Productively Aligned

Amplifying a Stored-Energy Innovator

Client Interest
With an opportunity to boost its global position, Energizer Holdings, Inc., sought to acquire Spectrum Brands’ global battery and portable lighting business, adding the established Rayovac® and VARTA® brands to its portfolio as well as complementary geographies and cost synergies.

Coordination with K&S
In a combination involving more than 30 international jurisdictions, Energizer worked with antitrust and corporate specialists at K&S to bid for Spectrum’s global battery and portable lighting business, ultimately finalizing and announcing an agreement within just four weeks. The expedited carve-out and separation of Spectrum’s global battery and portable lighting business from its parent organization required extensive diligence and negotiations, as well as the navigation of numerous business and legal issues, including antitrust clearance of the highly complex merger with the U.S. Federal Trade Commission and more than 25 foreign jurisdictions. Altogether, Energizer coordinated with 13 K&S practice teams and local counsel in more than 25 countries to close the transaction.

Commercial Wins
In January 2018, Energizer announced a $2 billion deal to acquire 36 subsidiaries of the Spectrum Brands family, as well as assets from approximately 20 additional Spectrum Brands subsidiaries, upon which Energizer’s shares traded up 15%. The combination will expand the company’s presence in Europe and Latin America, broaden its product portfolio and manufacturing capabilities, and enhance R&D capacity.

Maximizing Results for Retail Lenders

Client Interest
Traditional retail faces significant headwinds due in part to shifting consumer preference and the continued rise in e-commerce. Burdened by these industry-wide challenges, Payless, an iconic American footwear retailer, faced an imminent restructuring in early 2017. An ad hoc fulcrum lender group, holding a substantial portion of Payless’ nearly $1.0 billion in funded debt, engaged K&S to explore restructuring alternatives.

Coordination with K&S
K&S’s multi-disciplinary, cross-office team commenced negotiations with Payless regarding the terms of a comprehensive operational and financial reorganization. Among other things, K&S advised the ad hoc lender group regarding new money DIP financing to fund the chapter 11 cases and certain exit financing commitments to ensure a clear path to emergence, the terms of which were governed by a restructuring support agreement structured to maximize the ad hoc lender group’s ability to effectively control the process. K&S also took a central role in framing negotiations among Payless’s pre-petition sponsors and the official unsecured creditors’ committee regarding a global settlement of potential estate causes of action.

Commercial Wins
Payless emerged from chapter 11 after only 4 months. During that time, it successfully shed hundreds of underperforming leases, rejected burdensome contracts, secured favorable go-forward trade terms with critical vendors, and settled significant contingent claims against Payless, all with virtually no value destruction. The ad hoc lender group fared well, capturing substantially all of the reorganized equity, as well as $200 million in secured take-back debt.

The Payless bankruptcy has been recognized in the market as a “playbook” for future retail reorganizations.

An Offshore Leader Gains Nordic Depth

Client Interest
To strengthen its leading position in harsh environment, ultra-deepwater drilling, Transocean Ltd. moved to acquire Songa Offshore S.E., a publicly held Norway-based contractor with a strong presence in the North Atlantic basin and Statoil’s largest drilling service provider.

Coordination with K&S
Leveraging cross-border M&A, securities and tax expertise, Transocean chose to partner with K&S to negotiate the deal, which secured favorable terms and conditions for the client. Songa agreed not to solicit competing offers as the transaction progressed; its board recommended the combination; and Songa shareholders holding approximately 77% of the shares signed irrevocable pre-acceptance agreements. Songa Chairman, Frederik Mohn, was added to Transocean’s board. K&S worked closely with Norwegian, Swiss and Cyprus counsel to deal with complex corporate, securities and antitrust issues. Extensive advice relating to U.S. securities laws was provided by the firm, which included coordination with the SEC.

