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Michael Kagnoff was ready for some good news — and he just got some. After watching the economy tank and his former firm, Brobeck, Phleger & Harrison, implode, Kagnoff just marshaled the $65 million initial public offering of Digital Theater Systems Inc. to market. The DTS offering, on July 10, was only the 11th IPO this year nationwide. “It feels good to build something as opposed to tearing stuff down,” said Kagnoff, a partner at Heller Ehrman White & McAuliffe. “The same thing that happened to Brobeck has happened to a huge number of clients. We’ve been shutting them down or selling them off. “ Kagnoff and fellow partner Craig Andrews led a team of Brobeck refugees at Heller that included associates Jeffrey Thacker, Kirt Shuldberg and Shana Brown. Skadden, Arps, Slate, Meagher & Flom represented the underwriter, SG Cowen. DTS produces the digital surround sound technology that makes movie dinosaurs roar, hurricanes howl and — so far –investors smile: The stock, initially priced at $17 per share, was up 46 percent by the end of the day at almost $25. “Everyone involved on the management side would characterize this as a huge success,” Kagnoff said. When planning began in late February, however, a positive outcome was far from certain. An obligation to redeem 26 million shares of preferred stock made some action necessary — even though the market seemed inhospitable to IPOs. Kagnoff said DTS was considering selling stock or the company. “The sense was that, despite the risk, the IPO was the best way to maximize return to shareholders,” Kagnoff said. INVITROGEN/MOLECULAR PROBES For the third consecutive quarter, Gray Cary Ware & Freidenrich is handling an acquisition for client Invitrogen Corp. The firm represented the Carlsbad-based company in its acquisition of Oregon’s Molecular Probes in an all-cash deal worth about $325 million. Last quarter, Invitrogen made a $95 million deal to acquire PanVera LLC, and in the fourth quarter of 2002, it made a $42 million offer for Informax Inc. “That’s three good deals for a great client,” said Jeffrey Baglio, a San Diego-based partner who led the three deals. Invitrogen makes research and production tools for the biotech industry. Molecular Probes makes fluorescent technology used in medical research. Gray Cary has completed 29 deals this year, valued at more than $800 million. Baglio says he has seen a marked pickup in activity in the mergers and acquisitions market since the end of 2002, when he saw companies become more realistic about pricing. “Sellers came back and talked about prices that they had turned down a few months before, and buyers were ready to test the water and not wait for valuations to keep going down,” Baglio said. “After a year and a half, they felt that it was time.” Assisting Baglio at Gray Cary were partner Henry Lesser, co-chair of the M&A group, and associates Christian Waage and Adam Schwenker. Molecular Probes was represented by Cooley Godward partners Richard Climan in Palo Alto and M. Wainwright Fishburn Jr. in San Diego.

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