25 June 2012 | By Joshua Freedman
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Corporate may be stuck in the global doldrums but the teams up for this year’s The Lawyer Awards remained admirably calm in the face of adversity.
UK M&A saw a slight upturn in value terms in 2011, with announced deals rising by 4 per cent to a total of $325.4bn (£207.6m) compared with $312.5bn in 2010, but the improved monetary position was not necessarily good news for law firms - dealcount was down from 3,854 to 3,696, according to data provided by Thomson Reuters.
Economic circumstances mean the shortlisted candidates for The Lawyer Corporate Team of the Year Award 2012 do not enrobe themselves in glory for the size and splendour of their deals, but the work put forward for consideration certainly has a unique complexity.
Take Allen & Overy’s (A&O) entry for its role on one of the most politically charged M&A deals in recent times - Virgin Money’s acquisition of embattled Northern Rock for roughly £1bn.
A&O had been working with Virgin Money on the deal since the bank was nationalised in 2007 and 2008; this was the first step to returning the public stake to the private sector. The deal prompted questions including how the return to taxpayers could be maximised and how to avoid further compulsory redundancies.
The deal was led by global corporate co-head Andrew Ballheimer, although kudos goes to Michael Jacobs, the senior associate on the deal. The team, which included corporate partners David Broadley and George Knighton, was opposite a Freshfields Bruckhaus Deringer team led by corporate partner Barry O’Brien.
Although it was Ballheimer who led on this deal, A&O’s ties with the client date back to the mid-2000s when the firm was instructed thanks to a retired partner’s contact with the then general counsel of Virgin Group Josh Bayliss, now co-CEO.
Akin Gump Strauss Hauer & Feld found itself in the middle of a different political situation far, far away. Its client VimpelCom, the Netherlands-based telecoms provider, merged with Italy’s Wind Telecom in a deal that closed in April 2011.
The transaction, led by London corporate partner Dan Walsh opposite Cleary Gottlieb Steen & Hamilton Paris partners Pierre-Yves Chabert and Gamal Abouali, was not without obstacles. It was set to boost the company’s expansion significantly, but less than a year after it began, the Arab Spring put it in jeopardy.
For example, VimpelCom’s Egyptian subsidiary Orascom Telecom and the spin-off of assets suffered in the wake of the regional crisis, as did Orascom’s Algerian mobile operator Djezzy, as tensions between Egypt and Algeria increased and discussions over the future ownership of the company escalated. The Algerian unit has also had its funds frozen, meaning careful negotiations were needed to secure a government memorandum confirming it would sell a stake in the company to the state at a fair price. Along the way, it also had to defeat an injunction brought by shareholder Telenor before the English Commercial Court, which was rejected in March 2011. The deal closed the following month.
Clifford Chance’s role for Citigroup on its £1.2bn sale of music company EMI Group to Vivendi-owned Universal Music was in effect two transactions rather than one. The magic circle firm, which also advised Citigroup on its acquisition of the same target in February 2011, worked on a plan to split EMI into two, as the bank’s competitive auction process included an option to sell individual parts of the business to a buyer rather than the whole thing.
The restructuring was not in vain: Universal bought the recorded music division, while a consortium led by sector giant Sony took the publishing arm for $2.2bn, with the group also including the estate of Michael Jackson, Blackstone Group’s GSO Capital Partners, Jynwel Capital Ltd, Mubadala Development Company and record executive David Geffen.
Global corporate head Matthew Layton led for Citigroup, with SJ Berwin managing partner Rob Day and corporate partner William Holder guiding Universal, while Freshfields advised EMI, fielding Brussels partner Thomas Janssens and City duo Sarah Falk and Simon Marchant. Sony turned to New York corporate heavyweight Mort Pierce, who was with the now-defunct Dewey & LeBoeuf at the time (Pierce is now at White & Case).
Ashurst’s already complex task advising a Chinese state-owned energy group investing in the UK hit another hurdle when the earthquake and tsunami hit Japan in 2011.
The firm had been advising Taurus Mineral (a consortium between CGNPC Uranium Resources Co and China Africa Development Fund) on its recommended cash offer for AIM and NSX-listed mining company Kalahari when the natural disasters struck, sending uranium prices crashing and Kalahari running to the Panel Hearings Committee to prevent Taurus making a lower offer based on the “wholly exceptional circumstances” clause of the old Takeover Code.
Kalahari won the right to stop Taurus putting in a lower offer, meaning the latter was frozen by a six-month standstill under the code before it could launch a fresh bid.
But in February Ashurst helped Taurus seal a £632m recommended cash offer for Kalahari Minerals, as well as a related offer for Extract Resources, which valued the company at AU$2.2bn (£1.4bn).
Ashurst got its foot in the door with client CGNPC after being introduced by alliance partner Guantao, but partner Robert Ogilvy Watson had to shine to win the bid. Ashurst’s cross-border chops were tested by the acquisitions, which needed regulatory clearance from seven organisations. He advised opposite Laurence Graham corporate head Tim Casben for Kalahari.
