By Claire Poole
(Aug.29) – Texas lawyers sweated through a mountain of deals this past week, with 14 firms and 79 lawyers working on 15 transactions worth $20.7 billion.
It was the best weekly showing of the year in terms of value after the $68.6 billion reached a few weeks ago (thanks to the Energy Transfer Equity-Energy Transfer Partners merger).
Hunton Andrews Kurth’s announced involvement in a $16 billion Walmart notes offering earlier in the summer was responsible for the blowout week. But Enbridge’s sweetened offer to acquire the rest of Spectra Energy Partners for $3.3 billion certainly helped the numbers.
M&A dominated the action, accounting for 13 deals worth $4.7 billion, while capital markets transactions numbered only two but at more than $16 billion in value. Energy transactions dominated the deal count with some from the technology and industrial sectors sprinkled in.
In the past few months dealmakers have pontificated on the rise in dealmaking. But a recent first-ever poll by financial technology provider IntraLinks on the impact of geopolitical and financial events on mergers and acquisitions debunks some of the most commonly cited reasons.
According to the survey, only 17 percent of participants said changes to the U.S. tax code accelerated their M&A activity and plans while 78 percent said there was no change. And just 9 percent said that “technology transformation” is significantly impacting the speed of their M&A activity, versus 44 percent saying it’s increased somewhat, 8 percent saying they’re moving more cautiously and 39 percent saying there’s been no change.
When asked whether the outcome of the AT&T/Time Warner merger had influenced their thoughts on M&A activity, an overwhelming 93 percent of the respondents said it hasn’t had any impact on their M&A plans. Only 4 percent said it’s accelerated their plans, 2 percent said it’s delayed their plans and 1 percent said it’s cancelled their plans.
However, there was one question that got respondents going. When asked if the trend toward protectionism would impact their M&A activity over the next 12 months, more than two thirds thought there would be some impact (4 percent significant, 32 percent moderate and 33 percent minor) while 31 percent said there would be no impact.
Now on to the deals and who brought them forth.
HuntonAK represents Walmart on $16B notes offering
Hunton Andrews Kurth said Aug. 20 that it represented Walmart Inc. on a $16 billion notes offering.
The team included partners Dudley Murrey, Courtney Cochran Butler, Tom Popplewell and Robert McNamara and associates Mike Hoffman, Brooke Milbauer and Erin Juvenal.
The law firm said the offering closed June 27. The lead underwriters included Barclays, J.P. Morgan, Citigroup, HSBC Securities, Merrill Lynch and Wells Fargo, which were counseled by Simpson Thacher & Bartlett.
When it was announced, the offering was considered the largest bond sale this year after CVS Health Corp.’s $40 billion issue in March to help pay for its purchase of Aetna.
The proceeds will help Walmart finance its $16 billion acquisition of a 77 percent stake in Flipkart Group, the largest online seller in India. It’s the retailer’s largest acquisition ever.
V&E, Sidley advise on $3.3B Enbridge-Spectra deal
Canadian pipeline operator Enbridge Inc. sweetened its offer to acquire the units it didn’t already own of Houston-based Spectra Energy Partners for $3.3 billion. Texas lawyers from two firms took part.
Vinson & Elkins counseled Enbridge on tax matters, including partner Ryan Carney and associates Christine Mainguy and Jen Maul.
McCarthy Tetrault was Enbridge’s Canadian counsel and Sullivan & Cromwell is its U.S. counsel.
Sidley Austin assisted Spectra’s conflicts committee, including lead partner Bill J. Cooper and lead associate Leonard Wood, along with associates Erica von Pechmann and Alex Morgan.
BofA Merrill Lynch and Scotiabank are Enbridge’s financial advisors and Jefferies is Spectra’s financial advisor.
Enbridge will swap 1.111 of one of its shares for each common unit of Spectra, a 9.8 percent increase over the 1.0123 ratio it offered on May 17.
The new proposal implies a 5.7 percent premium over Spectra’s share price versus no premium under the previous offer, which disappointed Spectra investors and analysts.
