Robert Strauss Had Key Dual Role in MCA Acquisition
A key MCA board member and former Democratic National Committee chairman played an unusual dual role in talks that led to Matsushita Electric Industrial Co.’s $6.59-billion acquisition of MCA Inc.
Robert S. Strauss, a prominent Washington lawyer with Akin, Gump, Strauss, Hauer & Feld, represented both sides on certain matters under a special agreement between the companies. The firm will receive $8 million for representing MCA in the deal, and will get an additional fee from Matsushita, according to documents filed with the Securities and Exchange Commission late Friday.
Under a letter agreement between MCA and Matsushita dated Nov. 12, the attorney was permitted to represent both companies in “government relations” matters.
The letter specifically said Strauss wasn’t to represent either company in “negotiation or financing” of the deal.
In an interview Friday, Strauss said he was asked to advise Matsushita on government affairs by Keiya Toyonaga, a Matsushita executive whom he has known for over 20 years. Strauss is also a longtime friend of MCA Chairman Lew R. Wasserman. Strauss called “totally inaccurate” claims by an individual familiar with the bargaining that he had attended a key Matsushita caucus at which the company established a lower-than-expected bargaining position in the talks. Matsushita will pay $66 a share for for MCA, after the company’s TV station is spun off to shareholders.
MCA President Sidney J. Sheinberg also said Strauss had not exceeded his mandated role, though neither executive disputed reports that Strauss had become involved in a complex series of phone conversations that broke a negotiating impasse early Thanksgiving morning.
“Bob Strauss’ involvement was very constructive in getting the deal concluded,” Sheinberg said.
The attorney, an eight-year veteran of the MCA board, didn’t vote on the merger and said he left the board room when other directors discussed the deal.
The SEC documents, which outline Matsushita’s formal offer for MCA shares, describe rich payments to a number of individuals as a result of the MCA sale.
The investment banking firm Lazard Freres & Co. will be paid $16.8 million on completion of the deal. Felix Rohatyn, a Lazard Freres partner, represented MCA and is also a board member. Allen & Co., which represented Matsushita, will get $8 million.
The documents didn’t disclose the fee paid to Creative Artists Agency, whose chairman, Michael Ovitz, also represented the Japanese company and was a primary force in bringing the deal together. Wall Street sources have said they believe Ovitz will get as much as $40 million. CAA declined to comment.
Wasserman will receive a $3-million annual salary under a new five-year employment contract. Wasserman’s salary this year was $900,000, not including stock and other long-term compensation. Wasserman also will get an annual 8.75% dividend on the preferred stock he will receive in exchange for his nearly 5 million MCA shares, or about $30 million a year.
The documents disclosed that Wasserman will pay no taxes as a result of the exchange, except for a possible New York state tax. Other shareholders will pay capital gains tax to federal and state governments on the cash they receive for selling MCA shares.
Sheinberg, according the filings, will get a $21-million payment in exchange for benefits he might have received under an old employment contract that was amended as part of the deal. Under his new contract, Sheinberg is guaranteed succession to MCA’s chief executive post if Wasserman is unable to fill it.
MCA movie chief Thomas P. Pollock, executive vice presidents Thomas Wertheimer and Charles S. Paul and six other officers will get amended contracts and payments totaling $17.5 million.
The documents said there was a chance the deal would be completed this year, depending on whether the Federal Communications Commission quickly approves plans to spin off the WWOR-TV station to shareholders. The spinoff has been valued by company insiders at about $6 per MCA share, but investors expect the new stock to trade at a lower level.
Until the merger is completed, MCA is forbidden to make any capital expenditure of more than $35 million without consulting Matsushita executives.
More than 400 MCA employees have employment contracts. Matsushita has pledged to honor those agreements.
The documents didn’t mention the New York investment banking firm of Wasserstein Perella & Co. News reports have identified the firm as a secret adviser to Matsushita, but CAA has disputed that characterization.
