Cross-Border M&A

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On June 26, 2018, the U.S. House of Representatives passed its version of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”). Just over a week earlier, the U.S. Senate passed the National Defense Authorization Act for Fiscal Year 2019, which incorporated its version of FIRRMA. The bills, which passed their respective chambers by very wide margins, would update the statute authorizing reviews of foreign investment by the Committee on Foreign Investment in the United States (“CFIUS”) to reflect changes in CFIUS’s practice over the ten years since the last significant reform, expand CFIUS’s jurisdiction, and make significant procedural alterations to the CFIUS process. Introduced to “modernize and strengthen” review of foreign investment in the United States, FIRRMA would cement a relatively aggressive approach to foreign investment review. However, ultimately FIRRMA’s changes to current CFIUS practice are modest, and many of the changes merely codify practices in place since the later years of the Obama Administration.

Please click here to read the full alert memorandum.

Major transactions are driving the German M&A market. After several fruitless attempts, Deutsche Telekom and Softbank entered into a business combination agreement to merge T-Mobile US with its rival, Sprint. German building materials maker Knauf agrees the $ 7 billion takeover of competitor USG, while Merck sells its OTC business to Procter & Gamble for around € 3.4 billion. Vonovia continues to drive the consolidation of the residential property market, submitting a takeover bid of around € 900 million for Swedish real estate company Victoria Park. Daimler and BMW combine their mobility businesses, including car-sharing subsidaries Car2Go and DriveNow, forming five joint ventures in total. Continue Reading

In Varjabedian v. Emulex, the Ninth Circuit recently held that plaintiffs bringing claims under Section 14(e) of the Securities Exchange Act of 1934 (“Exchange Act”)—which prohibits misstatements, omissions or fraudulent conduct in connection with a tender offer—need only show that defendants acted negligently, rather than with scienter.

This decision marks a conspicuous divergence from the decisions of every other circuit court to consider the issue.  Those other courts have uniformly held that Section 14(e) claims require a plaintiff to demonstrate that defendants acted knowingly or with a reckless disregard of the truth, a significantly higher burden.  The Ninth Circuit’s ruling, thus, sets up a clear circuit split that may necessitate resolution by the Supreme Court.  In the meantime, however, it remains to be seen whether there will be a migration of tender-offer litigation to the Ninth Circuit.

Please click here to read the full alert memorandum.

Cleary Gottlieb was the lead contributor on the 2018 IFLR M&A Report. Along with the report’s introduction, Cleary lawyers authored the following chapters:

Please click here to view the full report.

To access the report on IFLR’s website, click here.

Lenders’ freedom to transfer their participations in large leveraged loans has been gradually eroded by developments introduced through the last few credit cycles.

This market wrap covers the development of the transferability clause from the early 2000s through to post-crisis developments.

If you have any questions concerning this memorandum, please feel free to contact the authors or your regular contacts at the firm.

The German M&A market started off with a bang in the new year. RWE and E.ON are set to swap a large part of their businesses, with E.ON now planning to concentrate on grid and energy sales, and RWE on energy generation. The complex transaction has a reported total volume of around EUR 43 bn and includes E.ON’s acquisition of innogy, innogy’s break-up, and RWE’s approximately 16.7 % participation in E.ON, plus a settlement payment to E.ON of some EUR 1.5 bn. SAP plans to acquire the U.S. cloud provider Callidus for around EUR 2 bn. HSH Nordbank will be the first German Landesbank to be privatized, transferring into the hands of a syndicate involving J.C. Flowers and Cerberus for around EUR 1 bn. Deutsche See will soon belong to the fishery Parlevliet & Van der Plas. Bosch and Continental are joining the shareholder group of the navigation service Here, and Deutsche Telekom is founding a joint venture with the Zeiss group to develop data glasses. Continue reading.

On March 15, 2018, the UK Government published new merger thresholds to allow greater intervention in transactions raising national security concerns. The new thresholds will apply to firms that develop or produce items for military use, computer hardware, or quantum technology. The Government will be able to intervene in mergers in these sectors where the target’s UK turnover exceeds £1 million or the target has a UK share of supply of at least 25% (even where that share will not increase following the merger).

Please click here to read the full alert memorandum.

Disclosure of Ultimate Beneficial Ownership in German Companies

Key Takeaways

  • Germany recently introduced new rules on the disclosure of the ultimate beneficial owner(s) of German companies. The rules are based on the 4th EU-Money-Laundering Directive (EU) 2015/849).
  • The rules are not only relevant for German entities and German shareholders, but also for foreign groups or organizations (including private equity groups) that have or intend to acquire holdings in German entities.
  • Recent experience indicates that not all foreign players eying German M&A targets or holding significant interests in German targets are aware of these rules.
  • If your group or organization
    • has or intends to acquire a direct or indirect holding of more than 25% of the capital or the voting rights of a German entity or otherwise controls such entity, and
    • is beneficially owned or controlled by one or more natural persons,

disclosure obligations with respect to the ultimate beneficial owners may apply and should be assessed. Continue Reading The German Transparency Register

The German M&A market has remained robust in 2017.  While the number of transactions has fallen, transaction volumes remain significant.  Testament to this were the agreed merger of Siemens’ rail operations with Alstom, the acquisition of Bayer’s seeds and herbicides business by BASF, the Stada takeover, General Motors’ sale of Opel to PSA or the merger between Linde and Praxair, which finally appears to be nearing a successful conclusion.  The steel JV between ThyssenKrupp and Tata is still in the works, as is the takeover of Uniper by Fortum.  However, yet another attempt at a London Stock Exchange and Deutsche Börse merger failed in 2017.

Continue Reading

In a recently published decision of November 7, 2017, the German Federal Court of Justice (Bundesgerichtshof) has added another twist to the much debated acquisition of German Celesio AG by US pharma wholesaler McKesson.  McKesson had launched a takeover offer to the free float of Celesio in late 2013, and had entered into a purchase agreement with its then main shareholder Franz Haniel & Cie. to acquire its shareholding of slightly above 50% alongside the takeover bid.  The transaction attracted the interest of Paul Singer.  Elliott acquired a position of approximately 24% in shares and, in addition, convertible bonds of Celesio, and opposed the initial offer due to an alleged undervaluation.  As a result, the initial offer, which was subject to a minimum acceptance threshold of 75%, failed in early January 2014. The 75% acceptance threshold is key under German law, for a bidder to be in a position to exercise control over a German listed corporation and access the cash flows, prior to having effected a squeeze-out of all remaining minorities. Continue Reading Treating Shareholders Equally – Another Chapter in the McKesson/Celesio Saga