The deal would involve 81.9 million Spectra units. The buyer already owns 83 percent of the entity.
Tudor, Pickering, Holt said the move is a positive step toward reducing Enbridge’s corporate complexity but notes it will marginally dilute shareholders.
Enbridge said the deal will benefit Spectra unitholders given weak capital markets for U.S. master limited partnerships that have adversely affected expansion opportunities and distribution growth.
The buyer said Spectra investors also will benefit from direct ownership in the largest energy infrastructure company in North America with liquids transportation, natural gas transmission and natural gas distribution – all franchises that generate diverse, reliable cash flows.
Enbridge expects to boost its annual dividend by 10 percent each year through 2020.
Shearwater buys Schlumberger marine seismic unit for $600M
Norway’s Shearwater GeoServices Holding said Aug. 22 that it acquired the marine seismic acquisition assets and operations of WesternGeco from Houston oilfield services giant Schlumberger for $600 million in cash plus a 15 percent Shearwater interest.
The transaction has to clear regulators and is expected to close in the fourth quarter.
Legal advisers were Arntzen de Besche for Shearwater and Advokat firmaet Schjødt AS for Schlumberger.
Carnegie and DNB Markets were Shearwater’s financial advisors while Pareto Securities assisted Schlumberger.
William B. Batzer, Schlumberger’s director of mergers and acquisitions/legal in Houston, told The Texas Lawbook that the transaction was put together by a team in the company’s London office led by Azlina Jaafar, deputy general counsel of M&A.
Alex Juden is Schlumberger’s general counsel, a position he assumed in 2009. Before joining the company in 2000, the University of Houston-trained lawyer held legal positions in various Texas state and federal litigation practices and served seven years in the U.S. Navy as a naval aviator.
Shearwater said the deal will create an industry-leading global provider of marine geophysical services with a fleet of 14 seismic vessels, 600 employees and operations in the major offshore basins around the world.
As part of the deal, Schlumberger will receive payments for a limited time under an earn-out agreement linked to vessel usage over specific thresholds. The seller also will have an option to use two vessels from Shearwater on potential multiclient work for the first two years after the deal closes.
Shearwater will fund the deal through $325 million in new cash equity underwritten by Rasmussengruppen AS and $325 million in debt financing provided by DNB Bank ASA and Sparebank 1 SR-Bank. GC Rieber Shipping ASA intends to subscribe for $28 million of the $325 million total before closing.
Shearwater is owned by GC Rieber Shipping and Rasmussengruppen.
Shearwater CEO Irene Waage Basili said in a statement that it’s been the company’s strategy to build a stronger enterprise during the downturn.
WesternGego president Maurice Nessim said the divestiture will strategically position the company as one of the largest asset-light geophysical services providers in the oil and gas industry.
Bracewell, K&E counsel on Entergy’s $314M purchase from NRG
Bracewell said Aug. 23 it represented Entergy Corp. unit Entergy Mississippi Inc. on its acquisition of the 810-megawatt Choctaw gas-fired power plant from NRG Wholesale Generation, a unit of GenOn Energy Inc., for $314 million.
The team included Houston partner Ryan S. Holcomb and lawyers from the firm’s New York and Connecticut offices.
Kirkland & Ellis counseled NRG, including partners Kim Hicks, Shubi Arora and Andrew Calder and associates Stella Tang and Gordon Cranner.
The transaction is expected to close in the third quarter of 2019.
Entergy Mississippi provides electricity to 449,000 customers in 45 counties.
Crain Caton, Gibson Dunn aid on Candor’s $200M EnCap backing
Houston energy company Candor Midstream attracted a $200 million commitment from EnCap Flatrock Midstream.
Crain, Caton & James was counsel to Candor’s management team. The leads were David Griffis, Jonathan Bickham and Larry George.
Gibson Dunn represented EnCap Flatrock, including partner Hillary Holmes in Houston along with an attorney in the firm’s Denver office. Tax partner James Chenoweth and associates Lindsay Ellis and Eric Haitz also worked on the deal.
