October 24, 2008 4:03 PM

Dead Deals: A Weekly Roundup

Posted by Brian Baxter

With Halloween just around the corner, The Am Law Daily couldn't help but notice that the current economic downturn has extended its tendrils into cross-border M&A, killing several billion-dollar deals.

Two large international transactions--Samsung's $5.8 billion bid for memory chip maker SanDisk and Sterlite's $2.6 billion offer for bankrupt copper miner Asarco--died this week and Russia's Gazprom is now reportedly having second thoughts about an $800 million gas deal with TNK-BP.

Stateside, HLTH and WebMD called off their merger plans. The Am Law Daily has a list of the firms with little to show for their efforts.

Sterlite/Asarco

Asarco's effort to exit Chapter 11 is now on hold after the Tucson-based copper miner announced on Thursday that it was terminating its $2.6 billion agreement to be acquired by Mumbai-based Sterlite Industries.

A leading producer of copper in India, Sterlite is a subsidiary of London-based Vedanta Resources. According to The Deal, Sterlite said last month that its ability to finance acquisitions is compromised by the condition of the credit markets. Sterlite was advised by Shearman & Sterling M&A partner Christa D'Alimonte and bankruptcy and reorganization partner Douglas Bartner.

Asarco, which filed for bankruptcy in 2005 in the Southern District of Texas, is being advised by its bankruptcy counsel at Baker Botts. The deal's cancellation means that Asarco will receive a $50 million breakup fee from Sterlite. The scuttled sale to Sterlite opens the way for Asarco's on again, off again parent--Mexican mining giant Grupo México--to make another bid for the company.

Samsung/SanDisk

Seoul-based Samsung, the largest business group in South Korea, withdrew its unsolicited $5.8 billion bid for Milpitas, Calif.-based data storage producer SanDisk on Wednesday, blaming SanDisk's intransigence and claiming that the target's value had declined.

SanDisk turned to Skadden, Arps, Slate, Meagher & Flom M&A partners Joseph Giunta and Kenton King (of Yahoo-Microsoft fame) for counsel; Sullivan & Cromwell M&A partners Eric Krautheimer and Scott Miller and antitrust partner Steven Holley advised Samsung.

The Wall Street Journal described the deal as the largest ever attempted by Samsung and, if successful, ranking as the largest foreign acquisition by a South Korean company. While Samsung has no debt, the WSJ reports, South Korea's currency has depreciated in value significantly against the dollar since the start of the credit crisis.

Sources to The Am Law Daily say that cultural differences between operating a Korean company and one out of Silicon Valley, such as SanDisk, also helped complicate any potential deal.

HLTH/WebMD

In dead deal news stateside, HLTH Corporation and its 84 percent-owned subsidiary WebMD announced on Monday that they were abandoning a $2.3 billion merger because of adverse market conditions.

The two companies had announced plans in February to combine into a single entity known as WebMD. HLTH, based in Elmwood Park, N.J., sought to finance the deal by spinning off two other units. It sold one unit in July; a planned sale of a second unit has been delayed indefinitely due to the difficulty in lining up financing.

William Hartnett, the chairman of the executive committee at Cahill Gordon & Reindel, advised a special committee of WebMD's board along with finance partner Stephen Greene. Spencer Klein, the east coast head of M&A at O'Melveny & Myers, represented HLTH.

Gazprom

The Financial Times reported late last week that Russia's largest company was threatening to pull out of a roughly $800 million deal to buy a stake in the Kovykta Siberian gas field from TNK-BP, the troubled joint venture between BP and a consortium of four Russian oligarchs called AAR.

"It's apparent that BP made a vast miscalculation in dealing with the Kremlin," says Robert Amsterdam of Amsterdam & Peroff, a frequent Kremlin critic and follower of Russian politics. (Amsterdam also represents imprisoned Russian oligarch Mikhail Khodorkovsky, on which he has an opinion column in Friday's Wall Street Journal.) "You know things aren't going well for Gazprom's cash flow when they can't even close a theft."

Amsterdam says Gazprom's deal to acquire the Kovykta field was "deeply corrupted and influenced by the state's manipulation of the licensing regulatory authorities." The FT story says that in addition to uncertainties about the field's value, Gazprom believes TNK-BP's Kovykta license is likely to be revoked.

That would be yet another chaotic chapter in the history of TNK-BP, which The American Lawyer and sibling publication Legal Week have both reported on. Disputes between BP and their Russian partners have involved lawyers from Linklaters, Herbert Smith, Lovells, SJ Berwin, Cravath, Swaine & Moore, Swedish firm Vinge, and Russian firm Egorov Puginsky Afanasiev & Partners.

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