Shiseido has agreed to acquire San Francisco-based Bare Escentuals by a $1.7 billion tender offer in a bid to increase the Tokyo cosmetic giant’s presence in the North American marketplace.
Score one for Shearman.
Score one for Ropes & Gray.
Not so much for Cooley Godward or Simpson Thacher.
Why they won and lost, after the jump.
Despite having a longstanding relationship with Cooley for regulatory work and executive compensation matters, Bare Escentuals went with Ropes & Gray when push came to shove. It wasn’t completely out of the blue, though – Ropes goes back a long way with Berkshire Partners, the private-equity fund of which Bare Escentuals was a portfolio company.
This looks like another step in Ropes & Gray’s plan for global private-equity domination, a fight they’ve recently picked with Kirkland over Bain Capital’s international work.The lead lawyer on the team, David Chapin (Lafayette BA ‘76, Harvard JD ‘80), is also one of the Boston-based partners tasked with devoting a substantial bit of attention to the London office. He and R. Newcomb Stillwell (Princeton AB ‘79, Harvard JD ‘84) are supporting the efforts of recent laterals Mike Goetz and Maurice Allen to build up the bank-finance piece of the international PE work.
Cooley, which has had the longest relationship with any of the principals, got shut out.
Kenneth Guernsey, a partner in Cooley’s San Francisco office, concedes that Shiseido’s acquisition of Bare could imperil Cooley’s long relationship with the company. The firm has done Bare’s regulatory work and advised on executive compensation matters; the relationship began when a former Cooley associate moved to Bare’s in-house department, Guernsey says. Whether that continues “will be up to the new owners,” he says.
Anyone know who that was? It wasn’t Bare Escentual’s GC – that’s Deanna Chechile, who was at Simpson Thacher until a few years ago. Does she not like her old firm or did the investors just bully her around. Simpson certainly has the capacity to handle this kind of deal.
This has been a very lucrative investment for Berkshire Partners, by the way:
Berkshire has a 16% stake in Bare Escentuals, the remnant of an investment it made in the company in 2004. It will tender those shares at $18.20 apiece to Shiseido, reaping some $260 million.
That’s just the latest return on a deal that has generated a steady stream of returns for Berkshire that we calculate totals at least $900 million.
Berkshire helped existing investor JH Partners recap Bare Escentuals in June of 2004, a deal that entailed about $87.5 million of equity. The amounts each firm invested aren’t known; JH has already completely exited its stake, judging from Securities and Exchange Commission documents associated with the Shiseido deal.
Within two years of that investment, Berkshire was already well into the black on the deal, having gotten back $306.3 million as a result of dividend recapitalizations. Shortly after Bare Escentuals went public in late 2006, it began selling down its stake. In two separate secondary sales of stock in the first half of 2007, it generated at least $330 million. Between then and the Shiseido announcement, its percentage ownership of the company has decreased somewhat, indicating it has been selling down its stake further, although there are no records on file with the SEC.
Shiseido, meanwhile, enlisted Shearman & Sterling’s Peter Lyons (Virginia BA ‘77, Georgetown JD ‘80) out of New York and Ken Lebrun (Carleton College BA ‘91, Georgetown JD ‘97) out of Tokyo. They got the work after a dog-and-pony show.
Just goes to show, commodity work may keep the lights on, but it’s no guarantee that a firm will get the big-ticket deals (and when it comes down to it, parents still tell subs whom to use).
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REally good point on: "Just goes to show, commodity work may keep the lights on, but it’s no guarantee that a firm will get the big-ticket deals (and when it comes down to it, parents still tell subs whom to use)."
Re: Ropes & Gray – word is they don't have the mustard that the rest of the big PE players have. They are used for fund formation work but really get invited to the ac quisition side of the coin, and thats where the really money is.