The Pulse Review — May 23 – 27, 2016

The Pulse Review

The Pulse is your weekly source for major deals, filings, rules and news in business and securities law and delivered every Monday. The Pulse Review expands on those deals so you can always have the most up-to-date information at your fingertips.

Here is the review of the week of May 23 – 27, 2016.

 

M&A’s

1.  On May 23, 2016, Bayer Aktienesellschaft made a $62 billion dollar tender offer bid to Monsanto Co, seeking to take over the genetically modified crop-seed manufacturer.  The target company, Monsanto Company, is a provider of agricultural products for farmers. The company’s seeds, biotechnology trait products, and herbicides provide farmers with solutions that improve productivity, reduce the costs of farming, and produce better foods for consumers and better feed for animals. They are a public company incorporated in Delaware and headquartered in Missouri.  The acquiring company, Bayer, is a public company both headquartered and incorporated in Germany.  They are members of the drug and chemical company. Bayer’s farm business produces seeds as well as compounds to kill weeds, bugs and fungus.

2.  On May 24, 2016, Computer Sciences Corp acquired Hewlett Packard Enterprise Co. in a $8.5 billion dollar Mergers, Spin-off / Demerger.  The target company, Hewlett Packard Enterprise Co., is a public company incorporated in Delaware and headquartered in California.  They are members of the computer and office equipment industry.  The acquiring copany, computer sciences corp., is a public company incorporated in Nevada and headquartered in Virginia.  They are members of the services/computer integrated systems design industry and were represented in this merger by the law firm Allen & Overy LLP.  Computer Sciences Corporation operates through three segments: Global Business Services, which is a provider of various technology solutions, including consulting, applications services and software; Global Infrastructure Services, which provides solutions, such as managed and virtual desktop solutions, and data center management, and North American Public Sector, which delivers IT, mission, and operations-related services.

3.  On May 25, 2016, New York Reit, Inc. acquired JBG Companies in a $8.4 billion dollar transaction.  The target company, JBG Companies, was represented by the law firm Hogan Lovells US, LLP with Bank of America Merrill Lynch and Morgan Stanley and Co. LLC as the company’s financial advisers.  The acquiring company, New York Reit, Inc., is a public company incorporated in Maryland and headquartered in New York.  They are members of the real estate investment trusts industry and were represented in this transaction by the law firms Venable LLP and Proskauer Rose LLP.  New York REIT, Inc. is a real estate investment trust. The company focuses on acquiring and owning office and retail properties in Manhattan. The company’s business is primarily conducted through New York Recovery Operating Partnership, L.P. The company owns approximately 20 properties in New York City, which aggregate approximately 3.4 million rentable square feet. The company holds interests in properties of various types, such as office, retail, hotel, parking and storage.

4.  On May 27, 2016, Thermo Fisher Scientific Inc. acquired FEI Co. in a $4.2 billion dollar Merger.  The target company, FEI Co., is a public company both headquartered and incorporated in Oregon.  They are members of the laboratory analytical instruments industry with the law firm Wilson Sonsini Goodrich & Rosati Professional Corporation representing them in this merger.  The acquiring company, Thermo Fisher Scientific Inc., is a public company incorporated in Delaware and headquartered in Massachusetts.  Thermo Fisher Scientific Inc. develops, manufactures and sells a range of products. The Company is a provider of analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics.  They are members of the measuring and controlling devices industry and were represented in this merger by the law firm Wachtell Lipton Rosen & Katz.

5.  On May 23, 2016, Ares Capital Ltd. acquired American Capital, Ltd. in a $3.43 billion dollar Reverse Triangular Merger.  The target company, American Capital, Ltd., is a public company incorporated in Delaware and headquartered in Maryland.  They were represented in this merger by the law firm Skadden Arps Slate Meagher & Flom LLP.  The acquiring company, Ares Capital Corp., is a public company incorporated in Maryland and headquartered in New York.  Ares Capital Corporation is a specialty finance company that is a closed-end, non-diversified management investment company. The company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The company invests primarily in the United States middle-market companies.

 

IPO’s

1.  On May 25, 2016, Greenbacker Renewable Energy Co. LLC filed their S-1 with the SEC for the registered amount of $1.5 billion dollars.  Greenbacker Renewable Energy Co. is an externally managed energy company that acquires and manages income-generating renewable energy and energy efficiency, and other energy-related businesses as well as finances the construction and/or operation of these and sustainable development projects and businesses.  They are managed and advised by Greenbacker Capital Management LLC, a renewable energy, energy efficiency and sustainability related project acquisition, consulting and development company that is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended. We expect Greenbacker Administration, or entities which have been engaged by Greenbacker Administration, to provide the administrative services necessary for us to operate.

2.  On May 23, 2016, Highland Acquisition Corp filed their S-1 with the SEC for the registered amount of $287.5 million dollars.  Highland Acquisition is a blank check company formed under the laws of the State of Delaware on April 25, 2016. They were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.  The company intends to focus their search on businesses in the healthcare, media, telecommunications, entertainment and energy industries located in the United States, although efforts to identify a prospective target business will not be limited to a particular industry or geographic region.

