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For years, Copenhagen-based Danisco A/S went Dutch with Eastman Chemical Co. Both parties held 42 percent stakes in the Palo Alto biotechnology business, Genencor International Inc. But over time, Danisco grew hungry for the whole venture. Last week, the food ingredient giant inked a deal to buy out Eastman’s shares and all other outstanding shares for $600 million. Cooley Godward partner Keith Flaum, who represented Genencor, said the deal put his client’s worth at $1.1 billion, including the value of shares already owned by Danisco. “It was one of the most interesting transactions I’ve worked on in many years,” Flaum said. The deal was unusual, he said, because it actually consisted of two transactions: one major stockholder buying out another and also buying public shares. When a major stockholder buys out others, it must comply with extensive Securities and Exchange Commission disclosure rules, detailing why the process and price of the transaction are fair. “That adds a level of complication,” Flaum said. Genencor’s board of directors added another twist by forming a special committee to evaluate the transaction. Boards tend to take such measures, said Flaum, when the majority of their members work for corporations involved in the deal. Despite such precautions, the deal sparked two lawsuits the morning it was announced. Minority shareholders of Genencor sued the directors for breach of fiduciary duty in approving the deal. Under the terms of the deal, expected to close May 31, Danisco will acquire Eastman’s common stock holdings in Genencor for $15 per share in cash and its shares of preferred stock for $44 million in cash — for a total of $419 million. Danisco will buy all other outstanding shares of Genencor common stock for $19.25 per share in cash, for a combined $181 million. Genencor makes products with enzymes that are used in a variety of applications, from removing stubborn stains to converting cornstarch to sweetener and enhancing the nutritional value of animal feed. Genencor has been at the center of a web of deals since its founding in 1982 as a joint venture between Genentech Inc. and Corning Inc., known as Genencor Inc. After Eastman Kodak acquired an interest in it and formed a joint venture with Cultor Ltd., the company was renamed Genencor International. Eastman Kodak eventually transferred its interest in the company to Eastman Chemical, and Danisco gained a stake in the company when it purchased Cultor in 1999. Flaum’s team included partners Richard Climan and Robert “Buff” Miller, associates Keith Pisani and Jennifer Fonner DiNucci and special counsel Francis Fryscak. Genencor General Counsel Margaret Horn also assisted on the deal. Heller Ehrman White & McAuliffe partners Sarah O’Dowd and Timothy Hoxie and associate Robert Weiss represented the special committee of Genencor’s board. They were assisted by Frederick Alexander, a partner at Wilmington, Del.-based Morris, Nichols, Arsht & Tunnell. Danisco was represented by New York’s Carter, Ledyard & Milburn. — Brenda Sandburg PROTEIN DIET INCLUDES ESP The starting gun went off sometime around Christmas, and when a team of five lawyers from DLA Piper Rudnick Gray Cary hit the finish line Tuesday, their client, Protein Design Labs Inc., was the winner of a tight race to acquire ESP Pharma Inc. for $475 million. “M&A is in general hectic,” said Diane Holt Frankle, a partner in the firm’s East Palo Alto office and a co-chair of the M&A practice. “But this one was particularly interesting because it was a competitive bidding process.” Fremont-based PDL “humanizes” mouse antibodies into compounds aimed at treating autoimmune conditions, asthma, cancer and other ailments in people. It acquired Edison, N.J.-based ESP — which focuses on the acquisition, marketing and late-stage development of new drugs — in order to bring its products to market more efficiently. The deal has PDL acquiring ESP for $300 million in cash and about $175 million in PDL common stock. PDL will also assume approximately $14 million in ESP debt. Frankle said the headlong pursuit of ESP by several buyers forced DLA lawyers to work overtime through the holidays on due diligence. “Speed and price were the two main factors,” she said. Frankle said she made a deliberate effort to “not get caught up in the competitive bidding situation.” While thorough and fast due diligence was required, she had to continually remind herself that a bidding war can inflate a company’s price far beyond its worth. Frankle and partner John “Howard” Clowes — who flew to New Jersey for on-site work near ESP’s headquarters — led the DLA team. They were joined by partners Lisa Haile in San Diego and P. James Schumacher in East Palo Alto and associate Joshua Rosenfeld in San Francisco, along with several lawyers in the firm’s Philadelphia and Washington, D.C., offices. ESP Pharma was represented by Milbank, Tweed, Hadley & McCloy in New York. — Justin Scheck

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