Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/854329
38 LEXPERT MAGAZINE | JULY/AUGUST 2017 "Frank," says Mann, "has now developed a reputation, firm-wide, for his expertise in ordering fine cuisine takeout." "Taking a break to eat," remembers Sel- ke, who ordered salad bowls from places like the Garden Gangster or pastas from Terronis or Trattoria Nervosa, "was really the only downtime we had throughout the day. … e days were filled with endless meetings, calls, negotiation and draing of all the transaction deliverables, of which there were many." Stikeman lawyer Raman Grewal spear- headed regulatory engagement on behalf of PSG with the OSC — a role that re- quired some tightrope walking. In most normal M&A transactions direct contact with regulators is uncommon. With PSG under the microscope by the SEC and the OSC, says Grewal, "they were regularly connecting to us. So we had this addition- al, real, live moving issue of managing our relationship and the company's relation- ship and disclosure with the regulators while many things were transpiring." Grewal and her team of up to four law- yers were tasked with assessing what Per- formance Sports Group's disclosure obliga- tions were. When and what information should go to market was critical. But with different securities regulations in Canada versus the US — some overlapping, some not — there was heightened risk of second- ary-market liability for PSG officers should any disclosures be deemed unfair to share- holders or potential investors. "ere are guidelines and there are legal tests set out in the legislation," explains for a bid deadline and to January 30 for the auction. "is was a trust thing," says Waitzer. "e company didn't enjoy trust. So it was very easy for those who were against the process to argue that we were setting up a sweetheart deal with Sagard. Ultimately when we got to the finish line, everyone was happy with the deal and with the process." In the meantime, however, Centerview Partners did its job in attracting parties interested in looking under PSG's hood. Eventually, estimates Jonah Mann, some 30 companies signed non-disclosure agree- ments. e flurry of bidders visiting PSG's New Hampshire headquarters to conduct due diligence massively increased the work Stikeman and its US counterpart, Paul, Weiss, Riind, Wharton & Garrison LLP, had to do. "We were going 24/7 since August," re- calls Mann. "People had really sacrificed in order to make very tight deadlines at the end of October when the extension for the lenders was going to expire, and we had to sign our deal by that date." He gives the example of Frank Selke, a Stikeman associate in Toronto. "Frank had had his first daughter in August, and was on paternity leave when this started. We summoned him back to the office as soon he had a decent amount of time to get things together." Besides his own work, Selke, with ex- tra panache, arranged the feeding of the Stikeman troops for months on end, when almost every meal the team had was at the office, including all-night meetings. Grewal. "But with everything there is a level of judgment that has to be applied to determine when that legal test is triggered." Her contact with the OSC proved refresh- ing. "ey were mindful of their obligation of protecting investors but at the same time very sensitive as to ensuring the role they were playing was also a positive role and one that was ultimately helping the process to get to the sale of the assets and not in any way hinder it." Cross-border Approved On February 6 of this year, PSG an- nounced that, with no bidders coming forth to top Sagard/Fairfax, both the Ca- nadian and US courts approved the sale of substantially all of its assets to that duo. On February 28, the transaction closed. It wasn't the hardest deal Ed Waitzer ever worked on, "but it was highly unique. Some aspects of it were extremely complex. Other aspects of it were pretty straightfor- ward. But we were able to save a good busi- ness caught in bad circumstances and put it into the hands of new owners at a time when it clearly couldn't survive as a public company. And at the same time [the deal] protected the interest of creditors." In fact, from Robert ornton's perch as a restructuring/insolvency lawyer, the law- yers involved in putting together this trans- action may yet pull off something rare: finding money for equity shareholders. ere remains an outstanding share- holder equity class action in the US against the estate of Old PSG Wind Down, the non-operating company le from PSG, which holds and will distribute to various creditors the proceeds of the $575-million sale. (e OSC inquiry and SEC investiga- tion into Old PSG remain open but idling.) But if remaining legal costs can be kept down, Old PSG may find residual money to at least partly pay off several common shareholder groups. "When a company goes into an insolven- cy proceeding, you oen see equity wiped out entirely … so this case was unique in that regard," says ornton. ough re- turns for equity claimants haven't hap- pened yet, he adds, "I will keep my powder dry on that. But that may very well happen over the course of the case." "At the end of the day, Fairfax stands for Fair, Friendly Acquisitions. And really that is how they, from their earliest days, proceeded on all their acquisitions. They have never walked away from a deal once they have committed to the transaction." DAVID CHAIKOF > TORYS LLP | ART OF THE DEAL | Anthony Davis is a freelance business and investigative writer based in Calgary.