Bloomberg News

Wachtell, Clifford Chance, Paul Weiss: Business of Law

November 27, 2012

Cravath Swaine & Moore LLP announced year-end bonuses for associates, ranging from $10,000 for the newest associates to $60,000 for the most senior, according to a memo the firm gave its lawyers that was obtained by Bloomberg News.

Associates who joined the firm in the class of 2004, will get $60,000 on Dec. 21, while the class of 2007 will receive $34,000. Those who are in the class of 2009, will receive $20,000.

The bonuses, which usually set an industry standard, reflect a substantial increase from last year’s, which was $37,500 for the most senior associates at Cravath, according to the New York Times.

Christine Varney, the head of Cravath’s antitrust practice and former chief of the U.S. Justice Department’s antitrust unit, said at a panel last month that her practice has been very busy. She predicted that merger activity will continue to be strong. Among Cravath’s work this year has been advising Hertz on its $2.6 billion purchase of Dollar Thrifty and Crown Castle on its acquisition of 7,200 T-Mobile USA cellular towers valued at $2.4 billion.

The bonuses aren’t awarded according to billable hours or other criteria, the memo said, though “suitable performance at that attorney’s experience level,” is required.

A spokesman for Cravath declined to comment on the bonuses.

Deals

Four Firms Advise on $2.5 Billion McGraw-Hill Sale to Apollo

Wachtell, Lipton, Rosen & Katz and Clifford Chance LLP advised McGraw-Hill Cos. (MHP:US) on its agreement to sell its education unit to Apollo Global Management LLC (APO:US) for $2.5 billion as Chief Executive Officer Harold “Terry” McGraw III remakes his family’s 124-year-old company around financial services.

Apollo received legal advice from Paul, Weiss, Rifkind, Wharton & Garrison LLP and Morgan, Lewis and Bockius LLP.

The transaction is expected to close by year-end or in early 2013, the company said yesterday in a statement. It will have a non-cash impairment charge of about $450 million to $550 million in the fourth quarter and use an estimated $1.9 billion in net proceeds to fund share buy backs and debt payments.

Partner Kathy Honeywood in London led Clifford Chance’s team. Wachtell’s team included partners: Trevor S. Norwitz, corporate; Joseph D. Larson, antitrust; Adam J. Shapiro, executive compensation and benefits; Joshua A. Feltman, restructuring and finance; and Deborah L. Paul, tax.

Paul Weiss’s New York corporate partners Greg Ezring and John Scott, and tax partner Brad Okun, worked on the deal. Morgan, Lewis Washington antitrust partner Jonathan Rich advised Apollo.

Cleary Gottlieb Steen & Hamilton LLP New York partner Ethan Klingsberg is advising Goldman Sachs, financial adviser to McGraw-Hill.

Following the sale, McGraw Hill Financial, as the new company will be called, will have at its core Standard & Poor’s, the world’s largest credit-rating company. More than a year ago, McGraw-Hill announced plans to split into two businesses, one focused on educational publishing and the other on financial operations.

The education division (MHP:US) reported $2.3 billion in sales last year and publishes in more than 65 languages. McGraw-Hill has weighed a sale or a spinoff of the business since at least last year, when hedge-fund investor Jana Partners LLC proposed a plan for a breakup.

McGraw-Hill “has consistently underperformed its potential and traded at a sizable discount,” with the education unit creating a “drag” on the company’s value, Jana said in August 2011.

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Kaye Scholer, Weil Work on Onex $2.3 Billion USI Insurance Deal

Kaye Scholer LLP advised Onex Corp. (OCX), Canada’s largest publicly traded buyout firm, which agreed to buy USI Insurance Services LLC from a fund run by Goldman Sachs Group Inc. (GS:US) in a transaction valued at $2.3 billion. Weil Gotshal & Manges LLP advised GS Capital.

Kaye Scholer corporate partner Joel Greenberg served as lead partner. Others partners on the team included Tom Yadlon corporate; Jeff London and Lou Tuchman, tax; and Stephen Culhane, investment funds. Onex’s general counsel is Andrea Daly.

Weil’s team was led by mergers and acquisitions and corporate partner Michael Aiello. Additional partners included Matthew Bloch, capital markets; Richard Ginsburg, banking and finance; Michael Nissan, executive compensation and benefits; Helyn Goldstein, tax; and Jeffrey Osterman, technology and IP transactions.

The deal includes a $700 million equity investment by Onex Partners III fund, the Toronto-based company said yesterday in a statement. Employees of the Briarcliff Manor, New York-based insurance broker will remain “significant” investors in USI, which has about 100 offices in the U.S.

