Deals & Suits
Aetna Inc. agreed to pay $5.7 billion in cash and stock for health insurer Coventry Health Care Inc. on August 20. The buyer will also assume $1.7 billion in Coventry debt, giving the deal a total value of $7.3 billion. The target's shareholders will receive $27.30 in cash and 0.3885 Aetna shares per Coventry share, consideration worth $42.08, a 20 percent premium to Coventry's closing price on August 17, the last trading day before the deal was announced. The deal would be the largest that Aetna has signed up since it completed a major reorganization in 2000 by selling its financial services and international businesses to ING Groep N.V. for $7.7 billion.
The acquisition would bolster Aetna's ability to provide government-supported health care plans, and the market applauded the deal, bidding Aetna's stock up by 4 percent on the news. WellPoint Inc. was motivated by the same goal in agreeing to buy managed care company Amerigroup Corporation for $4.9 billion in cash on July 9. Aetna and Coventry hope to close the deal by the middle of next year, pending approvals by regulators and Coventry shareholders.
For acquiror Aetna Inc. (Hartford)
General counsel William Casazza, head of corporate legal group Michelle Matiski, senior corporate counsel William Baskin, counsel Traci Kosak and Adam McAnaney, corporate secretary Judith Jones, chief Medicare counsel Christine Rinn, and chief Medicaid counsel Robert Kessler.
Davis Polk & Wardwell:
Corporate: David Caplan, H. Oliver Smith, counsel Ajay Lele, and associates Lee Hochbaum and Evan Rosen. Executive compensation and employee benefits: Edmond FitzGerald and associate Jennifer Freiman. Tax: Harry Ballan and associate William Curran. Credit: Jason Kyrwood and associate Darren Mahone. (All are in New York.) Davis Polk is longtime counsel to Aetna. The firm represented Aetna last year on several deals, including its $202 million purchase of PayFlex Holdings Inc.; its $290 million purchase of Genworth Financial Inc.'s Medicare supplement business; and its $600 million purchase of Prodigy Health Group Inc. from One Equity Partners. And in 2010 Davis Polk represented Aetna on its $500 million acquisition of Medicity Inc. Davis Polk also represented Aetna on the ING deal.
Antitrust: Phillip Proger, Margaret "Peggy" Ward, and associate Ausra Deluard. (Proger is in Washington, D.C. Ward is in Palo Alto. Deluard is in San Francisco.)
Insurance regulatory: Jon Biasetti, Elizabeth Tosaris, Paige Waters, and senior counsel Timothy Farber, Jay Kallas, and Jan Reimann Newsom. (All are in Chicago except for San Franciscobased Tosaris and Dallas-based Newsom.) Both Jones Day and Locke Lord have advised Aetna for many years.
Manatt, Phelps & Phillips:
Medicare and Medicaid managed care regulatory: Wendy Krasner. New York state health care regulatory: Mark Ustin. Health care corporate: Bruce Wolff and associates Karen Lam and Emily Lee. (All are in Washington, D.C., except for Albany-based Ustin and New Yorkbased Lee.)
For target Coventry Health Care Inc. (Bethesda, Maryland)
General counsel Thomas Zielinski and deputy general counsel Jonathan Weinberg.
Wachtell, Lipton, Rosen & Katz:
Corporate: David Katz and associate Donald Casey. Antitrust: Ilene Knable Gotts and associate Lori Sherman. Tax: Deborah Paul and associate Rachel Reisberg. Executive compensation and benefits: Jeremy Goldstein and associate D. Miishe Addy. Finance: Eric Rosof and associates Gregory Pessin and Austin Witt. (All are in New York.)
Bass, Berry & Sims:
Corporate: Bob Thompson and senior associate Price Wilson. Health care M&A: Angela Humphreys and J. James Jenkins Jr. Antitrust: R. Dale Grimes. Tax: R. Todd Ervin. (All are in Nashville.) Bass Berry's Thompson introduced Katz to the client many years ago and Coventry GC Zielinski called him again when Aetna first approached Coventry.
Bass Berry began working for Coventry in the 1990s when the company was still headquartered in Nashville, prior to its move to Bethesda. The firm has represented the company on more than two dozen health plan transactions, including the 1998 merger with Principal Health Care Inc. The firm also counseled Coventry on its $685 million purchase of Florida Health Plan Administrators LLC in 2007 and on its $1.8 billion acquisition of First Health Group Corp. three years earlier.
