(Aug. 20) – A big time acquisition in oil and gas and a sizable semiconductor manufacturing transaction highlighted another respectable week across business sectors for Texas lawyers, who logged 10 transactions valued at $12.4 billion. Eleven firms and 53 attorneys were involved.
The activity was a bit down from the previous week, which involved 12 firms and 132 lawyers working on 12 transactions worth $19.9 billion.
Diamondback Energy’s purchase of Energen Corp. for $9.2 billion dominated the news. However, the second biggest deal was in the semiconductor space: Cabot Microelectronics’ $1.6 billion purchase of KMG Chemicals. The retail, restaurant, real estate and financial services sectors also made appearances.
There were eight M&A deals worth $11.38 billion involving eight firms and 40 attorneys. On the capital markets side, there were three transactions worth $1.057 billion involving five firms and 13 attorneys.
Akin counsels Diamondback on its $9.2B Energen purchase
As The Texas Lawbook reported last week, Midland-based Diamondback Energy Inc. announced Aug. 14 that it had agreed to acquire activist-pressured Energen Corp. for $9.2 billion in stock and assumed debt.
The deal creates the third largest independent oil and gas producer focused on West Texas’ Permian Basin.
Akin Gump Strauss Hauer & Feld won the work from Diamondback, whose general counsel is Randall Holder. Corporate partners Seth Molay and Matt Zmigrosky led the deal from Dallas along with a partner in the firm’s New York office.
Other Texas attorneys on the team were partner Alan Laves and associate Kathryn Betts in Dallas on corporate matters and partner Michael Byrd, counsel Stephen Boone and senior practice attorney Shane Sullivan in Houston on oil and gas. Other firm attorneys in New York, Los Angeles and Washington, D.C. worked on the deal.
Diamondback tapped Citi for outside financial advice, including Fritz Schlopy, Serge Tismen, Doug Mackenzie and Logan Free.
Wachtell Lipton Rosen & Katz provided outside counsel to Energen. JP Morgan and Tudor, Pickering, Holt were the company’s financial advisors, including Jonathan Sloan, Nathan Craig and Andrew Castaldo at JPM and Travis Nichols, Maynard Holt and Lance Gilliland at TPH.
The deal was announced less than a week after Diamondback’s purchase of northern Midland Basin properties owned by Kelso-backed Ajax Resources for $1.2 billion in cash and stock. Akin worked on that transaction as well, including Byrd, Molay, Zmigrosky, Boone and Sullivan.
Last year, analysts thought that Diamondback could merge with Energen or RSP Permian, both of which were active in the Permian (RSP Permian was acquired by Concho Resources earlier this year for $9.5 billion).
Energen, meanwhile, was being pressured to sell itself by activist investors Corvex Management, Carl Icahn and Elliott Management, which claimed that management wasn’t realizing the full value of its oil and gas properties.
Under the terms of the transaction, Energen unitholders will get 0.6442 of a share of Diamondback stock for each Energen share they hold. The swap represents an implied value of $84.95 per share, a 16 percent premium over Energen’s closing price Tuesday. Diamondback also will assume Energen’s net debt, which was $830 million as of June 30.
Both companies’ boards have approved the deal, which requires clearance from both sets of shareholders and regulators. The transaction is expected to be completed by year-end.
Diamondback shareholders will end up with 62 percent of the combined company while Energen stockholders will have 38 percent. The buyer expects as much as $3 billion worth of synergies as a result of the deal.
Haynes and Boone advises KMG on $1.6B Cabot purchase
Cabot Microelectronics Corp. said Aug. 15 it reached an agreement to acquire Fort Worth-based KMG Chemicals Inc. for $1.6 billion, a deal that will expand its product offerings to the semiconductor sector and broaden it into the pipeline sector.
Haynes & Boone partner Bill Nelson led the team that represented KMG. He was assisted by partner Kristina Trauger and associates Sameer Saxena and Janna Mouret.
Shearman & Sterling also counseled KMG with attorneys in its New York office. KeyBanc Capital Markets Inc. was its financial advisor.
Cabot used Goldman Sachs as its financial advisor and Wachtell Lipton Rosen & Katz as its legal counsel.
KMG shareholders will get $55.65 in cash and 0.2000 of a share of Cabot stock for each share they own valued at $79.50. The offer represents a 19 percent premium, which is lower than some analysts thought KMG should fetch.