3.  On May 26. 2016, SQN Asset Income Fund V, L.P. filed their S-1 for the registered amount of $250 million dollars.  SQN Asset Income Fund V, L.P. is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. They could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1,000,000,000; (ii) the date that they would become a “large accelerated filer,” as defined in the Securities Exchange Act of 1934.  The company’s S-1 states they will operate a fund in which the capital invested will be pooled with capital invested by other investors. This pool of capital will then be used to invest in business-essential, revenue-producing (or cost-saving) equipment and Other Physical Assets with substantial economic lives and, in many cases, associated revenue streams. The pooled capital contributions also will be used to pay fees and expenses associated with the organization and this offering and to fund a capital reserve. The company may also borrow funds to make investments.

4.  On May 27, 2016, Planet Fitness, Inc. filed their S-1 for the registered amount of $201 million dollars.  Planet Fitness is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations, with a highly recognized national brand.  The company mission is to enhance people’s lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which they call the Judgement Free Zone, where anyone can feel they belong. The bright, clean stores are typically 20,000 square feet, with a large selection of high-quality, purple and yellow Planet Fitness-branded cardio, circuit- and weight-training equipment and friendly staff trainers who offer unlimited free fitness instruction to all members in small groups.  They offer this differentiated fitness experience at only $10 per month for the standard membership.

5.  On May 26, 2016, Twilio Inc. filed their S-1 with the SEC for the registered amount of $100 million dollars.  In their S-1, the company states that their goal is for Twilio to be in the toolkit of every software developer in the world. As of March 31, 2016, over 900,000 developer accounts had been registered on their platform. The company states that, because big ideas often start small, they encourage developers to experiment and iterate on the platform.   As their customers succeed, they share in their success through the company’s usage-based revenue model, which grows as customers increase their usage of a product, extend their usage of a product to new applications or adopt a new product. The company believes the most useful indicator of the increased activity from their existing customers is the Dollar-Based Net Expansion Rate, which was 155% for the year ended December 31, 2015.

 

Popular Memos

1.  On May 23, 2016, the law firm Clifford Chance LLP released the memo This week at the UK regulators – 23 May 2016.  The guide reports that, in a week of little enforcement action in the UK, the main development was the FCA’s publication of a Final Notice against the former compliance officer of Keydata Investment Services Limited. The FCA imposed a public censure and prohibition order on Peter Francis Johnson in respect of breaches between July 2005 and June 2009. In other developments, the FCA published a consultation paper about proposed changes to the Client Assets and Collective Investment Schemes sourcebooks and the PRA published a policy statement and revised supervisory statement about changes to audit committee requirements.

2.  On May 25, 2016, the law firm Wiley Rein & Fielding released the memo Federal Circuit Patent Bulletin: In re Aqua Prods., Inc.  The publication reports that on May 25, 2016, in ‘In re Aqua Prods., Inc.’, the U.S. Court of Appeals for the Federal Circuit affirmed the Patent Trial & Appeal Board decision in an inter parts review of U.S. Patent No. 8,273,183, which related to automated swimming pool cleaners used to filter water and scrub pool surfaces, to deny patent owner Aqua’s motion to substitute claims based on the failure to demonstrate that the amended claims would be patentable over the art of record.

3.  On May 24, 2016, the law firm Clifford Chance LLP released the memo Middle East legal trends in a sustained low oil price world.  The briefing note discusses the similarities and differences between the 2014/2015 crude oil price drop and the price crash of 2008.  The note explains that the 2008 pricing downturn lasted only a few months before prices recovered to US$100+/barrel. After a period of around five years during which Brent Crude traded consistently around or above US$100/barrel – and nearly 10 years at pricing consistently above $50/barrel – we are now in a period where Brent Crude has traded in a range of US$25-US$65 per barrel since the start of 2015. With sustained supply from OPEC into a market oversupplied by new production, new technology, large inventories and an uncertain demand picture, some commentators have suggested parallels to the impact of new North Sea supply in the 1980s, with oil trading in the US$10-US$30 range for most of that decade. The industry’s mantra seems to have become “much lower, for much longer”.

4.  On May 26, 2016, the law firm Morgan, Lewis & Bockius LLP released the memo FERC Upholds and Clarifies Reforms to Market-Based Rate Program.  The publication reports that on May 19, the Federal Energy Regulatory Commission issued Order No. 816-A, which upholds and clarifies the Commission’s reforms to its market-based rate program issued in Order No. 816 on October 16, 2015.  Order No. 816 streamlined a number of requirements for MBR filings, such as those related to horizontal market power wholesale market share and pivotal supplier indicative screens, and the asset appendices required of each MBR applicant. In upholding the prior reforms, the Commission addressed requests for rehearing from various entities, some of which concerned the following topics: reporting obligations for fully committed long-term generation capacity, reporting of long-term firm purchases, notices of change in status, new affiliation and behind-the-meter generation, waiver of Part 101 of the Commission’s regulations, and corporate organizational charts.

