Deals & Suits
Eaton Corporation agreed to pay $11.8 billion in cash and stock for Cooper Industries plc on May 21 in the second-largest M&A transaction of 2012. Cooper supplies equipment used in the production, transmission, and distribution of electricity and wiring and related components to electric utilities around the world, while Eaton is a diversified industrial manufacturer.
The buyer will pay $39.15 in cash and about $32.85 in stock per share for Cooper, a 29 percent premium to the target's closing price on May 19, the last trading day before the deal was announced. The parties hope to close the deal by the end of the year pending approvals from both sets of shareholders, regulators, and the High Court of Ireland.
For acquiror Eaton Corporation (Cleveland)
General counsel Mark McGuire, senior vice president Thomas Moran, chief counselM&A Mary Elizabeth "Liz" Huber, counselcorporate and securities Lizabeth Wright, senior vice presidenthead of tax John Williams, and director of international tax strategy Patricia "Patty" Hennis.
Simpson Thacher & Bartlett:
M&A: Charles "Casey" Cogut, Marni Lerner, Mario Ponce, and associates John Kupiec, Andrew Nightingale, Amie Siebert, and Rhett Van Syoc. Executive compensation and employee benefits: Brian Robbins, David Rubinsky, and associate Samantha Shipp. Tax: Robert Holo and associate Seojung Park. Credit: Brian Steinhardt and associate Makiko Harunari. Capital markets: Richard Fenyes and associate Mark Chorazak. Corporate: Ian Barratt, Adam Signy, and associate James Connor. Intellectual property: Lori Lesser. Antitrust: Peter Thomas and associates William Kearney and David Shogren. Environmental: senior counsel Adeeb Fadil. (All are in New York except for London-based Barratt, Signy, and Connor, and Washington, D.C.based Thomas, Kearney, and Shogren.)
Wachtell, Lipton, Rosen & Katz was the company's regular outside M&A counsel. But Wachtell could not advise Eaton because it was representing Cooper. Eaton interviewed Simpson and other firms and chose Simpson.
Corporate: Alan Casey, John Given, Cian McCourt, and associates Siobhan Dunne, Lyndsey Falconer, Emma Heffernan, Darragh O'Dea, and Yvonne Sheehy. Banking: Maireadh Dale and associate Maria McElhinney. Share options: associate Nora Ward. (All are in Dublin except for New Yorkbased McCourt and Falconer.) Cooper Industries is incorporated in Ireland.
Fenwick & West:
Tax: James Fuller, Adam Halpern, and associate Larissa Neumann. (All are in Mountain View, California.) Fenwick is Eaton's regular tax counsel.
Loyens & Loeff:
Tax: Lodewijk Berger. M&A: Jack Berk and senior associate Miranda van Es. Finance: senior associate Wytse Huidekoper. (All are in New York.) Simpson and Fenwick tapped the firm for advice on Dutch law issues.
Matheson Ormsby Prentice:
Tax: Shane Hogan, Mark O'Sullivan, and John Ryan. Corporate: Pat English and Patrick Spicer. (All are in Dublin except for New Yorkbased Ryan.) Fenwick tapped the firm for Irish tax advice.
M&A: G. Andrew Gardner, Michael Meaney, David Watson, and associates Lisa Lauer, Susan McGlone, and Jeremy Schirra. Real estate: Jeffrey Huntsberger. (All are in Cleveland except for Chicago-based Lauer.)
O'Melveny & Myers:
Government contracts: Theodore Kassinger and associate Tristan Morales. (They are in Washington, D.C.) Simpson recommended Kassinger to Eaton.
For target Cooper Industries plc (Houston)
General counsel Bruce Taten and associate general counsel Terrance Helz.
Wachtell, Lipton, Rosen & Katz:
Corporate: Daniel Neff, Gregory Ostling, and associates Victor Goldfeld and Sara Lewis. Executive compensation and benefits: Adam Shapiro and associate Michael Schobel. Antitrust: Nelson Fitts. Tax: Jodi Schwartz and associate Rachel Carlton. Finance: Eric Rosof and associate Lauren Cooper. (All are in New York.)