Cabot expects to finance the cash portion of the deal with existing cash and additional debt from its lenders, including JP Morgan, Bank of America and Goldman Sachs.
The deal carries an implied multiple of 10.9 times EBITDA after adjusting for $25 million in estimated annual cost synergies.
The transaction has to clear Hart-Scott-Rodino and KMG shareholders
and is expected to close near the end of the year.
Aurora, Illinois-based Cabot said the combination will be a top global provider of performance products and services for improving pipeline operations and add to its cash flow and earnings in the first year, including acquisition-related costs.
The merged companies are expected to have annual sales of $1 billion, an 80 percent boost over Cabot’s alone, and $320 million in EBITDA, including synergies. Their revenue would be made up of electronic materials (82 percent), pipeline chemicals (12 percent) and wood treatments and other products (6 percent).
Cabot claims to be the world’s top supplier of polishing slurries and the second largest provider of polishing pads to the semiconductor industry.
Cabot CEO David Li said in a statement that KMG’s industry-leading electronic materials business is complementary to Cabot’s product portfolio while its performance materials business broadens the company into the fast-growing pipeline performance products and services market.
KMG chairman Chris Fraser said the transaction creates significant and immediate value for KMG shareholders while also providing participation in the growth of the combined companies. He will remain as an advisor to the company during the integration.
Latham represents underwriters on $750M Western Gas notes
Latham & Watkins said Aug. 17 it counseled the underwriters on an offering of $750 million worth of notes for Western Gas Partners.
The team was led by Houston partner Ryan Maierson with associate Nick Dhesi. The underwriters included Wells Fargo, PNC Capital Markets, RBC Capital Markets and U.S. Bancorp.
Vinson & Elkins partners David Oelman and Alan Beck counseled Western Gas.
Western Gas’ general counsel is Philip Peacock, who previously was a partner at Andrews Kurth.
The offering included $400 million in 4.75 percent senior notes due 2028 at a price to the public of 99.818 percent of their face value and $350 million in 5.50 percent senior notes due 2048 at a price to the public of 98.912 percent of their face value.
Western Gas plans to use the net proceeds to repay its maturing 2.600 percent senior notes due this year, repay amounts outstanding under its revolver and for general purposes, including capital expenditures.
STB aids Invus on financing Cava’s $300M purchase of Zoe’s Kitchen
Simpson Thacher & Bartlett said Aug. 17 it’s representing the Invus Group on the financing for the Cava Group’s $300 million purchase of Plano-based Zoe’s Kitchen, which will become private.
Houston partner Chris May co-led the deal team along with a partner in the firm’s New York office. Houston associate Jim Cross assisted.
Piper Jaffray provided financial advice to Zoe’s Kitchen while Greenberg Traurig was its legal advisor with attorneys outside of Texas.
Morgan Stanley was the financial advisor to Invus and Act III Holdings, an investment vehicle created by Panera Bread founder and former CEO Ron Shaich.
Citigroup advised Washingon, D.C.-based Cava, which used attorneys from Skadden, Arps, Slate, Meagher & Flom outside the state for legal advice. Sullivan & Cromwell counseled Act III.
Zoe’s shareholders will receive $12.75 in cash for each share of common stock they hold, a 33 percent premium.
The deal has to clear the holders of a majority of Zoe’s stock and is expected to close in the fourth quarter. Cava agreed to pay a $17 million break-up fee if the merger agreement is terminated under certain circumstances.
Zoe’s is permitted to actively solicit other acquisition proposals for 35 days. If it accepts a different offer, it has to pay Cava an $8.5 million termination fee. Analysts don’t expect another bidder to come in given the premium.
Zoe’s is a fast-casual restaurant group with 261 U.S. outlets in 20 states. It was founded in 1995 and went public in 2014. Its sales went up 12 percent in the first quarter to $102.1 million, but it chalked up a net loss of $3.6 million in the period and sales at restaurants open at least a year were down.
Cava is a Mediterranean culinary brand with 66 restaurants. The combined companies will have 327 restaurants in 24 states.
Cava CEO Brett Schulman will continue in his role at the combined company and Shaich will be chairman.
