For East Palo Alto, California–based DLA Piper partner Brad Rock, helping the sixth-richest man in the world buy Hawaii’s sixth-largest island may have been a plum legal assignment, but it was no vacation.
“I did not play golf,” Rock says of the trip he took to Lanai earlier this year as part of his due diligence in advising on Oracle CEO Larry Ellison’s acquisition of the island from fellow billionaire David Murdock for an amount the two sides would only say was hundreds of millions of dollars.
The visit to Lanai was essential, Rock says, to get a feel for the people, culture, and politics of the place. Along the way, he visited many of the less-glamorous corners of the small island, including the local landfill, a solar power farm, a woodworking shop, and a feral cat kennel. “Buying land,” he says, “is not like buying a company.”
This particular envy-inducing land deal closed on June 27, a week after Murdock—citing, in part, his desire to shed the more than $20 million in annual losses his Lanai resorts have cost him in recent years—notified Hawaii’s Public Utilities Commission of his intention to sell the island. The disclosure came in a request to transfer three public utilities from Castle & Cooke Inc.—a Los Angeles–based company once tied to Dole Food Company that Murdock acquired in 1985 and took private in 2000—to an Ellison-owned holding company. In acquiring Lanai, Ellison gets two Four Seasons resorts, golf courses, and 88,000 acres of largely unspoiled land dotted with residential and commercial developments on the island of nearly 3,200 residents.
Ellison—whose other property holdings include a high-end home in San Francisco’s Pacific Heights neighborhood, a historic garden in Kyoto, Japan, several homes near Lake Tahoe, California, and a string of properties and restaurants in Malibu, California—has not publicly divulged what prompted him to acquire Lanai. According to the public utility filing, however, “the Buyer anticipates making substantial investments in Lanai and is looking forward to partnering with the people of Lanai to chart the island’s future,” adding that the sale brings the potential for new jobs, economic stimulus, and a reinvigorated tourism industry.
Adjacent to the much-larger Maui, the 50-mile-in-circumference Lanai—which means “veranda” in Hawaiian—was once home to a sprawling Dole pineapple plantation established by James Dole in the 1920s. Murdock shut down the island’s pineapple industry in 1993 and, in a move that stirred local opposition at the time, launched a wave of commercial development aimed at spurring tourism.
Stories published in the local press depict Lanai as having a small-town feel where residents all know the local gossip and manage to get by without street lights, but also as a community marked by a kind of modern-day feudal culture that is the product of Murdock’s—and now Ellison’s—ownership of nearly the entire island.
“You’re buying the entire economy,” Rock says of the change in ownership.
In addition to relying on DLA Piper, Ellison tapped Honolulu firms Schlack Ito (as lead local counsel) and Kobayashi, Sugita & Goda (for representation before the Public Utility Commission and advice on labor-related matters) to handle the Lanai acquisition. Castle & Cooke’s in-house lawyers worked with lead outside counsel Goodsill Anderson Quinn & Stifel and PUC counsel Rush Moore, both of which are based in Honolulu.
To avoid having to pay conveyance taxes, the deal was structured as the sale of one land-owning company to another, rather than a straight land sale, according to the Honolulu Star-Advertiser. Ellison now owns roughly 97 percent of the island, with the rest owned mostly by the State of Hawaii and local home owners. The deal’s terms allow Murdock to retain the right to continue developing a controversial wind-power project he plans for a remote section of the island. Murdock, who was extensively profiled in The New York Times last year, also continues to own a personal estate on Lanai.
Rock says the transaction moved along a “very aggressive timeline.” Work began in March and Ellison made a handshake deal with Murdock in early May. At that point, both parties conducted intensive due diligence before approaching the state utility agency in June. As part of the due diligence, lawyers sifted through more than 100,000 pages of files, Rock says, and had to very quickly find a method to make those documents available to all those involved.
When they presented the proposed sale to the utility commission on June 20, Murdock and Ellison suggested accelerating the approval process so that the transfer of ownership of the three utilities—controlling water, waste treatment, and public transit on the island—could receive interim approval a few days before the deal’s expected closing date and then having the months-long regular approval process come after. While Rock says the request was unorthodox, the utility agreed to the plan and is now completing the rest of the approval process, including allowing the public to weigh in.
In pitching the deal to the utility commission, Castle & Cooke wrote in a filing that “great comfort should come from the fact that the Lanai Transaction is taking place between two very financially fit Parties.” That could be considered an understatement: Forbes pegs 67-year-old Ellison’s worth at $36 billion and 89-year-old Murdock at $2.7 billion.
For Rock, the Lanai assignment is the latest in a client relationship that dates back to the 1990s, before the law firm he was then with, Gray Cary Ware & Freidenrich, took place in a three-way merger in 2005 to become DLA Piper. Over the years Gray Cary, and then DLA, have handled corporate, M&A, and investment work for Ellison, including his 2009 purchase of the stadium and rights for the Indian Wells tennis tournament in southern California for a reported $100 million.
Other DLA Piper partners assisting on the Lanai deal include Stephen Cowan, Laurie Scola, Mark Boxer, and Matthew Covington in San Francisco, James Anderson, David Plewa, and Matt Oshinsky in East Palo Alto, and Paolo Morante in New York. To thank the group after the deal closed, Rock says he used a twist on an old adage: “It takes a village to buy an island.”