Ashursts client Peter Black picks Eversheds after MBO
27 November 2000
A 10-strong Eversheds team, led by corporate partner Robert Pitcher, is acting on the £223m management buyout (MBO) of Peter Black through newco Beltpacker, led by a team comprising five directors, including chairman Gordon Black, chief executive Stephen Lister and financial director Neil Yewdall. The MBO team is also being advised by PricewaterhouseCoopers (PwC) on its recommended cash offer.
According to Ashursts corporate partner Adrian Clark, who acted for Peter Black with senior assistant Isabel Hatcher, the company is a "historic client".
But Pitcher says: "The chief executive has agreed that we will be the ongoing adviser to the newco."
Peter Black, a personal care and household products conglomerate, which counts Marks & Spencer as one of its largest customers, initially announced the possibility of an MBO on 3 July. Just four months earlier a group of independent directors, advised by Rothschild, which also later acted for the board of Peter Black, reviewed a number of options to increase shareholder value after its shares had continued to underperform.
A contributing factor, as pointed out in its offer document, was that Marks & Spencer, which accounted for 40 per cent of Peter Black's turnover for the six months ending 31 July 2000, had experienced a 30 per cent drop in share price over the last 12 months. The outcome of this decline was the MBO team's decision to make the company private after 28 years of being a publicly-quoted company.
The deal reunites the North's three main corporate finance players: Eversheds is acting on the recommended bid with Addleshaw Booth & Co, while DLA is representing the senior debt and mezzanine providers. The three recently acted on a deal involving the sale of HSBC Private Equity's controlling stake in engineering company CRP to Barclays Private Equity (The Lawyer, 13 November).
Led by corporate finance partner Richard Lee, Addleshaws is advising long-term client 3i, which injected £80m into the newco through a mixture of equity and loans.
DLA's team of eight, led by the head of North West banking operation Simon Woolley, acted for a banking syndicate led by the Royal Bank of Scotland, with Bayerische Hypo-und Vereinsbank and Scotia Capital Europe, which provided £145m of senior debt and £30m of mezzanine.
Although the offer, which was finally posted on 16 November, was initially made by a small group of directors, Black brought in a further 30 senior managers into the team. The management invested £4.2m into the company, while the Black family injected £26m.
One City source says that bringing other members into the equity before the deal has been completed is an unusual move, since it entangles the structuring of the financing. Pitcher admits that the deal was "extremely complicated", adding: "It nearly gave us kittens. Gordon Black wanted to bring his senior management into the team. Professionally it is complex, but it's not something we are unable to do.
"To make it work, we got a number of classes of security in the structure. Depending on their seniority, [the team] got different rates of return as they invested different amounts of money, while the family and trusts also put in their own money."
Since there was so much complexity surrounding the structure of the equity, DLA ended up playing a game of catch in terms of the negotiations between the banks and the other parties concerned.
Woolley at DLA first became involved in the transaction in September. He says: "Due to the number of managers it was complicated, so we needed the banking document to dovetail with that. Because of a concentration on equity, the senior management didn't get around to [negotiations] at the same rate, so there was a lot to do in the last phase."
However, Woolley adds that this is not unusual, since when the firm acted for the Bank of Scotland on the £133m public-to-private deal involving Adare Printing Group, it completed the deal in just 10 days.
The offer document was posted on 16 November, with the 21-day offer period due to close on 6 December.
Lee says that the next stage for the deal is an Extraordinary General Meeting on 8 December, during which the MBO team will hope to secure 90 per cent shareholder acceptance for the offer to go unconditional. He remains confident that the figure will be reached, but adds: "There's always that prospect of another bidder - you can never rule out that possibility."
Pitcher says: "The takeover code requires that you must get over 50 per cent of shareholder approval before the offer goes unconditional. There is scope for negotiation with the banks to go unconditional between 50 and 90 per cent, but we want the banks to feel comfortable about their investment."