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February 2, 2011 6:16 PM

Groundhog Day Deal Roundup: Transactions Heat Up Ahead of Spring Thaw

Posted by Brian Baxter

Two of the nation's top groundhogs are in agreement. After not seeing their shadows on Wednesday morning, Punxsutawney Phil and Staten Island Chuck concluded--or at least their handlers did--that spring is just around the corner.

But will the chilly dealmaking environment also begin to warm? While woodchucks might not be as adept at tracking the level of M&A activity, there are financial journalists and market analysts to keep tabs on such information.

The volume for M&A deals increased for the first time in three years in 2010, according to the Chicago Tribune, and a flurry of deal activity in recent months has some predicting big things for 2011. But don't get too excited. American Banker, which spoke with Sullivan & Cromwell senior chairman H. Rodgin Cohen, reports that mark-to-market accounting rules could hinder new bank mergers this year.

Now on to the latest deals... (As an aside, we already covered the legal advisers behind Hearst's $886 million acquisition of 100 magazines from French publisher Lagardère in early January.)

CNOOC / Chesapeake Energy

For the second time in four months, Vinson & Elkins, Wachtell, Lipton, Rosen & Katz, and Wilmer Cutler Pickering Hale and Dorr are advising on a deal between the state-owned China National Offshore Oil Corporation and Chesapeake Energy.

As reported by The Am Law Daily in October, CNOOC turned to Vinson for its $1 billion acquisition of one-third of the oil and gas assets in the Eagle Ford shale project in Texas owned by Oklahoma City-based Chesapeake Energy. Wachtell served as M&A counsel and Wilmer as regulatory counsel to Chesapeake on that deal.

Now Chesapeake is selling one-third of its oil and gas holdings in Wyoming and Colorado to CNOOC for $1.3 billion in cash, Reuters reports. The deal calls for a $570 million payment by CNOOC at closing, with the Chinese oil giant agreeing to fund additional drilling and completion costs until Chesapeake has been paid $697 million by 2014. CNOOC will own the rights to 33.3 percent of whatever oil is found in the region.

Vinson M&A partners David Blumental, Fielding "Tres" Cochran III, and Jay Kolb, and environmental partner Larry Nettles are advising Beijing-based CNOOC on its latest deal with Chesapeake, which turned to Wachtell, Wilmer, and Oklahoma City's Commercial Law Group for counsel.

Aditya Birla / Columbian Chemicals

Indian conglomerate Aditya Birla Group announced on January 31 that it would buy carbon black producer Columbian Chemicals from One Equity Partners, the merchant banking arm of JPMorgan Chase, for an estimated $875 million.

Columbian Chemical is the world's third-largest manufacturer of carbon black, a material that Bloomberg reports is produced by the incomplete combustion of oil and gas and used to improve the durability of tires and as well as in the pigment of paints. Joseph Gaynor, Jr., serves as general counsel for Marietta, Ga.-based Columbian, which received outside counsel on the Aditya Birla acquisition from Simpson Thacher & Bartlett.

Shearman & Sterling M&A partner Stephen Besen, tax partner Peter Blessing, employee benefits leader John Cannon III, finance partner Steven Sherman, antitrust partner Matthew Readings and counsel Lisl Dunlop, litigation partners James Tallon and Philip Urofsky, IP partner Samuel Waxman, capital markets partner Tobia Croff, corporate partner Alfred Kossmann, and real estate counsel Jason Pratt led the team from the firm advising Aditya on the deal.

Mumbai-based Aditya's chief legal officer is Ashok Gupta, who was hired for the position in December 2009. Indian newspaper Mint, an offshoot of The Wall Street Journal, reports that Aditya will become the world's largest carbon black maker by volume after its acquisition of Columbian.

Citigroup / EMI

British private equity firm Terra Firma, backed by financier Guy Hands, paid $6.3 billion for EMI Music Publishing in May 2007. Things spiraled downward from there. Upset with how his investment was panning out, Hands sued Citigroup, which had put up $4.3 billion in loans to finance the deal, claiming that the bank had duped him into buying the company.

Thanks to its lawyers at Paul, Weiss, Rifkind, Wharton & Garrison, Citi prevailed in that suit in November. That made a sale of EMI all but inevitable. On Tuesday, Citi took control of the New York-based music publisher as part of a debt-for-equity swap that will slash EMI's debt by 65 percent to about $2 billion, Bloomberg reports.

