March 01, 2019

MONTH-IN-BRIEF: Mergers & Acquisitions

Ryan Thomas, Chauncey Lane

M&A Law

Court Rejects Xerox’s Bid to Dismiss Federal Merger Suit

By Ericka Simpson Conner

Fujifilm Holdings Corporation (“Fuji”) scored a victory recently when the U.S. District Court for the Southern District of New York (the “Court”) denied Xerox Corporation’s (“Xerox”) request to dismiss Fuji’s lawsuit seeking $1 billion.  Xerox backed out of the planned merger between the companies due to pressure from activist investors, Carl Icahn and Darwin Deason.  Xerox argued Fuji was forum shopping and state court was a more convenient forum.  The Court, however, disagreed, ruling Xerox’s forum argument was a direct contradiction of forum selection provisions in the Fuji transaction documents.  Additionally, Xerox claimed the company had the right to terminate the transaction because Fuji failed to deliver a copy of their joint venture’s audited financial statements by an agreed upon deadline.  However, the Court noted the parties had thirty days to cure any default once notified and dismissed Xerox’s argument.  All of Fuji’s claims were allowed to move forward, including breach of the covenant of good faith and fair dealing claim, which is often dismissed by courts when an underlying written contract is in dispute.

Head of DOJ’s Antitrust Division Says Current Regime is Built for “Free” Technology Products

By Casey Kidwell

On February 11, 2019, Makan Delrahim, Assistant Attorney General, delivered the keynote address at the Silicon Flatirons Annual Technology Policy Conference.  Delrahim discussed antitrust issues related to zero-priced products and services such as Pandora, OpenTable, and IMDb Freedive.  According to Delrahim, public antitrust enforcement may need to play an even greater role in zero-price settings where the absence of price to the end consumers could make private damages recovery difficult, or where effects on business partners, such as advertisers who must rely on an ongoing relationship, may impede the incentives for private antitrust actions.  Delrahim’s public comments may shed some light on what to expect from the Department of Justice (DOJ) in mergers involving parties that provide zero-priced products or services.  While many in the antitrust community (including Microsoft in the late 1990’s) have argued that zero-priced strategies should be exempt from antitrust scrutiny, it doesn’t appear the DOJ will be changing the rules for these business models anytime soon.  Delrahim argued that the current antitrust regime is well-equipped to handle the issues presented by zero-priced products and antitrust authorities have been able to adapt to the non-price factors used in competition.

International M&A

European Commission Blocks Siemens’ Proposed Acquisition of Alstom

By Chris Johnson                                                              

On February 6, 2019, the European Commission (the “Commission”) blocked the proposed acquisition of Alstom AG, a worldwide rail transport provider (“Alstom”), by Siemens AG, a worldwide leader in several industrial areas, including rail transportation (“Siemens”). The new combined entity was expected to generate over $15 billion in annual revenue and combine the two largest European suppliers of railway and metro signaling systems and rolling stock.

The Commission’s investigation focused on the impediment of competition in the areas of signaling systems that are essential for railway safety and very high speed trains that operate at speeds of over 300 km per hour. The Commission found the combined entity would become the undisputed market leader in signaling systems and drastically reshape the landscape of the market for high-speed trains by eliminating one of the two largest suppliers.

Both Alstom and Siemens proposed remedies to alleviate the Commission’s concern over competition in the railway market.  However, the Commission determined the proposed remedies were not adequate to address competition concerns and permitting a merger between the two companies would result in higher prices for the next generation of high speed trains and signaling systems that keep passengers safe.

Joint Venture

European Union Unconditionally Approves Air France–KLM, Delta and Virgin Group Deal over Virgin Atlantic

By Lora Wuerdeman

On February 12, 2019, the European Commission announced its approval of the proposed deal between global airline group, Air France–KLM (“Air France”), international airline, Delta Air Lines Inc. (“Delta”), and British venture capital conglomerate, Virgin Group, Ltd. (“Virgin Group”), to acquire joint control over London based airline, Virgin Atlantic Ltd. (“Virgin Atlantic”).  In May 2018, Air France announced the deal that would allow Air France to acquire a 31% stake in Virgin Atlantic currently held by Virgin Group for €220 million. Upon completion, Virgin Group would retain a 20% stake of Virgin Atlantic, with Delta retaining its 49% stake.  The Commission examined the potential impact on (i) air transport of passengers, (ii) cargo air transport services and (iii) maintenance, repair and overhaul services. The investigation concluded the joint venture would not raise competition concerns in any of the relevant markets and cleared the case unconditionally.

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.