September 23, 2011 6:55 PM
Dealmakers of the Week: Lyle Ganske and James Dougherty of Jones Day
Posted by Tom Huddleston Jr.
James Dougherty (right), 37, and Lyle Ganske (below), 52, M&A partners in the Cleveland office of Jones Day. Ganske is partner-in-charge of the Cleveland office.
United Technologies Corporation's $18.4 billion purchase of Goodrich Corporation, announced Wednesday.
Charlotte, North Carolina–based Goodrich Corporation, a leading maker of aircraft landing gear, wheels, and brakes for the aerospace and defense industries.
United Technologies will pay $127.50 cash per Goodrich share in a deal with an enterprise value of $18.4 billion that calls United Technologies to assume $1.9 billion of Goodrich debt. The offer represents about a 47 percent premium over the closing price of Goodrich shares on September 15—the day before the company's stock began to rise amid speculation that a deal was imminent, according to Reuters. United Technologies will finance three-quarters of the purchase with new debt.
United Technologies, whose portfolio includes the aviation brands Sikorsky (helicopters) and Pratt & Whitney (jet engines), expects the deal—which is expected to close by the middle of 2012, subject to shareholder and regulatory approval—will add to earnings within two years of completion.
United Technologies said it expects Goodrich's 2011 sales to be about $8 billion, while United Technologies expects it own revenues for 2011 to total roughly $58 billion.
THE BIG PICTURE
Bloomberg reports that United Technologies has been circling Goodrich for several years as part of a strategy to expand its aerospace offerings. The company plans to merge Goodrich's operations with its own aerospace division, with Goodrich chairman Marshall Larsen heading the combined unit, according to the United Technologies statement announcing the deal. Company officials told Reuters the company plans to cut back on M&A activity and share repurchases over the next couple of years as it absorbs Goodrich.
Jones Day's relationship with Goodrich dates to when the company was known as B.F. Goodrich and based in Akron, Ohio, which helps explain why two Cleveland-based partners led the way for the company. Ganske, who has worked on matters for Goodrich for the past two decades, advised the company on its 2002 spin-off of an industrial products unit that became EnPro Industries, Inc.
(Ganske and Dougherty also advised Diebold, opposite Wachtell, on Diebold's successful defense against United Technologies's hostile bid three years ago.)
Dougherty only began to advise Goodrich on corporate matters during the past year, but says even that limited experience proved helpful in this transaction. "I had the benefit when this opportunity came to along to have spent some time with the management team and the internal legal team [this past year], and I wasn't really coming into it cold," Dougherty says.
Dougherty says the negotiations that resulted in Wednesday's announcement unfolded over several months. Among the challenges that arose along the way: rampant media and market speculation about a potential deal in the week before the agreement signed, including rumors of a final per-share offer from United Technologies that fell well short of Jones Day's goals for its client. (Bloomberg reported the price could have been as low as $110 per share.)
Dougherty says that negotiating a major transaction amid such a hail of rumors creates multiple challenges, including calming the worries of various parties as long as the deal remains up in the air. "It becomes a lot of board counseling," he says. "It becomes a lot of strategic work with the financial advisers on the transaction and really with your PR folks, as well, so that everyone's on the same page and getting input to really kind of keep things calm."
In this instance, he adds, that counseling paid off. The Jones Day team kept everyone focused on getting the best possible price for the company—and not being swayed by speculation.Make a comment