With 2014 drawing to a close, activist investors prevailed in pushing through two large going-private transactions, including the year's largest leveraged buyout for a U.S. company that yielded roles for three leading Am Law 100 firms.
Phoenix-based PetSmart, the largest specialty retailer of pet food and supplies in the U.S., turned to Wachtell, Lipton, Rosen & Katz to advise on an agreement announced Sunday to sell itself for $8.7 billion to a consortium led by London-based private equity firm BC Partners.
Simpson Thacher & Bartlett corporate partner Ryerson Symons in New York—who worked on the sale of The Am Law Daily this summer and was named a Dealmaker of the Week three years ago for his role handling another headline-grabbing LBO—has taken the lead for the BC Partners-backed investment group seeking to take control of PetSmart. Other lawyers from the firm working on the deal include antitrust senior counsel Michael Naughton, senior corporate counsel Michael Isby and real estate counsel Krista McManus.
Wachtell corporate partners Mark Gordon and David Karp are leading a team from the firm representing PetSmart on the deal that includes finance partner Joshua Feltman, executive compensation and benefits partner Adam Shapiro, tax partner T. Eiko Stange and associates Tijana Dvornick, Corinne Musa, Rohit Nafday, Ian Nussbaum and Viktor Sapezhnikov.
The proposed PetSmart deal, which is expected to close in the first half of 2015, is a first for Wachtell on behalf of the company, which announced in August its retention of the firm and intention to pursue a sale after New York-based hedge fund Jana Partners took a nearly 10 percent stake in the company. At the time, Perkins Coie was advising PetSmart on its purchase of online retailer Pet360 for an undisclosed sum, although subsequent reports put that acquisition’s value at up to $160 million.
PetSmart general counsel Paulette Dodson—hired by the company two years ago after she left now-defunct food conglomerate Sara Lee—and deputy general counsel J. Dale Brunk are handling in-house matters related to the retailer’s going-private sale. PetSmart’s former in-house legal chief, Scott Crozier, who retired in 2009 to make way for Dodson’s predecessor Emily Dickinson, told sibling publication The National Law Journal in 2009 that his company was pressing its outside firms to drop their hourly rates by 30 percent if they wanted to keep the retailer as a client.
Of course, it’s unlikely that Wachtell, a noted bane of activist investors, would reduce its own rates for PetSmart, which saw several bidders—including private equity rivals Apollo Global Management, Clayton, Dubilier & Rice and KKR—try to edge out BC Partners for control of the company, according to The Deal.
Paul Hastings leveraged finance partners Michael Michetti, Jeffrey Pellegrino, Mario Ippolito, Leslie Plaskon, John Cobb and Richard Farley are leading a team from the firm representing Barclays, Citigroup, Deutsche Bank, Jefferies and Nomura in connection with the financing for the transaction. (Farley joined the firm from Cahill Gordon & Reindel in 2011, while Cobb, a former Dewey & LeBoeuf partner, came aboard earlier this year from Weil, Gotshal & Manges.)
The expected sale of PetSmart is a victory for two investors who have pushed the company to shake up its operations in recent months amid slowing sales. Jana, the $11 billion hedge fund run by investment tycoon Barry Rosenstein that in August claimed to have received an anonymous tip with sensitive financial information to further its activist campaign, teamed up with longtime PetSmart shareholder Longview Asset Management to agitate for a sale of the company.
Skadden, Arps, Slate, Meagher & Flom corporate partner Rodd Schreiber in Chicago is leading a team from the firm advising Santa Fe, N.M.-based Longview that includes M&A partner Ann Beth Stebbins, tax partner Gavin White and banking partner Steven Messina. Longview, which is more of an independent investment management firm than rabble-rousing activist like Jana, owns about 9 percent of PetSmart.
Two other Am Law 100 firms took the lead on the other notable LBO with an activist component heading up to the holidays.
On Monday, noted activist and Harvard Law School graduate Paul Singer, who runs New York-based hedge fund Elliott Management, prevailed in his months-long quest to force a sale at Riverbed Technology, for which Elliott made a $3.2 billion bid earlier this year in an effort to drum up interest in the computer networking company.
San Francisco-based Riverbed successfully thwarted Elliott’s advances but after lowering its financial outlook in October, it acquiesced to the activist investor’s demands and agreed to evaluate its strategic alternatives, including a potential sale. Riverbed announced Monday an agreement to sell itself for $3.6 billion in cash to Thoma Bravo, the private equity arm of the Ontario Teachers’ Pension Plan. Elliott, which is Riverbed’s largest shareholder, supports the proposed sale.
Kirkland & Ellis has taken the lead for longtime client Thoma Bravo on the deal, which like the PetSmart transaction is expected to close in the first half of 2015. Corporate partners Gerald Nowak, Corey Fox and Bradley Reed are leading a Kirkland team working on the matter.
Wilson Sonsini Goodrich & Rosati, which advised Riverbed earlier this year as it considered Elliott's first takeover bid and also counseled its client two years ago on its $1 billion buy of Opnet Technologies, is once again representing the target on its proposed sale to Thoma Bravo. Michael Ringler, a senior member of Wilson Sonsini’s M&A group who spent about a month at Kirkland last year before returning to the firm, is leading a Wilson Sonsini team advising Riverbed.
Other lawyers from Wilson Sonsini working on the matter include M&A partner David Segre, finance partner Andrew Hirsch and of counsel Christine Li, tax partner Eileen Marshall, employee benefits partner Madeleine Boshart, IP and technology transactions partner Suzanne Bell, litigation partner David Berger, Delaware law of counsel Amy Simmerman and associates Thomas Earnest, Brandon Gantus, T.J. Graham, Derek Liu, Michael Ray and Myra Sutanto Shen. (Davis Polk & Wardwell corporate partner William Kelly and associate Bryan Quinn are representing Qatalyst Partners in its role as financial adviser to Riverbed on the deal with Thoma Bravo.)
Wilson Sonsini, Kirkland and Elliott teamed up in September on the proposed $4.3 billion sale of Palo Alto-based enterprise software company Tibco Software to private equity firm Vista Equity Partners, which is expected to close later this month.
Elliott’s longtime general counsel is Myron Kaplan, a founding partner of New York’s Kleinberg, Kaplan, Wolff & Cohen. The hedge fund turned to Paul, Weiss, Rifkind, Wharton & Garrison for outside counsel earlier this year to advise on its own bid for Riverbed. Elliott has also been angling for change at networking equipment maker Juniper Networks, which The Wall Street Journal recently reported had engaged the hedge fund in talks about adding new directors to its board.
Bloomberg reports that Elliott and Jana both made 40 percent gains on their bets that private equity bidders would take an interest in Riverbed and PetSmart.
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