Founded in Houston last year, Candor is focused on developing midstream infrastructure across North America through greenfield projects and acquisitions. It’s looking at investing in natural gas gathering, processing and treating; crude oil gathering, terminaling and logistics; and produced water gathering.
Candor’s management previously worked at Crestwood Midstream Partners, Enbridge, Oneok Inc. and Delhi Gas Pipeline Corp. They include co-founders Darrel Hagerman as CEO and Derek Gonseaux as chief commercial officer as well as CFO Eric Howell and senior VP of operations Barry Robison.
Bill Waldrip led the investment from EnCap Flatrock, which is making commitments to new management teams from its $3.25 billion fourth fund.
V&E, K&E aid on Magnolia’s $191M Harvest acquisition
Magnolia Oil & Gas Corp. said Aug. 21 it bought oil and gas properties in South Texas from Harvest Oil & Gas for $135 million in cash and 4.2 million shares valued at $56 million.
Vinson & Elkins represented Magnolia, including partner John Grand, senior associate Danielle Patterson and associate KJ Pedersen. Kirkland & Ellis partner Rahul Vashi represented Harvest.
Magnolia will fund the deal with cash on hand and borrowings under its revolver. The deal is expected to close Aug. 31.
Magnolia said the acquisition will immediately boost earnings and add an undivided working interest across part of its Karnes County assets and all of its Giddings Field assets, including 15 net locations to its core Karnes County inventory and 114,000 net acres to its Giddings position.
The assets produced 4,800 barrels of oil equivalent per day and net sales of $12 million in the first half of the year with 1,400 barrels in Karnes County and 3,400 barrels in Giddings.
Magnolia chairman and CEO Steve Chazen, who previously was CEO of Occidental Petroleum, said the assets are a natural fit for the company and should generate steady production growth, strong pre-tax margins and significant free cash flow.
Harvest, which emerged from EV Energy Partners’ bankruptcy, owns oil and gas properties across the U.S., including Arkansas, Colorado, Kansas, Louisiana, Michigan, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas and West Virginia. It’s led by CEO Michael Mercer.
Sidley, Bracewell work on Post Oak’s $100M commitment to Saxet
Post Oak Energy Capital said Aug. 20 it led a $100 million equity commitment to Saxet III Minerals. Company management will co-invest alongside Post Oak.
Sidley Austin partner David Denechaud advised Post Oak while Bracewell associate Lytch Gutmann assisted Saxet.
Ryan Mathews is a partner at Post Oak responsible for legal matters. Before joining the private equity firm, the University of Texas-trained attorney practiced at Thompson & Knight, where he represented clients in structuring, negotiating and documenting transactions in the energy industry, including financial institutions and borrowers and venture capital funds.
Mathews previously worked as a financial analyst at Shell Capital, where he originiated oil and gas investments in small to mid-sized exploration and production companies.
Houston-based Saxet Petroleum Inc. focuses on the acquisition and management of mineral and royalty interests in prolific U.S. basins.
Saxet III is the third partnership with Post Oak, with Saxet I and II aggregating core positions in the Scoop, Merge and Stack plays in Oklahoma, the Midland Basin in West Texas and the Bakken and Three Forks plays in North Dakota. Saxet said it continues to see attractive investment opportunities in those areas and elsewhere.
Robert E. O’Brien is president of Saxet, which was founded in 1992, and Frost Cochran is managing director of Post Oak, which was established in 2006.
HuntonAK aids Arena’s Polaris on $18M purchase from Nighthawk
Hunton Andrews Kurth said Aug. 20 that it represented Morse Energy Capital Partners affiliate Polaris Production Partners on its purchase of oil and gas assets in Colorado from Nighthawk Production, the bankrupt unit of Nighthawk Energy plc, for $18 million.
The team included partners Tad Davidson, Harve Truskett and Parker Lee and associates Joseph Rovira and Alex Miron.
New York City hedge fund Arena Investors is a co-investor in the assets.
The deal was first announced July 18 and closed July 27. Proceeds were expected to be used to pay down a $21 million loan from Commonwealth Bank of Australia and pay permitted expenses under its Chapter 11 filing.
