The Work

March 10, 2009 10:55 PM

Deal Roundup: Infrastructure, Mines, Magazines, and Utilities

Posted by Brian Baxter

Layoffs. Furloughs. Delayed start dates. Needing a respite from the deluge of doom and gloom, The Am Law Daily decided to roll up our sleeves and dive into a long-awaited deal roundup. Even we felt better after pulling this one together . . . almost.

After a sluggish few weeks, rather, months in M&A--substantive deal work seems to be here again. BusinessWeek recently reported that with asset prices in a nosedive, deal work was likely to rebound, even if a dearth of financing made megamergers unlikely.

"Expect a feeding frenzy," Jones Day head of M&A Robert Profusek told the magazine.

Profusek proved to be quite the prognosticator. Soon there were deals, even megamergers like Pfizer/Wyeth, Roche/Genentech, and Merck/Schering-Plough, thanks to a wave of consolidations sweeping through the pharmaceutical industry. (Forbes even looked into its crystal ball to see which pharma nuptials might happen next--and while Cravath, Swaine & Moore's profits were down last year, the firm likely couldn't be happier about its relationship with Bristol-Myers Squibb.)

All of this activity is good news for corporate lawyers. Below, a smattering of deals that came across our desk these past few days. Let us know where you see the work sprouting.

Infrastructure, Infrastructure, Infrastructure

Back in December we reported that a $1.2 billion bid to privatize Chicago's parking meter system would be a 'watershed' event for public-to-private partnership (P3) transactions in the U.S.

Now the Port of Oakland, the third busiest port in the western U.S., has announced a 50-year concession to develop and operate up to one-third of its maritime operations in a transaction valued at $686 million. The space is currently occupied by APM Terminals, a subsidiary of Copenhagen-based shipping giant A.P. Møller - Mærsk, whose lease expires on December 31, 2009.

O'Melveny & Myers project development and finance partner Eric Richards says that while the Port of Oakland concession won't take effect until January 2010, the winning bidder, Iselin, N.J.-based Ports America, wanted time for an orderly transition with APMT and to line up additional investments for the project.

The auction process began last May with ten interested respondents, Richards says. The list of bidders was whittled down to five late last year; final bids were entered in February.

Under the terms of the concession agreement, Ports America, which is owned by private equity firm Highstar Capital, will pay $60 million up front to the Port of Oakland out of a planned $150 million investment for infrastructure improvements.

Richards led an O'Melveny team advising the Port of Oakland that included M&A partners Christine Tam and Kelly McTigue (on environmental issues), projects development and real estate counsel Anita Sabine, international trade practice cochair Theodore Kassinger (CFIUS matters), tax partner Robert Fisher, finance and restructuring partner Steve Warren, transactions counsel Andrew Ellis, and associates Meghan O'Brien, Justin Bowen, Heather Johnston, Ali Tomcheck, Dana Gomez, and Betsy Laroche.

O'Melveny has been one of the firms at the forefront of P3 work in the U.S. In September, the firm advised a consortium that placed a winning $2.5 billion bid to privatize Chicago's Midway Airport. While that deal has yet to close, Richards expects more P3's to gravitate to U.S. shores, especially with the Obama administration's emphasis on infrastructure.

"There are a number of instances around the country where governments operate commercial assets and it makes sense for private operators to take over so [those] government's can focus on other aspects of their responsibilities," Richards says. "I think we'll certainly see more of that model being replicated where it makes sense, whether it's ports, airports, or other transportation assets like roads."

Vedder Price project and infrastructure finance partner John Bradley in New York served as lead counsel to Ports America with Cleary Gottlieb Steen & Hamilton also providing counsel and Gibson, Dunn & Crutcher advising the investor group on environmental issues from its San Francisco office.

Richards says that the deal has been signed by Ports America, but that the Port of Oakland will wait until October to sign the agreement for tax purposes.

O'Melveny is not the only firm bulking up on infrastructure projects.

Winston & Strawn was recently retained as legal counsel to the Tappan Zee Bridge Project, a $16 billion endeavor set to begin in 2012 to replace the 53-year-old bridge connecting Rockland and Westchester counties in New York State.

While not a P3 transaction--New York State's appetite for P3's pales in comparison to Illinois; it ended its only privatization of an airport in Newburgh, N.Y., two years ago--the state's Department of Transportation did approve a $2.2 million contract with Merrill Lynch to provide financial advice.

Winston public finance partner Sidney Holmes III in New York will serve as lead counsel to the Merrill Lynch team, which intends to develop a full financing report for the bridge construction project by year-end. Tax partner Alexander Deland, public finance partner Alan Hoffman, environmental partner Mary Wall, and litigation parters Eric Marcotte and Jeffrey Rosenstein round out the team from the firm.

Hughes Hubbard Brings New Republic Home

Facing a March 11 deadline to renegotiate the terms of an $87 million credit facility, CanWest Global Communications announced on Friday that it would sell The New Republic to a group led by its former owner.

CanWest paid roughly $7 million for the Washington, D.C.-based political magazine, which it took over in 2007. But with the Winnipeg-based media conglomerate now struggling to meet its debt obligations, CanWest is trying to clean up its balance sheet by selling noncore assets.

