtaining approval with the current acquisition plan. The FTC’s investigation focused on whether the acquisition could substantially lessen competition and thus be prohibited under Section 7 of the Clayton Act.

The decision to end the investigation was contentious, with only one of the two current FTC commissioners favoring approval. Commissioner Terrell McSweeny issued a statement indicating her concern that the acquisition has the potential to reduce competition and contending that additional analysis was needed. Acting FTC Chairman Maureen K. Ohlhausen does not share Commissioner McSweeny’s concerns, asserting that the Commission undertook a comprehensive analysis to conclude there would be no adverse impact on competition. Walgreens plans to begin purchasing stores in October and anticipates that all purchases will be completed by spring 2018.

 

FCC Requests Additional Information Regarding Sinclair-Tribune Acquisition

By Arooj Nazir, Husch Blackwell

On September 14, 2017, the Federal Communications Commission (FCC) requested that Sinclair Broadcast Group Inc. (Sinclair) provide additional information related to a possible transaction between Sinclair and Tribune Media Co. (Tribune). In May, Sinclair agreed to buy Tribune for $3.9 billion, potentially making Sinclair one of the largest broadcasting companies in the United States. Broadcasting companies are generally governed by the Communications Act of 1934, as amended (Communications Act). Section 308(b) of the Communications Act allows the FCC to require additional information to enable it to determine whether an application for station licenses, or modifications or renewals thereof, should be granted or denied or such license revoked. Currently, under FCC rules, a single company cannot own two power stations in a single market. The FCC’s letter to Sinclair requests additional information regarding the acquisition’s effect on national and local media markets, and requires Sinclair to submit information about its current audience reach and steps it would take to comply with ownership limits. If the FCC allows this acquisition to proceed, Sinclair and Tribune together will cover 72 percent of the nation’s television households.

Ryan Thomas

Counsel, Bass Berry & Sims PLC

As mergers and acquisitions (M&A) and securities counsel to numerous national companies and private equity firms, Ryan Thomas has closed more than $50 billion in M&A transactions, and more than $60 billion in overall transactions, including both the largest domestic LBO, and the largest private equity-backed IPO at the time. Ryan’s practice focuses on public and private companies within the healthcare, media, retail, government services, life sciences and technology industries, among others.

Chauncey Lane

Counsel; Husch Blackwell, LLP

Boards and senior executives of public and private companies and investment management firms call on Chauncey for his knowledge and experience in mergers and acquisitions and capital market transactions. In this role, Chauncey regularly assists domestic and international clients with buy-side and sell-side mergers, divestitures, asset acquisitions, going-private transactions, debt and equity offerings, corporate governance and corporate restructurings. Chauncey is an active member of the Business Law Section’s Mergers and Acquisitions Committee and Federal Regulation of Securities Committee.