Bruce Johnston, chair of the bank and institutional finance group and cohead of the European insolvency group at Dewey & LeBoeuf, is advising Citi as security agent on the sale and administration of EMI's holding company, Maltby Acquisitions Limited. Associate Michaela Schmiederova is assisting Johnston in the matter.

"This is a major chapter in the course of EMI's story, and we will work with Citibank on the best solution to the business' future and their assets in the group," Johnston said in a statement.

Clifford Chance corporate partner Daniel Kossoff and restructuring partner Adrian Cohen took the lead advising Citi as lenders on EMI's debt restructuring negotiations. PricewaterhouseCoopers is acting as administrator for EMI in the U.K., Reuters reports, and helped the music publisher trim $3.6 billion in debt owed to British creditors. Hogan Lovells restructuring partners Alexander Wood and Deborah Gregory are advising PwC in the matter.

EMI and Maltby turned to Freshfields Bruckhaus Deringer restructuring partner Richard Tett, tax partner Sarah Falk, corporate partner Martin Nelson-Jones, and finance partner Martin Hutchins for counsel on the sale to Citi. As for EMI, it remains to be seen whether Citi will hold on to its new music holdings, or look for a buyer of its own.

Cumulus Media / Cumulus Media Partners

Cumulus Media, the second-largest radio station ownership group in the U.S., announced this week that it would acquire radio station operator Cumulus Media Partners (CMP) in a $740 million deal that includes $660 million in debt and preferred stock, Bloomberg reports.

Three private equity firms--Bain Capital, The Blackstone Group, and Thomas H. Lee Partners--have turned to Simpson Thacher for outside counsel on the sale of their 75 percent stake in CMP, which was known as Susquehanna Radio until 2006 when Cumulus took a 25 percent stake and assumed operation of the partnership. CMP currently owns 32 radio stations throughout the country, Bloomberg reports, and is an investment partner of Cumulus.

Jones Day private equity partners John Zamer and David Phillips, capital markets partner Mark Hanson, tax partner Candace Ridgway, employee benefits partner Rory Lyons and counsel Arthur Kent, antitrust partner Tom Smith, and associates Daniel Fishbein and Rebecca Smith are advising Atlanta-based Cumulus on the deal. (Richard Denning serves as the company's general counsel.)

The firm has been advising Cumulus on a takeover bid for Citadel Broadcasting, the nation's third-largest radio station operator, which has rejected two unsolicited offers for the company. According to a recent story by The New York Times, Citadel shareholders are a bit upset about the refusal to entertain a buyout offer.

And in the Technology Sector...

Several noteworthy technology deals were also announced this week. Sibling publication The Recorder reports that DLA Piper and Hunton & Williams landed roles on defense contractor Raytheon's $490 million acquisition of Applied Signal on Monday.

Corning Incorporated, the manufacturer of glass, ceramics, and other materials for industrial and scientific products, has agreed to acquire leading wireless solutions provider MobileAccess for an undisclosed sum. The deal, which was announced on Tuesday and is expected to close in the first quarter of 2011, is reportedly worth between $150 million to $200 million.

Wachtell corporate partner Andrew Brownstein, antitrust partner Nelson Fitts, employee benefits partner David Kahan, and tax partner Jodi Schwartz are advising Corning on the transaction. Two years ago, the firm advised Corning on its sale of its Steuben Glass division to Schottenstein Stores. Terms of that deal were not disclosed. (Corning's general counsel is Vincent Hatton.)

Paul Weiss corporate partner Ariel Deckelbaum and counsel Da-Wai Hu took the lead for Time Warner on its $230 million acquisition of cloud computing company NaviSite announced late Tuesday. The entertainment conglomerate has been a longtime client of the firm, with Paul Weiss having handled its $17.6 billion acquisition of assets held by bankrupt Adelphia Communications in 2005 and $9 billion spin-off of Time Warner Cable in 2008. (Time Warner's general counsel is Paul Cappuccio.)

Boston's BRL Law Group, which specializes in technology transactions, advised Andover, Mass.-based NaviSite on the deal through firm cofounder Thomas Rosedale. Michael Allen, a corporate partner at Delaware firm Richards, Layton & Finger, provided counsel to a special committee of NaviSite's board of directors.

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