Corporate: Christopher McLaughlin, Maura McLaughlin, and associates Mary O'Dwyer and Miriam Walsh. Tax: Fintan Clancy and associate Kevin Mangan. Financing: Ultan Shannon. Equity incentives and employment: Stephen Hegarty and Kevin Langford. (All are in Dublin.) The firm represented the company on its 2009 redomestication to Ireland and has been its Irish counsel since then.David Marcus
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Carlyle Group L.P. raised $671 million in an initial public offering of common units that priced on May 2 and began trading on Nasdaq the next day. The IPO came a quarter-century after Carlyle was founded. The private equity firm sold 30.5 million units at $22 each, which gave the company a valuation of around $7 billion. Carlyle cofounders William Conway, Daniel D'Aniello, and David Rubenstein each own slightly more than 15 percent of Carlyle, stakes now worth $1 billion each. The shares traded between $20 and $22.09 in their first month on Nasdaq and closed at $23 on July 18.
Carlyle may have been penalized for the poor performance of other private equity firms that have gone public, including Blackstone Group L.P. and Apollo Global Management LLC [Deals & Suits, October 2007]. But KKR & Co. L.P. has performed reasonably well since its July 2010 IPO.
Carlyle's top LBOs of recent years include the??$3.9 billion buyout of fiber optic cable manufacturer CommScope Inc. and the??$2.6 billion purchase of mobile??telecommunications company Syniverse Technologies Inc. [Deals & Suits, February 2011], and the??$3.8 billion acquisition of vitamin and nutritional supplement manufacturer??NBTY Inc. [Deals & Suits, November 2010].
For issuer Carlyle Group L.P. (Washington, D.C.)
General counsel Jeffrey Ferguson and counsel Joanne Cosiol and Anne Frederick.
Simpson Thacher & Bartlett:
Capital markets: Joshua Ford Bonnie and associates William Golden, Karen Wang, and Samuel Warfield. Private funds: Thomas Bell, Barrie Covit, and associate Catherine Kidd. M&A: Edward Chung and associate Ken Shin. Corporate governance: associates Dov Gottlieb and LeAnn Leutner. Tax: John Creed and associates Sean Austin and Andrew Purcell. Executive compensation and employee benefits: senior counsel Jamin Koslowe and associate Jeannine McSweeney. (All are in New York.) Simpson was issuer's counsel for Blackstone and KKR on their IPOs.
For lead underwriters J.P. Morgan Chase & Co. (New York), Citigroup Inc. (New York), and Credit Suisse (USA) Inc. (New York)
At J.P. Morgan: associate general counsel Leslie Gardner. At Citigroup: counsel Samson Frankel. At Credit Suisse: vice president Sunil Hosmane.??
Skadden, Arps, Slate, Meagher & Flom:
Corporate finance: David Goldschmidt and Phyllis Korff. Tax: John Rayis. (Goldschmidt and Korff are in New York. Rayis is in Chicago.) Korff was underwriter's counsel on the Blackstone IPO. The firm was issuer counsel for Fortress Investment Group LLC on its 2007 IPO.D.M.
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USA v. Deutsche Bank Et Al
On May 10 Deutsche Bank AG agreed to pay $202.3 million to settle allegations that its U.S. mortgage unit made false certifications to secure federal insurance for loans that it made.
The case, spearheaded by the U.S. attorney's office for the Southern District of New York, was one of the highest-value civil fraud suits brought by the government over mortgage lending practices stemming from the financial crisis.
The U.S. attorney's office in Manhattan filed a civil claim last May against the German bank, its structured products unit, its bank securities unit, and MortgageIT, the U.S. mortgage lender it bought in 2007. Deutsche Bank moved to dismiss first the government's complaint and then its amended complaint, but at oral arguments in December, U.S. District Judge Lewis Kaplan in Manhattan said that he would allow the government to plead its case again. The case was settled before the government filed a second amended complaint.
Prosecutors alleged that the bank and its mortgage unit recklessly lied to the U.S. Department of Housing and Urban Development by stating that loans qualified for federal mortgage insurance when in fact they didn't, and that Deutsche Bank profited from reselling those mortgages. According to the complaint, HUD paid more than $386 million in insurance claims between 1999 and 2009 for home loans certified by Deutsche Bank. The government sought damages and penalties under the False Claims Act, which allowed it to seek treble losses.
In the settlement, MortgageIT admitted to some of the allegations and Deutsche Bank agreed that it was in a position to know that its subsidiary's practices didn't conform to government regulations.