Nighthawk Production filed for bankruptcy on May 18, saying it had failed to come up with an alternative proposal for restructuring and recapitalizing the company with its major stakeholders. Two other Nighthawk affiliates already had filed Chapter 11.
Nighthawk’s counsel was Greenberg Traurig with attorneys in New York, Wilmington, Delaware, and Miami. Paul Hastings was representing Commonwealth Bank out of Chicago.
Haynes and Boone, Strong counsel on $5M Commander financing
Norse Partners-backed Commander Oilfield Services said Aug. 21 it secured $5 million in financing from Tiger Capital Group.
The capital infusion, in the form of senior debt, will help Houston-based Commander add assets and expand its service lines to meet strong customer demand in West Texas’ and New Mexico’s Permian Basin.
Tiger was represented by Haynes and Boone partner Paul H. Amiel in Dallas while Commander was represented by the Strong Firm’s Brian Albert.
Commander, which was formed by Scott Milliren, Kyle Greemon and Norway’s Norse, is using the funds to purchase equipment used in high horsepower pumping operations, including 2,600-horsepower pumps, acid transports, data trailers and associated equipment. The assets allow Commander to support completions-related services.
Andy Babcock is director of capital solutions at Tiger while Lasse Wågene is co-founder of Norse.
Wilson Sonsini counsels PLNAR on $3.9M funding
Smart Picture Technologies Inc., known as PLNAR, said Aug. 20 it raised $3.9 million in Series A funding.
The investors were led by venture capital fund ManchesterStory Group, Venture Reality Fund and Colopl Next Inc.
Wilson Sonsini Goodrich & Rosati partner Robert Suffoletta counseled PLNAR. BelinMcCormick in Des Moines assisted the investors.
The financing will be used to fund PLNAR’s expansion in the insurance claims and home improvement industries.
PLNAR, led by CEO Andy Greff, said its property claims solution captures the data necessary to virtually settle interior insurance claims by allowing the user to gather the full context of the damaged area, including measurements, summary reports, photos and 3D models. The platform is designed to integrate into existing insurance industry claims applications.
Matt Kinley, managing partner of ManchesterStory, said PLNAR’s augmented reality-enabled data capture system will help insurers reduce losses while improving loss prevention and fraud detection efforts.
Marco DeMiroz is co-founder and general partner of the Venture Reality Fund while Shintaro Yamakami is CEO of Colopl Next.
Locke Lord, Sidley aid on Enterprise-American Midstream agreement
Enterprise Products Partners said Aug. 23 it agreed to possibly sell American Midstream a 25 percent interest in its Pascagoula natural gas processing plant for an undisclosed sum.
The purchase option has to clear conditions, including American Midstream completing modifications to facilities on its High Point pipeline system to provide additional natural gas volumes with access to the Pascagoula plant.
Locke Lord partner Joe Perillo led a team counseling Enterprise. Partners Hunter Summerford and Jeff Wallace and associate Lauren Corbeil also pitched in.
Sidley counseled American Midstream, including associate Tommer Yoked, partner Glenn Pinkerton and associates Adam Prestidge and Adam Decker, all of Houston.
American Midstream’s High Point pipeline delivers offshore natural gas production to the Enterprise-operated Toca Gas Plant in St. Bernard Parish, Louisiana, for processing services. Because of the pending modifications to High Point, Toca’s owners have voted to discontinue operations.
Enterprise said it and other Toca plant owners expect to realize significant operating expense savings from idling Toca and using processing capacity at the more efficient Pascagoula plant.
Toca customers will have the option to enter into similar processing arrangements with the Pascagoula facility, which is expected to provide customers with higher netbacks in the form of improved natural gas liquids recoveries and reduced energy costs.
Analysts at Raymond James said it’s a creative solution by Enterprise and American Midstream to optimize their Gulf Coast assets, including cost savings, more volumes to Pascagoula and potentially proceeds to Enterprise from the future stake sale.
Leading the deal for Enterprise was Brad Motal, senior vice president of natural gas assets and marketing. Lynn Bourdon is CEO of American Midstream.