Crowell & Moring:
Antitrust: Arthur Lerner, counsel Shawn Johnson and Barbara Ryland, and associates Elliot Golding and Lauren Patterson. (All are in Washington, D.C.) The firm is Coventry's regular antitrust counsel.
Potter Anderson & Corroon:
Corporate: Mark Morton and associate Pamela Millard. Litigation: Donald Wolfe Jr. (All are in Wilmington.) Wachtell's Katz tapped Morton as Delaware counsel on the deal.
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BC Partners and CPP Investment Board
BC Partners Limited and CPP Investment Board joined forces to strike a $6.6 billion deal to buy Cequel Communications Holdings LLC on July 19. Cequel operates Suddenlink Communications, the seventh-largest cable television operator in the United States. The buyout would be the second-largest of 2012 after the $7.15 billion sale of El Paso Corporation's oil and gas exploration and production unit to Apollo Global Management LLC, Riverstone Holdings LLC, and Access Industries Inc. [Deals & Suits, May].
The deal would allow Cequel's current investors to monetize their investments. GS Capital Partners L.P. owns 36 percent of Cequel; Quadrangle Group LLC, 17 percent; Oaktree Capital Group LLC, 10 percent; and Jordan Company, 8 percent. BC Partners and CPPIB will pay the foursome $2.5 billion and assume $4.1 billion in debt.
Much of the remaining 29 percent of Cequel is owned by a management team led by chairman and CEO Jerald Kent, who will continue running the company he cofounded a decade ago. Kent and his team will retain their stake, while BC Partners and CPPIB will own equal shares in a majority stake in the company. The deal is expected to close in the fourth quarter pending approvals from regulators.
BC Partners Limited (London) and CPP Investment Board (Toronto)
At CPPIB: General counsel John Butler.
Latham & Watkins:
M&A: Raymond Lin, Taurie Zeitzer, and associates Gareth Clark and Liliana Párias Neuburg. Communications law: Matthew Brill. (All are in New York except for Washington, D.C.based Brill.) Latham frequently works with BC Partners. Lin and Zeitzer also represented BC Partners on its $5.2 billion sale of Unitymedia GmbH to Liberty Global Inc. in 2009. BC Partners owned the cable operator along with Apollo. Lin also represented BC Partners in 2007 on its purchase of a controlling stake in satellite operator Intelsat Ltd. [Deals & Suits, October 2007]. Kirkland & Ellis announced on August 21 that it had hired Zeitzer away from Latham.
Wachtell, Lipton, Rosen & Katz:
Corporate: Steven Cohen and associate Donald Casey. Finance: Joshua Feltman and associate Gregory Pessin. (All are in New York.)
Corporate: Guy Berman, R. John Cameron, and Matthew Cockburn. (All are in Toronto.)
Cequel Communications Holdings LLC (St. Louis)
General counsel Wendy Knudsen and vice counsel Craig Rosenthal.
M&A: Barry Brooks, Luke Iovine III, and associates Karen Contoudis Buzard, Heather Davis, and Hyunah Kang. Leveraged finance: Jeffrey Pellegrino. Bank finance: Richard "Rick" Denhup. (All are in New York.) Paul Hastings is representing both the company and the management team led by Kent that will retain a stake in the company after the deal closes. Cequel used Paul Hastings in 2005 when it paid $2.5 billion to Cox Communications Inc. for regional cable systems. The firm also represented the company on a $475 million recapitalization in 2004. Daniel Bergstein, one of Cequel's founding partners, cochairs the telecommunications department at Paul Hastings. Kent was previously cofounder and CEO of Charter Communications Inc., which Paul Hastings represented when it was sold for $4.5 billion in 1998 to Paul Allen's investment vehicle Vulcan Ventures.
M&A: Stanley Bloch, Andrew Lucano, and associate Georgia Quinn. (All are in New York.) The firm represented the company on its $350 million purchase of cable systems owned by News-Press & Gazette Company in 2010.