V&E, Baker Botts advise on Carrizo’s $215M property purchase from Devon
Vinson & Elkins said Aug. 15 it advised Devon Energy Corp. on its agreement to sell oil and gas properties in West Texas’ Delaware Basin to Carrizo Oil and Gas for $215 million.
Partner John B. Connally led the corporate deal team with assistance from senior associate Joclynn Townsend and associate Erin Mitchell. Also advising were partner Todd Way and senior associate Julia Pashin on tax; partner Larry Nettles on environmental; and partner Ramey Layne and senior associate Crosby Scofield on the corporate side.
Carrizo general counsel and corporate development VP Gerry Morton said he used Baker Botts partner Gene Oshman and senior associate Luke Burns for outside counsel.
Others were partner Travis Wofford, associates Lakshmi Ramanathan, Sunil Jamal and Steven Lackey and partner Jon Lobb.
Gibson Dunn & Crutcher partner Hillary Holmes led the team that counseled underwriters Citigroup and Goldman Sachs on a $218.5 million equity offering to fund the deal.
Assisting Holmes were associates Justine Robinson, Harrison Tucker and Melissa Pick; partner James Chenoweth on tax; and associates Dave Cias and Jasper Mason on oil and gas. They had help from attorneys in the firm’s Los Angeles, Orange County and Washington, D.C. offices.
Jefferies provided financial advice to Devon on the transaction. Ajay Khurana, Ralph Eads and Bill Marko worked with Devon on previous asset sales (Khurana left Jefferies this month to join private equity firm Quantum Energy Partners).
The transaction, which was announced Aug. 14, is expected to close in the fourth quarter.
The properties included 9,600 net acres of non-core Delaware Basin acreage in Ward and Reeves County that produce 2,500 oil equivalent barrels per day, 60 percent of which is oil. The deal will boost Carrizo’s position in the area to 46,000 net acres.
Oklahoma City-based Devon said the transaction brings its total proceeds from asset sales to $4.4 billion. The company expects to sell more non-more assets across the U.S. by year-end, including enhanced oil recovery projects in the Midland Basin and Rockies and Wise County acreage in North Texas’ Barnett Shale, using the proceeds to buy back shares.
Carrizo CEO S.P. “Chip” Johnson said in a statement that the acquisition fits with the company’s existing Phantom-area acreage and meaningfully increases its scale in the area.
Raymond James analyst John Freeman said the deal expands the company’s Phantom area position deeper into western Ward County in a “blocky manner,” which should allow for extended lateral development. There’s also additional inventory upside in the future from further delineation of other prospective formations beyond just those identified, he said.
Freeman added that the acquisition was relatively in line with previous transactions on a per location basis and just a touch higher than Carrizo’s ExL Petroleum acquisition from last year.
The equity offering of 9.5 million shares of common stock priced at $23 per share, a 5.4 percent discount over the stock’s previous close. The issue is 11 percent dilutive to the company’s shares outstanding, Freeman said.
Vinson & Elkins advises New York Mortgage Trust on $88.5M offering
Vinson & Elkins said Aug. 14 that it counseled New York Mortgage Trust Inc. on a $88.55 million stock offering.
The issue involved 14.375 million shares of its common stock at $6.16 per share.
The V&E corporate team was mostly from outside of the state but included senior associate Doug Lionberger in Houston.
New York Mortgage Trust priced the offering on Aug. 9. The underwriters included Morgan Stanley, Credit Suisse, Barclays, Deutsche Bank, JP Morgan, Stifel unit Keefe, Bruyette & Woods, RBC Capital Markets and UBS.
The net proceeds will be used for general business purposes that may involve acquisitions, including single-family residential and multi-family credit investments and other types of mortgage-related and residential housing-related assets.
Skadden represents Hanwha affiliate on $35M investment in NextDecade
Skadden Arps Slate Meagher & Flom said Aug. 13 it counseled HGC Next INV LLC, an affiliate of South Korean petrochemical company Hanwha, on its $35 million investment in Series A convertible preferred stock of NextDecade Corp.
The Skadden team included corporate partner Eric Otness, infrastructure project associate Mark Schlackman and corporate associate Rebekah Reneau in Houston along with attorneys in the firm’s Seoul and Washington, D.C. offices.
Macquarie Capital advised NextDecade on the HGC investment.