Hughes Hubbard & Reed represented a group of private investors led by longtime New Republic editor-in-chief Martin Peretz--who owned the magazine from 1974 to 2002--and Canadian investment banker Laurence Grafstein, former head of the media group at Lazard.

M&A partner Kenneth Lefkowitz led a team from the firm that included tax partner Andrew Braiterman, employee benefits partner Javier Hernandez, technology and media counsel Wayne Josel, and associate Francesca Lisk.

"I first worked with Marty and Jim Cramer when they started in 1996," Lefkowitz says. "And then I represented Marty in 2002 when he sold two-thirds of the [magazine] and then that ownership group a few years later when they sold to CanWest."

CanWest was advised by Joel Greenberg, cochair of the corporate and finance department at Kaye Scholer, who also represented the company during its initial acquisition of a 30 percent ownership stake in The New Republic in 2006.

"Joel and I are flipping roles now, so what's good for the goose is good for the gander," Lefkowitz jokes. "It always makes it a lot easier when you've been on both sides and can say, 'Oh, well, you got that the last time when you were the buyer!'"

Terms of the deal were not disclosed.

Latham Leads on $800 Million Diagnostics Deal

Beckman Coulter, the Fullerton, Calif.-based manufacturer of medical test systems equipment, announced a week ago that it would acquire the life sciences diagnostics business of Tokyo-based conglomerate Olympus for $792 million.

The deal broadens Beckman's clinical chemistry business and is expected to help increase the company's market share in the number of biomedical products it provides to prominent research laboratories and large hospitals. Beckman is financing the acquisition through $500 million in new debt.

Latham & Watkins M&A cochair Paul Tosetti, emerging companies cochair Cary Hyden, M&A partners Michael Yoshii, Michael Treska, Joachim von Falkenhausen, and Nicolas Bombrun, global antitrust cochair Javier Ruiz Calzado, antitrust partner Abbott "Tad" Lipsky, Jr., tax partners Laurence Stein and Nicholas DeNovio, life sciences cochair and regulatory partner John Manthei, employee benefits global chair James Barrall, environmental partner Christopher Norton, M&A counsel Kuang Hung Tang, and IP counsel David Kuiper all advised Beckman on the deal.

Pending regulatory approvals, the transaction is expected to close in the third quarter of this year.

Mining Mergers and Acquisitions

One of the country's largest coal producers, St. Louis-based Arch Coal, announced on Monday that it would acquire Rio Tinto's Jacobs Ranch mine in Wyoming's Powder River Basin for $761 million.

Rio Tinto received antitrust advice from Crowell & Moring antitrust chair Wm. Randolph Smith, partner Christopher Ondeck, and counsel Shawn Johnson in Washington, D.C.

Bloomberg reports that the Melbourne- and London-based mining giant is in the process of selling assets as part of a plan to reduce a nearly $40 billion debt load.

Arch Coal was advised by Bryan Cave M&A partner Patricia Brandt and tax partner Philip Wright and associates Diedre Gray and Erika Labelle.

On Friday, Mumbai-based bronze producer Sterlite Industries managed to salvage a mining deal that we had previously written off for dead.

Sterlite, which is a subsidiary of London-based mining concern Vedanta Resources, finalized a $1.7 billion acquisition of bankrupt copper miner Asarco. The deal, which includes roughly $1.1 billion in cash and a $600 million note, is nearly $1 billion less than what Sterlite agreed to purchase Asarco for in October.

Shearman & Sterling M&A partner Adam Givertz, bankruptcy and reorganization partner Douglas Bartner, litigation partner William Roll III, and associates Nora Pines and Gaurav Sud advised Sterlite on the transaction.

Tuczon, Ariz.-based Asarco, which filed for Chapter 11 in 2005 after being hit with a series of asbestos and environmental pollution civil suits, was advised by its bankruptcy counsel at Baker Botts.

Firmwide bankruptcy and insolvency practice chair Jack Kinzie, bankruptcy partners Judith Ross, James Prince II, and Tony Davis, M&A partners Soren Lindstrom, Don McDermett, Jr., and Samantha Crispin, and associates C. Luckey McDowell, Romina Mulloy, Omar Alaniz, Kevin Jones, Elise Green, and Mary Birdlebough served as counsel to Asarco.

Completion of the deal is subject to the approval of the U.S. bankruptcy court in Corpus Christi, Texas.

Utility Megamerger Enlists European Firms

Already owner of a 67 percent stake in Spain's largest electric utility, Madrid-based Endesa, Italy's largest electric utility Enel announced in late February a $14.3 billion bid to boost that stake to 92 percent.

Rome-based Enel turned to leading Italian firm Bonelli Erede Pappalardo for its purchase of the 25 percent stake in Endesa held by Spanish energy company Acciona, which acquired the company with Enel in 2007 after the Spanish government nixed a deal by Germany's E.ON.

Enel received Spanish corporate advice from our favorite Iberian firm Cuatrecasas--besides being the country's most profitable firm, it's name just rolls off the tongue. Fernando Torrente, director of the corporate practice in Cuatrecasas's Madrid office, was the lead partner advising the company.

Spain's third-largest firm, Uría Menéndez, is advising Acciona on the sale of its Endesa stake to Enel.

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