For GS Capital Partners L.P. and other Cequel equity holders
Fried, Frank, Harris, Shriver & Jacobson:
Corporate: Gus Atiyah, Andrew Colosimo, Mario Mancuso, F. William Reindel, Robert Schwenkel, Steven Steinman, and associates Melissa D'Arcy, Lily Desmond, Benjamin Haskins, Erica Jaffe, Michael Schneider, and Ryan Williams. Executive compensation and employee benefits: Donald Carleen, Jeffrey Ross, and associate Mindy Meyers. Intellectual property and technology: Henry Lebowitz and associate Jason Greenberg. Tax: Robert Cassanos and associate Kenneth Rosenfeld. (All are in New York except for Washington, D.C.based Atiyah and Mancuso.) Fried Frank represented GS Capital Partners in 2006 when Cequel bought cable systems in Virginia and West Virginia from Charter Communications Inc. D.M.
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NRG Energy Inc. agreed on July 22 to acquire rival independent power producer GenOn Energy Inc. for $1.7 billion in stock. GenOn shareholders will receive 0.1216 NRG shares for every GenOn share, consideration that reflected a premium of 21 percent to GenOn's closing price of $1.82 on July 20. NRG will also assume GenOn debt and lease obligations of $3.8 billion, giving the deal a total value of $5.5 billion. NRG stock rose by 8 percent on July 23, which suggests that its shareholders like the deal.
The parties hope to close the deal by the first quarter of 2013, pending approvals from regulators and both sets of shareholders.
For acquiror NRG Energy Inc. (Princeton)
Assistant general counselsecurities and finance Brian Curci, assistant general counseltransactions Kevin Malcarney, and regional general counselTexas Christopher O'Hara.
Kirkland & Ellis:
Corporate: Thomas Christopher, Andres Mena, Gerald Nowak, Yi Claire Sheng, of counsel Paul Zier, and associates Roy Cho, James Markel, Dvir Oren, and Seniz Yakut. Energy: Mitchell Hertz and associate Karen Sheffler. Executive compensation: Scott Price and associate Suzi Sabogal. Employee benefits: Jeffrey Quinn and associate Margaret Hermes. Tax: Gregory Gallagher and associate Munsoor Hussain. Environmental: Paul Tanaka and associate Martin Sul. Intellectual property: Edward Sadtler and associate Daniel St. Onge. Real estate: John Caruso and associate David Curfman. Antitrust: Mark Kovner, Bilal Sayyed, and associate Marin Boney. Labor: Timothy Stephenson. (All are in New York except for the following: Nowak, Zier, Quinn, Hermes, Gallagher, Hussain, Caruso, and Curfman are in Chicago. Hertz, Sheffler, Kovner, Sayyed, Boney, and Stephenson are in Washington, D.C. Tanaka and Sul are in San Francisco.) Kirkland helped NRG fight off a hostile bid from Exelon Corporation in 2009. During the course of the takeover battle, Kirkland counseled NRG on its $353 million purchase of Reliant Energy Inc.'s retail business in Texas, after which Reliant assumed the name RRI Energy Inc. Kirkland also helped represent NRG on its $8.3 billion purchase of Texas Genco LLC in 2005, a deal on which Skadden also advised NRG.
For NRG board of directors
Potter Anderson & Corroon:
Corporate: Michael Reilly, Michael Tumas, and associates David DiDonato and Roxanne Houtman. (All are in Wilmington.)
For target GenOn Energy Inc. (Houston)
General counsel and chief compliance officer Michael Jines, deputy general counselcorporate Steven Nickerson, deputy general counselassets David Sladic, assistant general counselcorporate Kathy Tedore, senior corporate counsel Allison Cunningham, assistant general counselgovernment and regulatory affairs Debra Raggio, assistant general counselenvironmental policy Walter Stone, associate general counsellabor Mark Artlip, and associate general counselbenefits Nancy Brame.
Skadden, Arps, Slate, Meagher & Flom:
M&A: Frank Bayouth and Michael Rogan. Energy: Clifford "Mike" Naeve. Antitrust: John H. Lyons. (All are in Washington, D.C., except for Houston-based Bayouth.) Skadden represented RRI Energy Inc. in the 2010 merger with Mirant Corporation that formed GenOn.
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In Re Chase Bank "Check Loan" Contract Litigation
JPMorgan Chase & Co. agreed July 23 to pay $100 million to resolve claims that the bank improperly jacked up credit card holders' minimum monthly payments. The case stemmed from a decision by JPMorgan unit Chase Bank USA National Association to increase minimum payments for some cardholders from 2 percent of account balances to 5 percent in 2008 and 2009.
The settlement represents about half of the up-front transaction fees that class members paid to lock in initial interest rates that were later hiked, according to a motion to preliminarily approve the settlement filed in federal district court in San Francisco.