Commercial Wins
In a deal valued at $3.38 billion, in August 2017 Transocean reached an agreement to acquire 100% of issued and outstanding Songa shares through a Voluntary Exchange Offer. The combination is expected to be accretive on an EBITDA, operating cash flow, and net debt/EBITDA basis, with anticipated annual expense synergies of approximately $40 million.

Securing Rare FDA “No Objection” for Off-Label Promotion

Client Interest
In the face of the opioid public health crisis, Egalet sought the right to communicate with healthcare professionals about the important abuse–deterrent properties of Arymo™ ER, an opioid that FDA approved in January 2017. According to an FDA advisory committee, the necessary clinical study had demonstrated that the drug had physical and chemical characteristics that would deter intranasal and intravenous abuse.

Coordination with K&S
When information regarding the drug’s intranasal abuse–deterrent properties was blocked from inclusion in Arymo’s labeling by another product’s exclusivity, Egalet and a team of FDA and First Amendment experts from K&S asked FDA to reconsider how exclusivity is assigned to information about abuse deterrence. They also asserted Egalet’s First Amendment right to communicate information about Arymo’s intranasal abuse-deterrent properties to healthcare professionals, while FDA reconsidered how to assign exclusivity for these types of claims.

Commercial Wins
In March 2017, the FDA issued a letter to Egalet stating it would “not object” to Egalet’s provision of information to healthcare professionals about Arymo’s intranasal abuse-deterrent properties. To this firm’s knowledge, this “no objection” letter was the first of its kind. The “no objection” letter ensured that Egalet could share critical information to help healthcare professionals make better treatment decisions to combat and prevent opioid abuse.

Syncing Antitrust in Global High-Value Combinations

Client Interest
Seeking to bolster its portfolio, WestRock Company, a leading global paper packaging solutions provider, looked to resolve potential antitrust issues in several significant transactions in 2017, including its acquisition of Multi Packaging Solutions International Limited (MPS), a leading global provider of print-based specialty packaging with a blue-chip customer base.

Coordination with K&S
Having navigated antitrust issues on strategic transactions for decades, including multibillion-dollar acquisitions, WestRock and K&S were able to efficiently execute cross-jurisdictional clearance for the MPS combination while helping favorably position WestRock for continued growth. To close this large acquisition of a competitor, K&S partners and associates worked hand-in-glove with foreign counsel in Mexico, Canada and the UK, coordinating our filings and submissions and drafting advocacy to secure clearances from all jurisdictions without conditions. Key to success was formulating compelling and consistent work product for the U.S. Department of Justice and international antitrust enforcement authorities.

Commercial Wins
WestRock reached a definitive agreement with MPS in early 2017, effectively broadening its product capabilities; expanding its presence in the growing healthcare and consumer markets, among others; and reaping operational efficiencies. The acquisition was also expected to be immediately accretive to the company’s financial results, on both an earnings per share and a cash flow basis, inclusive of purchase accounting adjustments.

No Charges = A “Win” in an SEC Enforcement Matter

Client Interest
Recently, an international law firm’s client, a private equity firm, received a subpoena from the United States Securities and Exchange Commission. At the same time, the law firm itself was served with a separate subpoena seeking files and information about its work with the private equity firm. The SEC sued the private equity firm. While the SEC had not sued a law firm since the 1980s and the firm’s work included multiple, highly skilled partners in various geographic locations, the agency’s high-profile focus on “gatekeepers” brought heightened attention on the law firm.

Coordination with K&S
To assist in the initial response, the law firm engaged K&S. With a deep understanding of private equity and fund formation as well as the SEC enforcement process, K&S undertook extensive analysis of the facts, the law firm’s responsibilities regarding attorney-client privilege and attorney work product, and relevant ethics requirements. As the investigation progressed, the private equity firm pursued a reliance on counsel defense. Meanwhile, under its “gatekeeper” initiative, the SEC scrutinized the law firm’s activities, focusing on the advice of the lead corporate partner, as well as reviewing the work of the lawyers who worked on litigation and other corporate matters.