NextDecade’s general counsel is Krysta Behrens De Lima, who has been in that post since 2015. She previously was senior counsel of Bechtel Oil, Gas & Chemicals, a contract attorney at Schlumberger and chief of staff and VP of legal of BG Group’s Trinidad unit.
HGC will make its investment as part of an anticipated $50 million capital raise alongside NextDecade’s three largest stockholders, York Capital Management Global Advisors, Valinor Management and Halcyon Capital Management.
NextDecade is developing liquefied natural gas export projects and related pipeline facilities in Texas. Its first, the Rio Grande LNG Project, is a 27 million metric tons-per-year facility under development in Brownsville.
HGC will receive one seat on the company’s board and have the right to contribute up to $350 million of project-level equity once the final investment decision on Rio Grande is made.
Publicly traded NextDecade, which is based in The Woodlands, plans to use the proceeds to continue developing the Rio Grande terminal and associated pipelines in South Texas and for general corporate purposes and working capital.
Locke Lord advises Comstock on $34M asset purchase from Enduro
Locke Lord said Aug. 15 it counseled a Comstock Resources unit on its purchase of natural gas properties in northern Louisiana’s Haynesville Shale from bankrupt Enduro Resource Partners for $34 million.
Enduro was formed in 2010 with $200 million in backing from Riverstone Holdings.
The Locke Lord team was led by partners Phil Eisenberg and David Patton in Houston.
Enduro was represented by Latham, including partner Mike King and associate Johnny Ellis on oil and gas matters and partner Tim Fenn and associate Jim Cole on tax. Some of the firm’s Chicago attorneys helped on the bankruptcy aspects.
Young Conaway Stargatt & Taylor was Latham’s co-counsel on the bankruptcy. Evercore was Enduro’s financial advisor and Alvarez & Marsal North America was its restructuring advisor.
Comstock’s general counsel is Dale Gillette, who joined in 2006 after practicing at Gardere Wynne Sewell (now Foley Gardere) and Locke Liddell & Sapp (now Locke Lord). The University of Texas law graduate also worked for Dallas oilman T. Boone Pickens as corporate counsel at Mesa Petroleum Co.
Comstock was the a stalking horse bidder for one of several asset packages offered by Enduro, which filed for bankruptcy in May due to its heavy debt load.
Enduro is run by the well-known Brumley family in Fort Worth, including former Mesa CEO Jon Brumley. At one time the company had oil and gas properties in Texas, North Dakota, Louisiana, New Mexico, Wyoming and Montana.
Jones Day aids Greystar Real Estate Partners on apartment acquisition
Jones Day said Aug. 16 that partner Susan Cox represented Greystar Real Estate Partners on its acquisition of the 273 apartment unit Indigo at Twelve West in Portland, Oregon, for an undisclosed sum.
Completed in 2009, the apartments – which feature high ceilings, gas appliances and good views – are in the city’s affluent West End area. The purchase also includes 86,000 square feet of office space and a 10,000-square-foot retail component, both of which are fully leased.
Greystar U.S. investment platform leader Kevin Kaberna said in a statement that the partnership purchased the property at a discount to replacement cost. It plans to reduce expenses and refresh interiors to maximize its potential and capitalize on what it expects will be a supply shortfall in the area through 2020.
Charleston, South Carolina-based Greystar is the largest apartment operator in the U.S. with 435,000 units under management. It currently owns 610 units in the Portland area and manages 13,700 more in Oregon.
Boardroom uses FBFK for Boardroom Salon for Men sale
Southlake-based Boardroom Salon for Men announced it received an undisclosed amount of funding from LightBay Capital, which will own a majority stake in the company.
Ferguson Braswell Fraser Kubasta counseled Boardroom on the deal, including Chris Williams, Megan Fooshee and Mackey Culbertson. Deloitte Corporate Finance was its financial advisor.
Massumi & Consoli represented LightBay and Harris Williams is its financial advisor.
Boardroom is a men’s salon operator wth 30 company-owned and franchised units across Texas, Oklahoma, Georgia and Tennessee. It was founded in 2004 by Bruce and Heather Schultz, who are keeping ownership stakes.
As a result of the investment, Boardroom said it expects to accelerate its growth plans by significantly expanding the number of salons and markets in which it operates.
Adam Stein is a partner and co-founder of Los Angeles-based LightBay and David Burcham is managing director. The firm is investing out of its $655 million inaugural institutional private equity fund.