Anatomy of a deal: ExCeL
17 November 2008
Earlier this year Trowers & Hamlins advised on the acquisition of Londons largest exhibition centre, ExCeL, for the price of 178m plus repayment of debt. Our client was Abu Dhabi National Exhibitions Company PJSC. I was lucky enough to be involved at the heart of a deal that, like so many things in the legal profession, was a world away from what you learn at law school. By John Maton
ExCeL is owned by London International Exhibition Centre Holdings (Liech). This company was bought by Abu Dhabi National Exhibitions Company PJSC (Adnec) through a newly incorporated UK company called ADCG. Liech is a public (as opposed to private) limited company, meaning it can offer its shares to the public. Such companies often have several thousand shareholders and the legal process of a takeover offer is designed with these companies in mind.
The deal was completed by means of a takeover offer by ADCG made to all Liech shareholders to buy their shares, subject to the rules of the City Code, which governs takeover offers for public companies in the UK.
Unusually for a plc, the majority of the shares in Liech were owned by one corporate shareholder, called Visionary Properties, with the remainder split among several dozen individuals and companies. As a result the deal was in some ways not typical of a public takeover. From the perspective of the buyers solicitors, one of the ways in which this manifested itself was that certain aspects of the work that would often be done by third-party contractors, such as the printing of documents and maintenance of lists of shareholders, was done by us. More specifically, much of it could be done by the trainee meaning me.
The day on which the offer was announced and the offer document published, Friday 2 May 2008, was the culmination of several months of hard work and preparation by both sides but certainly was not the end of it.
For lawyers, the real work of buying a company begins with due diligence, the process by which an intending buyer of a company investigates all relevant aspects of the target and its business. In the case of ExCeL, this process took several weeks, with Trowers & Hamlins lawyers poring over thousands of pages of documentation.
Due diligence usually starts with the buyers solicitors sending out a questionnaire to the sellers solicitors, which aims to elicit as much information about the target and its business as possible. The parties then agree how and where such information is to be provided. This may include virtual data rooms, where specific individuals are granted restricted access to a secure website containing all of the uploaded information, CD-ROMs sent to the buyers solicitors and/or the good old-fashioned physical data room literally a room full of documents, as was the case for this deal.
Access to a data room is subject to rules set out by the sellers, or by their solicitors. In this case the rules included the requirement to email the data room controller every morning with a list of attendees (with an estimated time of arrival) and a prohibition on taking copies of any documents out of the room. These rules resulted in a junior member of the team having to copy out key documents verbatim much to the delight of said junior.
The sellers solicitors granted us access to the data room for a period of approximately five weeks. During this period we were also provided with further documentation in response to a number of additional supplemental questionnaires. As is often the case with due diligence, the most important documents only surfaced towards the very end of the process, leaving very little time (and requiring a huge amount of effort) to analyse. Most of the team worked a considerable period of the Easter weekend.
The offer document
As with any transaction, much of a lawyers work on an offer consists of preparing transaction documents and much of the trainees work consists of proofreading and, where necessary, amending them.
The central document to this deal was the offer document, which was posted to all Liech shareholders, and which was also publicly available from the date on which the offer was made. The offer document constitutes the offer element of the contract. The contract under which a shareholder sells their shares is completed by the shareholder filling in a form of acceptance (which is sent to them along with the offer document) and returning this to the buyer.
In addition to the terms of the contract between the selling shareholders and ADCG, the offer document contained all of the information required by the City Code. It was therefore necessary to draft and check it as carefully as possible, which meant many late nights of drafting and redrafting the offer document and the various supplementary documents in which its wording was reflected. These included the forms of acceptance, Stock Exchange announcements regarding the offer and undertakings from the Liech directors and certain other shareholders to accept the offer once it was made.
On the morning of 2 May 2008, having spent the previous night finalising the remaining points on the offer document (which were finally confirmed in an email from Liechs advisers at 5.18 am), we could relax at least until the end of breakfast.
Having agreed the form of the documents, the next task was to send them out. This meant producing dozens of copies of the documents and packaging them up to be sent to shareholders. Each offer document needed to be sent together with forms of acceptance for each shareholder, but only the forms relevant to the class or classes of shares (of which there were five) held by that particular shareholder. Once the documents arrived back from the firms print room, it was my job to arrange this.
Commandeering an entire meeting room, a colleague and I laid out dozens of envelopes together with the offer document and relevant forms. I also had to coordinate with the firms post room in order to ensure that all were sent out at the right time. Once everything was ready, we awaited final instructions from the client.
When these were received we published the announcement of the offer with the Stock Exchange and posted all of the documents. Success.
