KNOWING MATTERS

DEAL BRIEF

Deal Description: June 1, 2018 – SK Capital Partners, a private investment firm focused on the specialty materials, chemicals and pharmaceuticals sectors, announced today an agreement to acquire SI Group, a leading global developer and manufacturer of performance additives and intermediates. Headquartered in Schenectady, New York, SI Group operates 20 manufacturing facilities on five continents with more than $1 billion in annual sales and over 2,800 employees worldwide.

SI Group is being acquired from the descendants of W. Howard Wright, who founded the company in 1906. At the close of the transaction, SK Capital will combine SI Group and Addivant, a leading global supplier of additives including antioxidants, antiozonants, inhibitors, polymer modifiers and UV stabilizers used by customers to improve the production and performance properties of polymers, plastics and rubbers. SK Capital has owned Addivant since 2013.

The transaction is expected to close in the second half of 2018.

Baker Botts is representing SI Group in the transaction.

Baker Botts Lawyers/Offices Involved:

Corporate: Geoffrey L. Newton (Dallas, Partner), Michael Young (Dallas, Associate), Michelle Matthews (Dallas, Associate), Ian Lurie (Dallas, Corporate), Cale L. Curtin (Dallas, Associate) and Sumair Sangha (Dallas, Associate)

Antitrust: Sean Boland (Washington, Partner), Catriona Hatton (Brussels, Partner), David Cardwell (Brussels, Counsel) and Jeffrey S. Oliver (Washington, Senior Associate)

Employee Benefits and Labor Matters: Eric Winwood (Dallas, Partner), Jennifer Trulock (Dallas, Partner) and Marian Fielding (Dallas, Associate)

Environmental: Aileen M. Hooks (Austin, Partner) and Paulina Williams (Austin, Special Counsel)

Finance: Jon Finelli (New York, Speical Counsel) and Peter Glenn (New York, Senior Associate)

Intellectual Property: Jennifer C. Tempesta (New York, Partner) and Carolyn Pirraglia (New York, Associate)

Real Estate: Patrick Matthews (Dallas, Senior Associate)

Tax: Stephen D. Marcus (Dallas, Partner) and Jordan Hahn (Dallas, Associate)
Next Story / OUR LAWYERS

Corporate Department Chair Mike Bengtson Moves to Baker Botts’ New York Office

NEW YORK, June 13, 2018 – Baker Botts L.L.P., a leading international law firm, announced that Mike Bengtson, corporate partner and chair of the firm’s corporate practice, has moved to Baker Botts’ New York City office, leading the corporate practice.

Mr. Bengtson, who has been with the firm since 2004, previously was located in Baker Botts’ Austin office. His practice focuses on representing business clients in a variety of transactional and other corporate matters, including mergers and acquisitions (M&A), joint ventures and capital formation transactions.

Baker Botts’ robust corporate practice is recognized for its depth of experience, handling a full range of corporate, securities and financing matters, including mergers and acquisitions (M&A), public and private securities offerings and institutional and other specialized financings.

The firm represents companies of all sizes, and has been especially active in the energy, energy services, energy transportation, telecommunications and computer (hardware and software) service industries in recent years. In addition to energy transactions in regions throughout the world, the firm represents numerous technology and media clients in some of the industry's most important and transformative transactions.

“The corporate group also has extensive experience in private equity and venture capital fund transactions and specialized financings in both domestic and international contexts,” said Baker Botts’ Mike Bengtson. “In addition, Baker Botts’ corporate lawyers work on complex business restructurings, both in and outside of court-supervised bankruptcy proceedings and further profile the groups work in key target markets.” Mr. Bengtson noted.

Baker Botts' NYC office was established in 1992 and has an accomplished and continually growing practice that services entities from individuals to Fortune 500 companies involved in the energy, technology, media, financial services, life sciences and many other sectors of our economy.

