CURRENT MONTH (May 2019)
Pressure from European Commission Causes Tata Steel and thyssenkrupp to Desert Joint Venture Plans
By Chris Johnson
On May 10, 2019, thyssenkrupp AG (“thyssenkrupp”) announced that it was abandoning its joint venture with Tata Steel Group (“Tata”). The 50:50 joint venture was originally announced in September 2017, but was abandoned due to the European Commission’s (the “Commission”) competitive concerns. The Commission was concerned that the joint venture could cause “distortions of competition in the European steel market, for example through excessive market shares in individual market or product areas.”
Tata and thyssenkrupp both offered to divest individual plants, in what the companies thought was a comprehensive package covering all areas of the Commission’s concerns. However, the Commission did not believe that the concessions were sufficient to alleviate competitive concerns. After deliberation, Tata and thyssenkrupp abandoned the joint venture because any further changes “would have adversely affected the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid.”
Takeda and Frazier HealthCare Partners Announce Collaboration to Launch Phathom Pharmaceuticals
By Lora Wuerdeman
On May 15, 2019, Takeda Pharmaceutical Company (“Takeda”) and Frazier HealthCare Partners (“Frazier”) announced a collaboration to launch Phathom Pharmaceuticals, a biopharmaceutical company focused on the development and commercialization of treatments for gastrointestinal diseases and disorders (“Phathom”). As part of the deal, Takeda granted a license to Phathom for the development and commercialization rights for an acid blocker known as vonoprazan in the United States, Europe, and Canada in exchange for an unspecified amount of cash and equity in Phathom, as well as future cash milestones and royalties on net sales. Phathom represents a truly unique opportunity to launch a new company around a highly experienced, world-class team developing a late-stage product candidate supported by strong clinical data and commercial experience.
Occidental Edges out Chevron in Bid for Anadarko
By David Marshburn
On May 9, 2019, Anadarko Petroleum Corporation (“Anadarko”) announced its entry into a merger agreement with Occidental Petroleum Corporation (“Occidental”) in a transaction valued at $57 billion. Under the terms of the agreement, Occidental will acquire all of Anadarko’s outstanding shares in exchange for $59.00 in cash and .2934 of a share of Occidental common stock per share of Anadarko common stock.
Prior to entering into the merger agreement with Occidental, Anadarko had previously entered into a merger agreement with Chevron Corporation (“Chevron”), valued at $50 billion. Following the competing bid by Occidental, Chevron announced on May 9, 2019, that it would not submit a counterproposal to acquire Anadarko and would allow its four-day match period to expire. As a result of ending its agreement with Chevron, Anadarko was required to pay Chevron a termination fee of $1 billion.
With the merger agreement now finalized, Anadarko and Occidental must secure the customary stockholder and regulatory approvals needed before the transaction can close. The parties expect the merger to close in the second half of 2019.
FCC Chairman Places Conditions on Approval of T-Mobile – Sprint Merger
By Cooper Overcash
Federal Communications Commission (“FCC”) Chairman Ajit Pai announced Monday that he will recommend the approval of T-Mobile acquisition of Sprint (via merger) to the FCC commissioners. However, Chairman Pai’s recommendation to the agency comes with significant concessions from the two telecommunication giants. Chairman Pai conditioned his approval and recommendation of the merger on two key points, following the merger, T-Mobile must: (i) meet certain wireless network speed thresholds and coverage goals in rural areas, and (ii) divest itself from prepaid wireless company Boost Mobile. If T-Mobile does not meet either of the conditions set out by Chairman Pai, the company will be subject to significant fines by the FCC.
Although better than nothing, some see the conditions placed on the merger as not going far enough. In a world that is dominated by merely three service providers, several commentators and regulators expected to see greater concessions made by the two companies—especially for a merger of this magnitude. Those skeptical of the conditions placed on the merger by Chairman Pai claim that the FCC is merely managing optics, while shirking its duty to protect the telecommunications market from monopolization. However, as the merger is still under review by the Department of Justice and other regulatory agencies, proponents of the deal cast the concessions extracted by the FCC as merely a floor upon which other agencies can build—allowing agencies to gain additional concessions and further tailor the merger as appropriate.
Delaware Chancery Court finds Company Did Not Comply with Notice of Merger Requirements
By Ericka Simpson Conner
On May 8, 2019, the Delaware Chancery Court (the “Court”) ruled that Mobile Posse, Inc. (“Mobile”) failed to inform common shareholders of the proposed merger with ACME Mobile LLC (“ACME”), denying Mobile’s motions for summary judgment and allowing the shareholder suit against Mobile to continue to the next stage of the litigation process.
Anurag Mehta (“Mehta”), a common shareholder of Mobile, filed suit in May 2018 alleging that Mobile did not comply with various sections of the Delaware General Corporation Law (“DGCL”) by failing to: (i) timely notify stockholders of their rights to seek appraisal of their shares within the timeframe set by Section 262 of the DGCL, (ii) send prompt notifications of the written stockholder consents as required by Section 228 of the DGCL, and (iii) include the amount of cash preferred stockholders would receive for their shares on the face of the merger agreement or documents it incorporates as required by Section 251 of the DGCL.
When Mehta inquired about the merger, he did not receive any information from Mobile for twenty-one days, a violation of DGCL notice requirement laws. By that time, Mobile’s directors had already agreed to the merger. Only after Mehta’s suit was filed did Mobile send a supplemental notice to common shareholders, informing them of the deal terms, and their appraisal rights and extending the timeframe during which shareholders were allowed to exercise those rights.
The Court was not persuaded by Mobile’s attempt to comply with statutory notice requirements after the fact. Vice Chancellor Kathleen S. McCormick concluded that the supplemental notice did not cure the fact that Mobile failed to timely notify stockholders of their appraisal rights. In addition, the written consents submitted by preferred shareholders did not include the consideration paid to preferred shareholders for the merger.