Private-equity firms are buying insurance-services companies for their steady cash flow and low capital needs.

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Firm News

EADS Hires Clifford Chance for Internal Bribery Probe

European Aeronautic, Defence & Space Co. (EAD) has hired law firm Clifford Chance LLP to start internal probe in response to investigations into whether EADS paid bribes to win a 2003 fighter jet contract, EADS spokesman Rainer Ohler said by phone.

German and Austrian prosecutors conducted raids in three countries Nov. 7 as part of separate investigations into whether EADS paid bribes to win a 2003 fighter jet contract.

The Austrian parliament in 2007 investigated whether Eurofighter Jagdflugzeug GmbH or EADS, one of the venture’s co- owners, paid bribes to win the 1.96 billion-euro ($2.52 billion) contract signed in July 2003. Along with EADS, Eurofighter’s parent companies include London-based BAE Systems Plc (BA/) and Rome- based Finmeccanica SpA. (FNC)

Vienna prosecutors are looking into allegations of bribery, money laundering, breach of trust and tax evasion, Thomas Vecsey, a spokesman for the prosecutor, said.

Der Spiegel reported the story earlier, citing EADS CEO Tom Enders as saying that he wants to “clear up this matter as quickly as possible”

Slaughter and May Advise Glaxo on Indian, Nigerian Stake

Slaughter and May is advising GlaxoSmithKline Plc (GSK), the U.K.’s biggest drugmaker, on its plans to buy shares in its publicly traded Indian and Nigerian consumer-products units, boosting stakes in businesses that are growing faster than branded pharmaceuticals.

Glaxo offered to buy as many as 13.4 million shares of India’s GlaxoSmithKline Consumer Healthcare Ltd. (SKB) for 3,900 rupees each, or a total of 52.2 billion rupees ($940 million), the London-based company said in a statement yesterday. Glaxo also will buy about 321 million shares of GlaxoSmithKline Consumer Nigeria Plc (GLAXOSMI) at 48 naira a share, for a total of 15.4 billion naira ($100 million), Glaxo said in a separate statement.

Slaughter and May supported GlaxoSmithKline’s in-house legal counsel, Steven Rix, and worked closely with law firms AZB & Partners in India and Udo Udoma & Belo-Osagie in Nigeria, the firm said in a statement.

The Slaughter and May team is led by corporate partners David Johnson, Simon Nicholls and Richard Smith. The AZB & Partners team is led by partner Ajay Bahl. The Udo Udoma and Belo-Osagie team is led by partner Daniel Agbor

The Indian unit sells Horlicks and Boost nutritional drinks, Sensodyne toothpaste and Eno antacid, among other consumer products. Horlicks is India’s top packaged beverage behind bottled water and sells more than twice as much as PepsiCo Inc. (PEP:US)’s namesake cola.

The Nigerian unit manufactures, markets and distributes consumer-health brands including Sensodyne, Horlicks and the Lucozade sports drink. The company also sells pharmaceutical products including antibiotics and vaccines.

Consumer health-care sales have been rising 19 percent annually over the last five years in India and 21 percent a year over the past four years in Nigeria, according to the company. Glaxo’s pharmaceutical sales fell 2 percent at constant exchange rates in the first nine months of this year.

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Moves

Jenner Hires Co-Chairman of the Private Equity Practice

Jenner & Block LLP hired mergers and acquisitions lawyer Mark A. Harris as a partner in the Chicago office. Harris will join Jenner & Block’s corporate practice and become co-chairman of the firm’s private equity practice. Harris was a partner at McDermott Will & Emery LLP, the firm said.

Harris will advise clients on acquisitions, divestitures, spinoffs, LBOs, going-private transactions, reorganizations, proxy contests and other complex transactions, as well as on corporate governance and other general business matters.

“Mark is well-known for his work in numerous areas, including private equity transactions. He will be a tremendous asset to companies engaging in complex legal and financial transactions, and his hiring further demonstrates our commitment to deepening our transactional service offerings,” Susan C. Levy, the managing partner of Jenner & Block, said in a statement.

Among his past work was on Wrapports LLC’s acquisition of the Chicago Sun-Times. He also advised Merge Healthcare on its acquisitions of AMICAS and Ophthalmic Imaging Systems and Munich Re in its acquisition of the Windsor Health Group as well as the management teams of CDW Corp. and Nuveen Investments Inc. in their going-private transactions led by Madison Dearborn Partners.