To schedule an interview with Mr. Bengtson on his move to New York City, please contact Sheena Cochran at Sheena.Cochran@bakerbotts.com or 713.229.1964.
Next Story / NEWS RELEASE

Texas Supreme Court Rules for Baker Botts Client in Horizontal Drilling Lease Interpretation

HOUSTON, June 5, 2018 – Baker Botts L.L.P., a leading international law firm, received a significant win on Friday, June 1, 2018, when the Texas Supreme Court ruled 5-4 in favor of firm client Murphy Exploration & Production—USA in an ongoing case over the proper interpretation of an offset well clause in the context of horizontal drilling.  

The Court’s 5-4 opinion turned on a key distinction between horizontal drilling in tight shale formations where there is little to no drainage, and vertical drilling in more traditional reservoirs where migrating hydrocarbons lead to drainage.

“We are very pleased with the outcome for our client and that the Texas Supreme Court agreed with Murphy’s interpretation and application of the lease provision,” said Jason Newman, lead Baker Botts partner for the case. “The Court’s opinion is a notable victory as the Court recognized important differences in horizontal drilling in deciding that Murphy drilled in the appropriate location on the lease.”

Baker Botts has been representing the client in the ongoing litigation challenging the plain language of the initial lease provision as it pertains to an alleged distance requirement of the offset well from the triggering well.  

“The Texas Supreme Court compared Murphy’s interpretation with that of the lower court and the opposing party, and determined that Murphy’s interpretation of the lease clause was the only reasonable one,” said Baker Botts appellate partner Macey Reasoner Stokes, who argued the case before the Texas Supreme Court.  

Under the provision at issue, if a well was drilled within 467 feet of Murphy’s lease line, Murphy was required, within 180 days, to drill a well adequate to test the same formation, pay compensatory royalties as if an equivalent amount of production was obtained from an offset well on the lease, or release sufficient acreage to constitute a spacing unit as if the initial well had been drilled on the leased premise.

In siding with Murphy, the Texas Supreme Court discussed the context in which the lease was negotiated – horizontal drilling in the Eagle Ford shale. Citing prior precedent, the Texas Supreme Court recognized that the term “offset well” could describe a vertical well drilled to prevent drainage, but also noted that this provision was drafted in a different context, one where production from tight shale presented little risk of drainage.  

Baker Botts lawyers who worked on the case include: Jason Newman (Partner, Houston), Macey Reasoner Stokes (Partner, Houston), J. Mark Little (Senior Associate, Houston), Benjamin Sweet (Senior Associate, Houston), and Johnathan Havens (Associate, Houston).  

Read the full Baker Botts alert discussing the case.
Next Story / MEDIA ALERT

Baker Botts Partners Examine the Rise of Digital Currency

HOUSTON, June 12, 2018 - As digital currency grows in popularity, many have been questioning what should be considered when it comes to regulatory requirements, tax treatments, and litigation issues.

Baker Botts Litigation, Securities, Corporate, Intellectual Property and Tax partners provide commentary on certain points that many companies and individuals should focus on concerning digital currency.

SEC Activity
  • Beyond whether cryptocurrencies themselves should be registered as securities, the SEC is starting to discuss what the legal requirements are for the platforms on which they are traded, and, in particular, whether those platforms should be registered as national securities exchanges under the ’34 Act.

  • To the extent that cryptocurrencies are subject to regulation as securities and subject to anti-fraud rules, the SEC is starting to consider whether it will draw bright line rules as to whether, and to what extent, non-accredited investors may acquire, hold and use these tokenized securities without requiring that they be registered under the ’33 Act.


Civil Litigation and Criminal Law Issues
  • There are a number of class actions pending around the country in which plaintiffs’ lawyers are arguing that initial coin offerings (ICOs) were illegal unregistered securities offerings, thus subject to rescission under the ’33 Act.