The post-offer process
In the sale of a private company, a lawyers work is largely complete once the contract is signed and dated. In the case of a public offer, once the offer is made the offeror must meet a series of deadlines over the following weeks in order to complete its acquisition.
First there was the small matter of ADCG paying for the shares in Liech.
Once any particular shareholder has accepted the offer and the offer has become unconditional, the City Code gives the offeror 14 days in which to make payment to that shareholder. Payments for Liech shares were made every Thursday to shareholders who had accepted the offer in the previous week.
One part of the deal that was outsourced was the role of the receiving agents that is the job of receiving forms of acceptance from shareholders and monitoring the level of acceptances. This is important not only to ensure that shareholders are paid promptly, but also as certain levels of acceptance of the offer entitle the buyer to acquire the remaining shares compulsorily, which is often useful to a buyer in these circumstances.
The City Code also requires public announcements to be made at particular stages of the offer. The first of these is a long announcement that the offer is to be made, setting out the main terms of, and reasons for, the offer. The second is a simple announcement that the offer document has been posted to shareholders. Further announcements are required when acceptances of the offer reach certain stages. In this case, for each of the five classes of shares in Liech (known as A, B, C, D and E shares) an announcement was required when 90 per cent in each class had been acquired, as this was the point at which the offer in respect of that class of shares would either be declared unconditional, or Adnec would otherwise be entitled to exercise its rights under the squeeze-out procedure.
The squeeze-out procedure enables an offeror who has acquired, pursuant to an offer, 90 per cent of any particular class of shares in another company to require the remaining shareholders in that class to sell their shares to the offeror on the terms of the offer. The squeeze-out procedure is contained in the Companies Act.
The offeror must send a notice to each of the shareholders who has not accepted the offer, notifying them of its intention to acquire their shares under the procedure. Six weeks after sending the notices the offeror can arrange for the remaining shares in the target to be transferred to it.
The offeror must send the notices by recorded delivery. This helps to ensure that they arrive and, importantly from the offerors perspective, provides a simple way to evidence the fact that they were sent in the form of a label stamped by the Post Office.
While the majority of post is sent out from a law firm by sending it to the post room, this would not have given us what we needed the stamps from the Post Office showing that the envelopes had been posted on a particular day. So off went the trainee (me again) to the local Post Office branch with armfuls of envelopes to get them labelled up, stamped over the counter and sent out.
Completing the deal
Once ADCG had completed the necessary procedures to acquire all of the shares in Liech, the relevant shares could be transferred to ADCGs ownership. We completed the relevant stock transfers forms, arranged for the payment of stamp duty and, once HM Revenue & Customs had confirmed that the relevant stamp duty had been paid, we were able to enter ADCG in the register of shareholders of Liech as the sole owner of the company.
For Trowers, bringing this transaction to a conclusion required a huge amount of work from everyone involved, from partners to trainees, as well as the firms print room and post room. Being part of a project such as this is a hugely satisfying experience and one that will develop skills you never knew you had.
John Maton is a trainee solicitor at Trowers & Hamlins
Buyer: Abu Dhabi National Exhibitions Company PJSC
Target: London International Exhibition Centre Holdings
Buyers solicitors: Trowers & Hamlins
Targets solicitors: Clifford Chance
Takeover offer: An offer to buy shares in a public limited company that, if accepted, would give the buyer control of that company.
City Code: The City Code on Takeovers and Mergers regulations for the conduct of takeover offers, published by the Panel on Takeovers and Mergers, which have the force of law.
Squeeze-out: A statutory process by which the buyer of 90 per cent or more of the shares in a company under a takeover offer can require the remaining shareholders to sell their shares to the buyer.
TYPICAL TRAINEE TASKS:
Due diligence reviewing documents and assisting in the preparation of a formal report to the client.
Drafting and proof-reading of documentation.
Preparing Companies House forms and stock transfer forms for shares.
Printing, posting and/or hand-delivering documents.
Writing up statutory registers.
February 2008-April 2008:
Negotiations regarding possible offer. Trowers & Hamlins conducts due diligence process regarding Liech and its subsidiaries.
2 May 2008:
Offer announced and offer documents posted to shareholders. In the following weeks acceptances
are received and payments made to accepting shareholders.
Week beginning 12 May 2008:
Notices are posted to shareholders regarding the compulsory acquisition of remaining B, C and D shares under squeeze-out procedures.
4 June 2008:
100 per cent of the E class shares are acquired.
17 June 2008:
All remaining C shares are acquired compulsorily.
25 June 2008:
All remaining B and D shares are acquired compulsorily.
22 July 2008:
All shares have been registered in the statutory books of Liech as being owned by ADCG. The acquisition is finalised.