M&A Law

Xerox Terminates $6.1B Transaction with FujiFilm after Criticism, Lawsuit by Xerox Shareholders

By David R. Venturella, Bass, Berry & Sims PLC

On March 15, 2018, Xerox Corporation (“Xerox”) announced the termination of its previously announced agreement with Fujifilm and Fuji Xerox Co., Ltd.—Xerox’s joint venture with Fujifilm. Pursuant to the now-terminated agreement, Fuji Xerox would become a wholly owned subsidiary of Xerox, and Fujifilm would increase its stake in Xerox to 50.1 percent. Xerox cited the failure by Fujifilm to deliver the audited financials of Fuji Xerox by April 15, 2018 and certain material deviations of the unaudited financial statements of Fuji Xerox from its audited financial statements as grounds for the termination of the agreement.

The deal was previously the subject of a lawsuit by prominent Xerox shareholders, who alleged that the transaction disproportionately favored Fujifilm. In connection with the termination of its agreement with Fujifilm and Fuji Xerox, Xerox also announced the settlement of the shareholder litigation. Pursuant to the settlement agreement, Xerox agreed, among other things, to restructure its board to appoint certain shareholder nominees and to accept the resignation of 6 incumbent directors.

FTC Provides Reminder on HSR Transactions

By Arooj Nazir, Husch Blackwell LLP

The Premerger Notification Office (the “PNO”) of the Federal Trade Commission (the “FTC”) issued a reminder on May 16, 2018 about transactions that may require notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).  The HSR Act generally requires filing of a notification before the purchase of voting securities, assets, or certain non-corporate assets.  However, in the recent reminder issued by the PNO, the following categories of transactions may be reportable even though no payment is made at the time of acquisition: (i) exchange of one type of interest in a company for another, (ii) backside acquisitions, (iii) consolidations and acquisition of shares in a new corporation, (iv) reorganizations, and (v) employee compensation.  Failure to file a notification with the FTC and the Antitrust Division of the Department of Justice, and to observe the statutorily prescribed waiting period prior to closing, may result in significant financial penalties, currently in the amount of up to $41,484 per day of noncompliance. 

International M&A

FTC Declines to Stay Tronox-Cristal Hearing

By Tyler Huseman, Bass, Berry & Sims PLC

On May 16, 2018, the Federal Trade Commission (“FTC”) denied a motion by Tronox Limited, a U.S. based mining and inorganic chemical company (“Tronox”) and National Titanium Dioxide Company of the Kingdom of Saudi Arabia (“Cristal”) to stay and temporarily withdraw the FTC’s review of their proposed transaction to allow them “the opportunity to renew discussion with the [FTC] about the procompetitive nature of this transaction and to provide for settlement discussions.” The transaction, which had been announced on February 21, 2017, would result in Tronox acquiring Cristal for $1.673 billion in cash as well as a 24% of the stock of the combined business. The transaction was approved by Tronox shareholders on October 2, 2017, and the companies have received regulatory clearance from a handful of jurisdictions, but the companies are still facing regulatory pressure from the FTC and the European Union. In its denial of the motion to stay its review, the FTC stated “[n]either the completion of discovery nor progress regarding settlements with other competition authorities provides good cause to stay this proceeding.” In the absence of the stay requested by the parties, the FTC’s review will continue.

Joint Venture

Delaware Court of Chancery Refuses to Rescind ETE Private Offering, but Finds Transaction Unfair

By Michael Caine, Husch Blackwell LLP

On May 17, 2018, the Delaware Court of Chancery denied a request for rescission and associated equitable relief related to a one billion dollar private equity offering by Energy Transfer Equity, L.P. (“ETE”) that occurred in 2016 despite finding that the transaction was unfair.  Per the Limited Partnership Agreement (LPA), conflicted transactions were prohibited unless objectively fair and reasonable.  Applying the “entire fairness” review often used by Delaware courts to determine whether a conflicted transaction is indeed fair and reasonable, the Court found that ETE did not meet its burden to demonstrate the transaction was fair.  Typically, conflicted transactions are set aside if it is determined that such transaction was unfair to the corporation.  In this case, however, the Court let the transaction stand, stating that the transaction caused no damage to ETE and granting equitable relief by cancelling the securities and redeemable credits would “cause equitable problems of its own.”




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