  • Although some cryptocurrencies have more built-in anonymity than others and several new ones on the horizon that are claiming that they will provide full anonymity, Bitcoin transactions are not inherently anonymous. In many instances, cryptocurrency transactions may raise anti-money laundering issues, know-your-customer issues, and sanctions list issues.


Regulators
  • A major question is what cryptocurrencies are. Are they securities, commodities, or some other sort of property? The answers are clearer with respect to options and futures based on cryptocurrencies, but the SEC, CFTC, and CFPB are jockeying for regulatory positions that may overlap with respect to cryptocurrencies themselves.

  • In the U.S., state regulators are not ignoring cryptocracies or exchanges and have been involved with the issue much longer than federal regulators.

  • Regulations vary throughout the international arena. In the United Arab Emirates, as an example, there are multiple regulatory authorities including the ‘onshore’ Securities and Commodities Authority (SCA) and at least two "offshore" financial regulators being DFSA in the Dubai International Financial Centre (DIFC) and FSRA in the Abu Dhabi General Market (ADGM). Each regulator has taken a different position on digital currencies and ICOs ranging from issuing guidance on how ICOs might be viewed (making the distinction between utility tokens and securities offerings) and therefore how they might be regulated (ADGM) to an outright refusal to “recognize, regulate or supervise any ICO presently and that ICO investments are not offered legal or regulatory protection” (SCA).

  • Distributed ledger technologies use decentralized tokens to execute transactions between counterparties and do so without the need for intermediaries, such as market-places, stock exchanges, and clearing banks. Blockchain technology was designed to be de-centralized. Its de-centralized nature enables users to trade on a peer-to-peer basis. This has disrupted banking and financial services already, as peer-to-peer file-sharing disrupted the media industry at the turn of the century. So, the question was asked at the Global Corporate Venturing "Symposium" in London last month: "Is this the end of intermediaries?" Contrary to some expectations at the start, the group concluded that -- actually -- trusted intermediaries are even more important to de-centralized networks, not less. And that regulators are likely to rely on regulated intermediaries that the peer-to-peer technology otherwise renders unnecessary."


Tax
  • Under guidance dating back to 2014, the Internal Revenue Service has made clear that cryptocurrency is “property” for tax purposes, and that transactions in cryptocurrency can give rise to taxable gain or loss that must be reported by taxpayers. Based on the recent volatility in the prices for cryptocurrency the Internal Revenue Service may be increasing its enforcement activities regarding the reporting (or non-reporting) by taxpayers of their cryptocurrency transactions.

  • With the recent changes to the “like-kind exchange” provisions of section 1031 of the U.S. Internal Revenue Code, the Internal Revenue Service must now bring attention to how they should interpret the tax treatment of cryptocurrency transactions in the U.S. and internationally.


Intellectual Property
  • Digital currency is based on an open and unpatented blockchain or distributed-ledger technology. Bitcoin, the most popular cryptocurrency in terms of recognition and value, is unpatented. Supporters have argued that its lack of protection have allowed others to seemingly copy the code and invent hundreds of cryptocurrencies with slight modifications. However, patents and other forms of IP protection are available for the software and technology aspects of cryptocurrency and applications of the technology.

  • The proliferation of cryptocurrencies raises significant questions about intellectual property law’s role. Companies that utilize blockchain technologies should be careful to seek protection if a particular implementation of the technology presents a novel solution. Patent applications in this space have ranged from payment processing and improvements, authentication, including trust and trustless systems, electronic settlement, and a host of applications. Patents will be subject to the same traditional principles that the invention is a new and useful process or machine as other software patents. If a business has built new and useful technology, or made a process more efficient by leveraging existing technology, it should consider whether the technology merits patent protection.


To schedule an interview regarding a certain topic listed above, please contact Brecke Boyd (Brecke.Boyd@bakerbotts.com) or Sheena Cochran (Sheena.Cochran@bakerbotts.com).
Next Story / DEAL BRIEF

Baker Botts Represents SI Group in Acquisition by SK Capital Partners