image: Caroline Fong
Two leading European defense companies are breaking up U.S. security firm L-1 Identity Solutions in a two-part transaction valued at $1.6 billion, including debt, Bloomberg reports.
French aerospace and security conglomerate Safran has agreed to pay more than $1.1 billion to acquire most of L-1, which specializes in biometrics identification through face, fingerprint, palm and iris recognition systems used to secure documents and other important assets. L-1's government consulting and intelligence services division will be sold to Britain's BAE Systems, the largest military contractor in Europe, in a separate deal valued at $296 million.
Four firms advised the various parties involved in the transactions, with a thicket of cross-border national security issues complicating the breakup of L-1. The two deals require the standard blessings of antitrust regulators, as well as approval by the Committee on Foreign Investment in the U.S.
"All of the security issues associated with this just adds another layer of complexity," says one lawyer involved in the matter, who like most of his colleagues, was tight-lipped on the transactions given their national security implications and required regulatory approvals.
Skadden, Arps, Slate, Meagher & Flom advised L-1 on its sale to both BAE and Safran. M&A partners Peter Atkins and Eric Cochran, executive compensation partner Neil Leff, CFIUS practice head Ivan Schlager, tax partner David Rievman and IP and technology partner Jose Esteves led the team from the firm, which was brought in solely to handle the Stamford, Conn.-based company's breakup.
James Stuart III, chair of the corporate group at Crowell & Moring, advised BAE Systems on its acquisition of L-1's government consulting arm. The firm is known for its government contracts and regulatory practice groups, and the sale of L-1's non-biometric assets to BAE is what allowed Safran to swoop in and pick up the rest of the company.
Weil, Gotshal & Manges M&A partners Raymond Gietz, Frederick Green and Arthur Baudry d'Asson advised Paris-based Safran on the acquisition. The state-owned company is a client of Weil's Paris office, where d'Asson is based; d'Asson handled Safran's spinoffs of its mobile and broadband businesses in 2008.
Tax partner Jared Rusman, employee benefits partner Andrew Gaines, technology and IP transactions partner Charan Sandhu, environmental partner Annemargaret Connolly and counsel John O'Loughlin and litigation counsel Michael Eisenberg rounded out the Weil team representing Safran. The firm previously represented GE Security, the former homeland security unit of General Electric that sold a majority stake to Safran for $580 million in April 2009. Safran intends to incorporate L-1's identification businesses into that unit, now called Morpho.
Fred Marcusa, a senior partner in Kaye Scholer's corporate department, led a team from the firm serving as lead CFIUS, national security and regulatory counsel to Safran. The firm has previously represented Safran in such matters.
Also serving as a strategic adviser to Safran is the Chertoff Group, a risk management shop set up by former Department of Homeland Security secretary and current Covington & Burling senior of counsel Michael Chertoff.
Safran's vice president of legal affairs is Celeste Thomasson, who was appointed to the position this past June. L-1's chief legal officer is Mark Molina. The third in-house legal chief involved in the deal, Ian Graham of BAE Systems, was profiled by sibling publication Corporate Counsel in June.
BAE's acquisition of certain L-1 assets is expected to close by the end of the year, while Safran's purchase of the rest of the company is tentatively set to take place by the first quarter of 2010, pending CFIUS and other regulatory approvals.
The New York Times notes that the biometrics industry has recently been going through a period of consolidation. Last month, Morrison & Foerster and Cleary Gottlieb Steen & Hamilton won roles on a $943 million merger between 3M and Cogent Systems. Reuters reports that as large defense contractors face sharp cuts in national defense budgets, they've begun targeting smaller security players in the niche technology markets of cybersecurity, surveillance and intelligence.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