Prior to his work in private practice, Harris was the COO and a Principal, Portfolio Manager of GTCR Golder Rauner LLC, a Chicago private-equity firm.  He has also served as a senior executive and the chief legal officer for two VC-backed technology companies -- PrairieComm Inc. and Click Commerce Inc. -- and has been an outside director of two public companies, including Global Imaging Systems Inc., a distributor and servicer of computer peripherals and copiers, which was acquired by Xerox in 2007, the firm said.

Jenner & Block has about 450 attorneys at offices in Chicago, Los Angeles, New York and Washington.

Dmitry Kurochkin Joins Dechert’s Litigation Group in Moscow

Dechert LLP announced that Russian litigator Dmitry Kurochkin joined the firm as a partner in its dispute resolution practice in Moscow. Prior to joining Dechert, Kurochkin was head of litigation for Central Europe, the Middle East and Africa at Herbert Smith in Moscow, the firm said.

Kurochkin focuses his practice on commercial, corporate, shareholder, employment, regulatory litigation and arbitration matters for both domestic and international clients.

A Russian-qualified lawyer, Kurochkin received a Master of Laws from the University of Frankfurt am Main, Germany. He is fluent in English, French and German as well as his native Russian.

Dechert has lawyers in 26 offices worldwide.

Litigation

Morgan Keegan Trial Judge to Decide SEC Claims He Dismissed

Morgan Keegan & Co. is going to trial before a judge whose decision to throw out regulators’ claims the retail brokerage misled thousands of investors about the risks of auction-rate securities was reversed on appeal.

Lawyers for the U.S. Securities and Exchange Commission and the Memphis, Tennessee-based financial firm delivered opening statements yesterday in federal court in Atlanta in a nonjury trial scheduled to take two weeks.

The case, alleging that Morgan Keegan told clients that the more than $2 billion in securities it sold had “zero risk” as the market was collapsing in late 2007 and 2008, was dismissed by U.S. District Judge William Duffey Jr. in June 2011. In May, the U.S. Court of Appeals in Atlanta overruled Duffey, finding he incorrectly concluded brokers’ verbal comments to four customers were immaterial in light of disclosures posted on the firm’s website.

Morgan Keegan brokers told customers auction-rate securities were “liquid, short-term investments,” M. Graham Loomis, a lawyer for the SEC, said during openings yesterday. “None of the brokers told them their money could be tied up indefinitely.”

“Morgan Keegan’s failure to predict the future is not securities fraud,” a lawyer for Morgan Keegan, Amelia Rudolph, a partner at Sutherland Asbill & Brennan LLP, said in openings yesterday. “This was a market that went up in smoke overnight. Morgan Keegan did not misrepresent this product to anyone.”

The suit is Securities and Exchange Commission v. Morgan Keegan & Company Inc., 1:09-cv-01965, U.S. District Court, Northern District of Georgia (Atlanta).

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News

Schapiro to Quit as SEC Chairman and Be Replaced by Walter

U.S. Securities and Exchange Commission Chairman Mary Schapiro, who took the agency’s helm in 2009 as it reeled from public rebukes for failing to rein in Wall Street abuses, is leaving the agency next month.

Schapiro, 57, will be replaced as chairman when she steps down on Dec. 14 by Commissioner Elisse Walter, former senior executive vice president at the Financial Industry Regulatory Authority, President Barack Obama said in a statement.

It was unclear how long Walter might serve as chairman. An administration official said Obama intends to make a new nomination to the commission in the near future. The official, who spoke on condition of anonymity, didn’t specify whether the nomination would be for the chairman position.

Walter’s five-year term as a commissioner expired in June. Under current law, she’s entitled to work through the end of 2013 without being reconfirmed. The president has the right to designate any commissioner as chairman.

Walter, who served as interim chairman before Schapiro took over, will return to the helm as the agency works to implement Dodd-Frank rules ordered in response to the credit crisis and looks to overhaul oversight of the money-market mutual fund industry after Schapiro’s initial effort ended in failure.

Schapiro tapped Robert Khuzami, a former federal prosecutor, to reinvigorate the agency’s enforcement division, setting in motion the biggest overhaul in that unit’s history. The enforcement division, which has since filed dozens of cases related to the financial crisis, has also faced criticism from lawmakers, judges and investors that it has gone easy on top executives.

In the most prominent enforcement effort after the 2008 financial crisis, Schapiro’s SEC sued Goldman Sachs Group Inc. in 2010, accusing it of fraud when it sold investors a mortgage security without disclosing that hedge fund Paulson & Co. helped pick the loans and bet against them. Goldman paid a record $550 million fine.

For more, click here.

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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