A sextet of plaintiffs firms filed an amended complaint in July 2009, accusing Chase of forcing customers to accept higher-interest credit card fees to maintain the 2 percent minimum monthly payment, or face late payment fees and a penalty interest rate of about 30 percent. The plaintiffs alleged breach of implied covenant, unconscionability, unjust enrichment, and breach of contract; they also claimed that Chase's actions violated state consumer protection laws and the Truth in Lending Act.
In 2009 U.S. District Judge Maxine Chesney threw out all the claims except onebreach of implied covenant of good faith and fair dealingwhich she certified for class treatment in May 2011. Court filings say that the class includes about 1 million credit card customers.
The settlement was reached after the parties held their fifth formal mediation session in May; trial in the case was originally set to begin in early July. Under the terms of the agreement, the plaintiffs lawyers can seek an award of attorney fees of up to 27 percent of the settlement amount$27 millionplus expenses.
For plaintiffs Michael Moore et al.
Lieff Cabraser Heimann & Bernstein: Elizabeth Cabraser, Roger Heller, and Michael Sobol. (They are in San Francisco.)
Giskan Solotaroff Anderson & Stewart:
Oren Giskan. (He is in New York.)
Eric Gibbs and associates Geoffrey Munroe and Amy Zeman. (They are in San Francisco.)
Green & Noblin:
Robert Green. (He is in Larkspur, California.)
Paul Andrejkovics, Jeff Westerman, counsel Nicole Duckett, and associate Christian Keeney. (Andrejkovics is in New York; the others are in Los Angeles.)
The Sturdevant Law Firm:
James Sturdevant. (He is in San Francisco.)
For defendant Chase Bank USA National Association (Newark, Delaware)
Stroock & Stroock & Lavan:
Stephen Newman, Julia Strickland, counsel David Moon, and associates Joseph Escarez and Alexandria Kachadoorian. (They are in Los Angeles.)
Ross Todd, with Tom Coster
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In Re Southeastern Milk Antitrust Litigation
Lawyers for a class of dairy farmers got some very welcome news on June 15and so did creditors of the defunct law firm Howrey. Almost a year after lawyers reached a $140 million class settlement with Dean Foods Company to resolve price-fixing claims on behalf of about 7,500 dairy farmers and cooperatives in the Southeast, a federal judge in Tennessee finally signed off on the deal.
U.S. District Judge J. Ronnie Greer granted the settlement final approval, and also approved a separate $5 million deal with defendants Southern Marketing Agency Inc., a milk marketing cooperative, and its general manager, James Baird. According to the judge, the agreements provide for about $13,000 for individual class membersor close to a third of what a plaintiffs expert pegged as the farmers' damages in the alleged scheme to depress prices for raw milk. The Southern Marketing Agency settlement also includes structural changes to the way milk is marketed in the Southeast.
Plaintiffs lead counsel Robert Abrams originally struck a settlement with Dean's lawyers at Dechert in July 2011, just four months after he left the failing Howrey to join Baker & Hostetler as antitrust chair. The deal was put on indefinite hold, however, when Greer agreed with Dean that potential conflicts required him to decertify a subclass of farmers that belonged to a cooperative, Dairy Farmers of America Inc., which is also a key defendant in the case. Finally, after appointing new counsel for the DFA members subclass, Greer recertified the class in February and put the settlement back on track.
On July 11 plaintiffs attorneys were awarded $48.3 million in fees and $7.4 million in expenses. Most is expected to go to Baker & Hostetler and to Howrey creditors. Eight other firms, including Cohen Milstein Sellers & Toll; Boies, Schiller & Flexner; and Hausfeld LLP, each estimated their fees at around $500,000 or less.
At press time dairy farmers were still forging ahead with claims against alleged coconspirator Dairy Farmers of America and related defendants. Trial in that case is set to begin in January 2013.
For plaintiffs Sweetwater Valley Farm Inc. (Philadelphia, Tennessee) et al.
Baker & Hostetler:
Robert Abrams, Robert Brookhiser, Gregory Commins Jr., Joanne Lichtman, Terry Sullivan, counsel William DeVinney, Danyll Foix, and associates Carey Busen, Evan Mannering, Bridget Merritt, and Nicole Skolout. (Lichtman and Skolout are in Los Angeles; the rest are in Washington, D.C.)