Judge Kaplan approved the settlement on May 10.
For plaintiff the United States of America
At the U.S. attorney's office in Manhattan: Assistant U.S. Attorneys Pierre Armand, Lara Eshkenazi, and Christopher Harwood.
For defendants Deutsche Bank AG (Frankfurt, Germany) and MortgageIT (New York)
Linda Goldstein, Cheryl Krause, Andrew Levander, Michael Park, and associates Peter Kreher, Laura Meehan, Sheku Sheikholeslami, David Staubitz, and Albert Suh. (Goldstein, Levander, Meehan, Park, and Staubitz are in New York; the others are in Philadelphia.) Levander gave oral arguments in December. The firm declined to comment on how it got the matter.Tania Karas
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King County Et Al v. IKB Deutsche Et Al
On May 4 U.S. District Judge Shira Scheindlin in New York ruled that investors could proceed with a class action against two investment banks and three ratings agencies. The plaintiffs alleged in their October 2009 claim that IKB Deutsche Industriebank AG and Morgan Stanley collaborated with the ratings agencies to misrepresent that notes backed by mortgage-backed securities were sound.
The decision is among the first in major claims over soured AAArated securities in which investors have overcome a defense often raised by ratings agencies: that claims against them should be dismissed because ratings are opinions that are not actionable. The order also affects a separate case involving some of the same defendants, according to a lawyer on the plaintiffs team.
Investors alleged that IKB used an investment vehicle called Rhinebridge to dump more than $1 billion in toxic, mortgage-backed securities that IKB could not offload, while the underwriter, Morgan Stanley, allegedly coerced the ratings agencies to issue stellar ratings on notes issued by Rhinebridge. Investors claimed they lost tens of millions of dollars when the vehicle collapsed in October 2007.
Scheindlin found that the Rhinebridge ratings qualified as actionable misstatements under New York law. The rating agencies had a "special relationship" with the plaintiffs, she concluded, because they "prepared their ratings with the end and aim of inducing investors such as the plaintiffs to invest" in it. Scheindlin also allowed the negligent misrepresentation claims to move forward against Morgan Stanley and IKB.
Scheindlin had already green-lighted the plaintiffs' common law fraud claims in an earlier ruling. Plaintiffs counsel filed a bulked-up second amended complaint in January, after the New York Court of Appeals ruled that New York's Martin Act doesn't preempt nonfraud tort claims in the securities context.
At press time a settlement had been reached but the amount was not public.
For plaintiff King County, Washington, et al.
Robbins Geller Rudman & Dowd:
Luke Brooks, James Caputo, Daniel Drosman, and associate Darryl Alvarado. (All are in San Diego except for Brooks, who is in San Francisco.) The firm is plaintiffs counsel in a parallel claim, the Cheyne SIV litigation, involving overlapping defendants.
For defendant The McGraw-Hill Companies Inc. d/b/a Standard & Poor's Rating Services (New York)
Cahill Gordon & Reindel:
Floyd Abrams, Brian Markley, Dean Ringel, Tammy Roy, Adam Zurofsky, and associate Jason Hall. (They are in New York.) The firm did not comment.
For defendant Fitch Ratings Inc. (New York)
Paul, Weiss, Rifkind, Wharton & Garrison:
Andrew Ehrlich, Martin Flumenbaum, Julia Wood, and associates Christopher Filburn, Mark Silver, and Tobias Stern. (They are in New York.) Flumenbaum was lead counsel.
For defendant Moody's Corporation (New York)
Satterlee Stephens Burke & Burke:
James Coster, Joshua Rubins, and associate James Doty. (They are in New York.) Coster was lead counsel.
For defendant Morgan Stanley (New York)
Davis Polk & Wardwell:
Antonio Perez-Marques, James Rouhandeh, and associates Gina Castellano, Jessica Freese, Matthew Kelly, and William Miller Jr. (They are in New York.) Rouhandeh was lead counsel; the firm has a longtime relationship with Morgan Stanley.
For defendant IKB Deutsche Industriebank AG (Düsseldorf)
John McFerrin-Clancy, Thomas Redburn, Zachary Rosenbaum, counsel Monica Watson, and associate Michael Hampson. (McFerrin-Clancy and Rosenbaum are in New York. The rest are in Roseland, New Jersey.) Rosenbaum was lead attorney.