Commercial Wins
While the private equity firm’s principal ended up settling with the SEC, the SEC Staff closed its investigation regarding the law firm and its lawyers without recommending any action. Following multiple meetings between K&S and SEC staff, which included detailed presentations and discussions about the facts, the law, and the law firm’s policies and procedures, the SEC investigation staff from the Division of Enforcement confirmed that they would not recommend enforcement action against the law firm, its partners and employees—a clear “win” in the context of SEC enforcement.

Prevailing in Investment Treaty Arbitration

Client Interest
Burlington Resources Inc., ConocoPhillips’ wholly owned subsidiary, aimed to resolve a long-running investment treaty arbitration against the Republic of Ecuador in what Burlington alleged was an unlawful expropriation of significant investments without compensation. The subsidiary also sought to refute Ecuador’s retaliatory US$2.6 billion counterclaim of alleged environmental and infrastructure damage on the part of Burlington and a fellow Consortium member.

Coordination with K&S
For more than seven years, a K&S team marshaling international disputes, energy and environmental expertise joined with co-counsel and Burlington to lead arbitration under the U.S.-Ecuador Bilateral Investment Treaty before the International Centre for Settlement of Investment Disputes. Leading the counterclaim defense, K&S endeavored to help the Tribunal evaluate extensive environmental data using Ecuador’s own laws and best environmental science principles. And in a first-ever ICSID decision of its kind, the Tribunal concluded that the Consortium operations were reasonable and resulted in modest impacts standard for oilfield operations, awarding an extremely small percentage of the environmental and infrastructure claim. At the same time, the three-member Tribunal held that Ecuador had unlawfully expropriated Burlington’s investment, awarding the company $380 million in damages. Ecuador then sought an annulment of the award, leading to an automatic stay of enforcement.

Commercial Wins
Demonstrating Ecuador’s history of enforcement avoidance, K&S and co-counsel convinced the Annulment Committee to lift the stay. Fearing attachment of its assets, in December 2017, Ecuador agreed to pay $337 million — a highly favorable outcome given the country’s credit risk and the costs of enforcement proceedings.

Dialing Down Music Licensing Fees

Client Interest
In this challenge to common industry practice not well-suited to ESPN’s circumstances, ESPN sought an alternative to the traditional blanket, percentage-of-revenue fee structure offered by Broadcast Music, Inc. (BMI) for a license to cover the public performance of songs that ESPN does not secure directly from rights-holders – which comprises mostly music in commercials and the ambient music played in arenas and stadiums that the cable network is not in a position to directly license. ESPN directly pays songwriters and publishers for the lion’s share of the music played during its broadcasts.

Coordination with K&S
After unsuccessful efforts to resolve the issues by negotiations, ESPN initiated a proceeding before the court overseeing the BMI antitrust consent decree, which retains jurisdiction to determine reasonable license fees for users where they cannot achieve a negotiated agreement with BMI. The ESPN case was the first case to challenge BMI’s off-the-shelf license structure for audiovisual programming. K&S’s Media & IP team developed arguments based on the costs associated with ESPN’s competitive direct-licensing transactions as well as the merits of its fair use arguments pertaining to performances of ambient music captured in connection with live sports broadcasts. After about a year of pre-trial proceedings, the cable network felt well-positioned to go to trial.

Successful Outcome
Ultimately, BMI agreed to a settlement on the eve of trial that established an unprecedented-for-BMI license structure and favorable rates for ESPN from 2010 to 2020.

“This case was a model example of client and law firm partnering together in the development and presentation of a challenging case – and it was rewarding to obtain a result of significant benefit.” Kenneth Steinthal, Partner, King & Spalding ESPN’s Amy Klein commented that “the K&S team’s innovative arguments – and willingness to work with us on a fee structure that created a potential for a ‘win/win’ outcome – was essential to ESPN’s willingness to bring this case; and we are delighted we did.”