Jessee & Jessee:
Thomas Jessee. (He is in Johnson City, Tennessee.) The firm was local counsel.
For plaintiffs DFA members subclass
Brewer & Terry:
Gary Brewer. (He is in Morristown, Tennessee.) The court appointed the firm reinstated class counsel.
For defendant Dean Foods Company (Dallas)
Carolyn Feeney, Paul Friedman, counsel Paul Frangie, and associate David Stanoch. (Feeney and Stanoch are in Philadelphia. Friedman and Frangie are in Washington, D.C.)
For defendants Southern Marketing Agency Inc. et al.
Winston & Strawn:
Gordon Dobie and associates Jared Hasten, Michael Pullos, and Kari Rollins. (They are in Chicago; Hasten has left the firm.)
For defendant Dairy Farmers of America Inc. (Kansas City, Missouri)
Williams & Connolly:
Kevin Hardy, Steven Kuney, Carl Metz, John Schmidtlein, and associates Simon Latkovich and Shelley Webb. (They are in Washington, D.C.)
David Bario, with T.C.
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In Re Tremont Securities Litigation
It was a rough summer at the U.S. Court of Appeals for the Second Circuit for investors in feeder funds that lost money in Bernard Madoff's Ponzi megafraud.
On July 10 two sets of investors in funds managed by Tremont Group Holdings Inc., which lost more than $3 billion in client money in Madoff's scheme, failed in their bid to revive claims against the funds' auditors at KPMG L.L.P. and Ernst & Young LLP. A three-judge panel issued a summary order upholding dismissal of the plaintiffs' federal securities claims against the auditors.
Agreeing with rulings by U.S. District Judge Thomas Griesa in Manhattan, the Second Circuit panel found that the plaintiffs' allegations that the accounting firms had carried out inadequate audits of the Tremont funds were not adequate to support scienter claims that the auditors intended to help Madoff defraud investors or even knew of Madoff's fraud.
The panel found that the auditors were not responsible for auditing Madoff securities, so they were not liable for missing red flags. The Second Circuit panel also pointed out that these risks were disclosed to plaintiffs in the Tremont offering materials, to investors and auditors of other Madoff feeder funds, and to the Securities and Exchange Commissionall of which were duped by Madoff's scheme.
The ruling is the third at the Second Circuit since May to quash the efforts of feeder fund investors to recover Madoff losses through litigation. On May 18 a panel affirmed dismissal of fraud and malpractice claims brought against auditor PriceWaterhouseCoopers LLP by an investor in the Greenwich Sentry fund. And in June, the court affirmed the dismissal of auditor claims brought by an investor in feeder fund First Frontier for lack of scienter.
In appellate briefs, KPMG (Cayman) had asked the panel to affirm one of the dismissals in part under the U.S. Supreme Court's Morrison v. National Australia Bank, which curtailed the overseas reach of federal securities laws. But the court took a pass on the Morrison issues.
For appellants Meridian Horizon Fund LP (Albany and New York) et al.
Friedman Kaplan Seiler & Adelman:
Anne Beaumont, Scott Berman, John Orsini, and associate Steven Frankel. (They are in New York.)
For appellants Arthur M. Brainson et al.
Jeffrey Haber, Christian Siebott, and counsel Stephanie Beige. (They are in New York.)
For defendant KPMG L.L.P. (Montvale, New Jersey)
Gregory Ballard, Gary Bendinger, Carter Phillips, Paul Zidlicky, and associates Samuel Choi, Adam McClay, Leslie Regenbaum, Gazeena Soni, and DeNae Thomas. (Phillips is in Chicago and Washington, D.C.; Zidlicky is in Washington, D.C.; and the rest are in New York.)
Williams & Connolly:
David Forkner and John Villa. (They are in Washington, D.C.)
For defendant KPMG (Grand Cayman, Cayman Islands)
Ira Feinberg, George Salter, and associate Chava Brandriss. (Brandriss has left the firm. The rest are in New York.)
For defendant Ernst & Young LLP (New York)
Associate general counsel William Hammer.
Morrison & Foerster:
Robert Hubbell, Brian Matsui, Deanne Maynard, and associates Natalie Ram and Tiffany Rowe. (Hubbell is in Los Angeles; the rest are in Washington, D.C.)
R.T., with T.C.
David Marcus is senior writer for TheDeal.com. Email: email@example.com.