5.  On May 25, 2016, the law firm Wilson Sonsini Goodrich & Rosati released the memo SEC Updates Guidance on the Use of Non-GAAP Financial Measures.  As reported in this alert, the SEC released several new and revised Compliance and Disclosure Interpretations related to the use of non-GAAP financial measures under Regulation G and Item 10(e) of Regulation S-K. The new guidance addresses the SEC staff’s concern with the use of non-GAAP financial measures in a manner that could be viewed as misleading to investors. The new and revised C&DIs focus on providing consistent, clear presentations of non-GAAP financial measures that show a complete financial picture. Companies should use the new guidance as an opportunity to review their use of non-GAAP financial measures.

 

Litigation Release

1.  On May 26, 2016, the SEC released the document Christopher R. Esposito, et al. under the material type/category Litigation/Litigation Release with the release number LR-23545.  The litigation states that on May 26, 2016, the SEC announced charges against four individuals and two companies for their roles in conducting a scheme to defraud investors by misappropriating investors funds and by concealing the ownership and control of a publicly-traded company in order to enrich themselves by colluding in the sale of hundreds of millions of shares into the public market, in violation of SEC statutes and regulations.  In a complaint filed in federal court in Boston, Massachusetts, the SEC alleges that Christopher R. Esposito, of Topsfield, Massachusetts, accomplished the first phase of his fraudulent scheme by raising more than $550,000 from investors between June 2011 and June 2012 in an unregistered offering of securities in his company Lionshare Ventures LLC, spending almost $300,000 of Lionshare investor funds for unauthorized personal expenses, and using $75,000 of Lionshare investor funds to acquire control of a Massachusetts-based publicly-traded company, Cannabiz Mobile, Inc., by purchasing all of its convertible debt.

2.  On May 24, 2016, the SEC released and filed the document Michael J. Kipp and Joanne K. Viard under the material type/category litigation/litigation releases with the release number LR-23544.  The report announced charges made by the SEC against three former corporate officers of North Carolina-based hygiene and sanitation company Swisher Hygiene, Inc. for their participation in a fraudulent earnings management scheme.  According to the SEC’s complaint, during the second, third and fourth quarters of 2011, Michael J. Kipp, Swisher’s former CFO, exploited Swisher’s lack of effective internal controls and directed his accounting group to aggressively reevaluate and manipulate various acquisition-related reserves and expenses in order to increase earnings to predetermined targets tied to the expectations of the company’s lenders as the basis for future acquisition financing. The SEC’s complaint alleges that Joanne K. Viard, Swisher’s former Director of External Reporting, identified potential acquisition-related entries that could be reclassified to meet earnings targets, and made various adjusting entries in Swisher’s accounting records without adequate justification or support.

3.  On May 27, 2016, the SEC released the document SEC Complaint in the case of David B. Kaplan, Esq., et al. under the material type Litigation/Litigation Releases with the release number LR-23547.  The litigation announced that the The SEC announced today that it filed fraud charges and obtained an asset freeze against an attorney and Nevada resident David B. Kaplan and three entities that he controls based on an allegedly fraudulent scheme that raised $15.8 million from 26 investors in eight states.  The SEC’s complaint, unsealed yesterday, was filed on May 19, 2016, in the U.S. District Court for the District of Nevada-Reno, and charges Kaplan and the three entities, Synchronized Organizational Solutions International Ltd., Synchronized Organizational Solutions LLC, and Manna International Enterprises Ltd. According to the complaint, Kaplan repeatedly lied to prospective investors by stating that their funds would be invested in a low-risk, private off-shore trading program that would be provide estimated monthly profits of 10 percent.

4.  On May 27, 2016, the SEC released the document BioChemics, Inc., et al. under the material type Litigation/Litigation Releases with the release number LR-23546.  The litigation reports the SEC announced that on May 25, 2016, the Honorable Mark L. Wolf entered a final judgment against Craig Medoff of Boston, Massachusetts, a defendant in a previously-filed enforcement action. Among other things, the judgment requires Medoff to pay over $100,000 and prohibits him from participating in the issuance, offer, or sale of any security (expect for his own personal purposes) for ten years.  In December 2012, the SEC charged BioChemics, Inc., a private biopharmaceutical company based in Danvers, Massachusetts, its founder and CEO, John J. Masiz, and two other individuals affiliated with the company, Medoff and Gregory S. Kroning, with fraudulently raising at least $9 million from investors. The SEC’s complaint alleged that the defendants, while raising proceeds from investors, misrepresented, among other things, the status of BioChemics’ collaborations with certain pharmaceutical companies, the results of clinical trials for BioChemics’ drugs, and that certain claimed valuations of BioChemics of between $500 million and $2 billion were independent and reliable when they were not.