SG counsels Speed Industrial on sale to CI Capital-backed Tech Air
CI Capital Partners-backed Tech Air acquired Kemah-based Speed Industrial Supply for an undisclosed sum.
Seller’s counsel was Sherrill & Gibson PLLC partner R. Caven Crosnoe.
Founded in 1935, Tech Air is a Danbury, Connecticut-based distributor of industrial, medical and specialty gases and related equipment and supplies to 45,000 customers. It’s led by CEO Myles Dempsey Jr.
Speed is a distributor of industrial and welding supplies in the Galveston Bay area. Its customers include large industrial welding and maintenance companies serving the heavy industrial sector, such as oil rigs and refineries.
Tech Air said the acquisition gives it a base from which to launch a new regional operation in the Houston area and continues its geographic expansion throughout the U.S.
The acquisition is Tech Air’s 26th add-on acquisition under CI Capital’s ownership. Earlier this year, it completed the acquisition of Leeper Brothers in California and Colorado Distributing in Colorado.
Joost Thesseling is managing director at CI Capital, which was founded in 1993 and has made 290 acquisitions representing $9 billion in enterprise value.
HuntonAK represents DCP Midstream on option to buy fractionator interests
Hunton Andrews Kurth said Aug. 20 it counseled the special committee of the board of DCP Midstream’s general partner on securing an option to buy up to 30 percent of two 150,000 barrel-per-day natural gas liquids fractionators.
The HuntonAK team included partners Bob Jewell, Melinda Brunger, Harve Truskett, Parker Lee, Robert McNamara and Lisa Shelton and associates Michael Hoffman, Amanda Thienpont and Alex Miron.
The facilities will be built at Phillips 66’s Sweeney Hub in Old Ocean, Texas.
The deal was announced and closed June 13. It represents a potential capital investment of around $400 million.
Kirkland counsels BCE-Mach on Repsol property purchase
Oklahoma City-based BCE-Mach LLC said Aug. 20 it agreed to buy producing oil and gas properties in Oklahoma and Kansas from Repsol E&P USA Inc., a unit of Spain’s Repsol, for an undisclosed sum.
BCE-Mach is a partnership between Bayou City Energy Management LLC and Mach Resources LLC.
Mach Resources senior counsel Michael Reel said he worked with Kirkland & Ellis out of Houston, including partners David Castro and associate Chris Heasley with assistance from associate Barrett Schitka.
Kirkland’s website said partner Anthony Speier also worked on the deal.
The assets are in Alfalfa, Garfield, Grant, Kay, Major, Harper, Noble, Pawnee, Payne, Woods and Woodward Counties, Oklahoma, and Barber, Comanche, Finney, Ford, Gove, Gray, Harper, Hodgeman, Ness, Reno, Scott, Sumner and Wichita Counties, Kansas.
The assets are primarily interests in wells operated by SandRidge Energy. Mach CEO Tom Ward is the former CEO of SandRidge.
The parties expect to close the deal in October.
Ward said BCE-Mach’s focus has been on properties within the Mississippi Lime and the assets are complementary to its current operated position.
BCE managing partner Will McMullen said the acquisition is an excellent fit for the strategy set out for BCE-Mach.
Mach was founded in January of last year to pursue assets with production history and development opportunity.
BCE is a private equity firm founded in 2015 to focus on investments in the North American upstream oil and gas sector.
Katten, Jackson Walker aid on Trinity Hunt’s Veracity purchase
Trinity Hunt Partners said it acquired Veracity Research Co., a Denton, Texas-based provider of outsourced investigative services, for undisclosed terms.
Katten partner Vic Zanetti counseled Trinity Hunt while Jackson Walker partner Rick Dahlson assisted Veracity.
Veracity Research Company, co-founded in 1995 by CEO Marcus Doyle and president Lance Foster, services insurance carriers, third party administrators and self-insured corporate clients.
Doyle and Foster will remain large shareholders to recapitalize the business and accelerate its next growth phase.
Dallas-based Trinity Hunt is a growth-oriented middle market private equity firm led by managing partner Pete Stein. It has $715 million under management.