CMS Cameron McKenna and other members of the CMS network were sparring with the big boys when the firm won a role for Takeda on the second-largest deal by a Japanese pharmaceutical company ever attempted outside of Japan. It got a call from Takeda vice-president and deputy general counsel Carmela Zammuto in December 2010 to say the firm had been selected to advise on the deal, although press reports suggest the company did not make the approach until a few months into 2011.
The deal spanned 70 jurisdictions, a real feat for Camerons, with numerous interested parties such as the private equity sellers including Nordic Capital and Credit Suisse, meaning the team, led by corporate partner Sandra Rafferty, had plenty of parties to manage.
The deal was a culmination of Camerons’ relationship with Takeda that dates back to 1997. Also on the deal were relationship partner Nick Beckett, deputy life sciences head Sarah Hanson and international head of life sciences corporate M&A David Butts. Freshfields corporate partner Julian Long advised Nycomed and the consortium led by Nordic and Credit Suisse.
Freshfields’ own shortlisted deal saw the magic circle firm advise a consortium led by Cheung Kong Infrastructure Holdings (CKI) - an investment vehicle owned by Asian tycoon Li Ka-shing - on its acquisition of Northumbrian Water for £2.4bn, the largest takeover of a UK publicly-listed company in 2011 at the time.
Indeed, as the largest such transaction since Cadbury’s high-profile £11.5bn purchase of Kraft in 2010, the spotlight was on the deal. The Freshfields team had to manage the requirements of both the Hong Kong Stock Exchange, on which CKI is listed, and the UK Takeover Panel, with which the firm worked closely.
To make matters more complicated, the Water Industry Act 1991 requires that the Office of Fair Trading must refer any merger of water companies to the Competition Commission if the revenue of each is £10m or more. The problem: CKI already owned Cambridge Water, meaning it had to dispose of this to HSBC quickly before the Northumbrian deal was announced. It worked together with Mills & Reeve corporate partners Stephen Hamilton and Claire Clarke on this.
The Freshfields deal team, led by London corporate partners Piers Pritchard Jones and Edward Braham and Hong Kong partner Simon Weller, also had to secure a promise from the Ontario Teachers’ Pension Plan Board, a 26.8 per cent shareholder in Northumbrian Water, that it would support the deal and not participate in a rival bid.
Hogan Lovells partners Steven Bryan and Guy Potel advised Northumbrian. Linklaters advised HSBC.
Linklaters’ own corporate highlights for the past year have been focused on its work for commodities trading giant Glencore. The firm has advised it on numerous deals including its proposed £59bn merger with mining company Xstrata and European aspects of its £3.9bn takeover of Canadian grain trading company Viterra.
But perhaps the standout deal of the firm’s 2011 was Glencore’s IPO, a long-awaited float that saw relationship partner Charlie Jacobs lead. It was the first simultaneous listing on the London and Hong Kong exchanges, with the UK official-list deal involving a secondary listing on the Hong Kong Stock Exchange, raising a total of $10bn. It gave Glencore a market capitalisation of roughly $60bn.
Glencore was also the first company for 25 years - and only the third ever - to enter the FTSE100 at the close of trading on the first day, following in the footsteps of BT and British Gas.
Linklaters’ 18 months of work saw the company structure the deal with a massive ’cornerstone’ tranche of investors putting in a total $3.1bn. This led to a goldmine of M&A mandates from the resources giant.
We move back from the billions to the millions with Shearman & Sterling’s role on Tata Steel’s sale of Teesside Cast Products (TCP) to Thai steel producer Sahaviriya Steel Industries (SSI). Another example of a relatively small but politically spicy transaction, this saw the US firm’s London corporate co-head Laurence Levy advise Tata on the complex sell-off that consisted of three arms.
SSI bought the Redcar and South Bank coke ovens and other plants, while Tata held on to certain other businesses such as the Teesside Beam Mill and Shapfell Lime Quarry. The third nugget was a joint venture (JV) between Tata and SSI to operate Redcar Wharf, TCP’s strategically crucial bulk shipping terminal. The JV included a funding arrangement that ring-fenced one member if the other wanted the JV to spend big on a project.
It drew high-profile media coverage during the general election, with over 1,000 jobs at risk if it did not go through - another example of how corporate lawyers can find themselves thrust into the limelight when their client work has a true impact on people, be they steel plant staff or taxpayers.
Middle class: Corporate Team of the Year - Midcap shortlist
- Addleshaw Goddard’s impressive role for property consultancy King Sturge on its £197m merger with global real estate company Jones Lang Lasalle saw professional practices group head William Wastie lead the client through a complex deal by virtue of the UK company’s status as a n LLP. The deal team had to be mindful of partners’ fiduciary duties while keeping the transaction team tight and overseeing the buying of certain partners’ interests in subsidiaries.
- Berwin Leighton Paisner had to ensure the Olympic Delivery Authority (ODA) shared a gain in subsequent refinancing when it advised the organisation on the £557m sale of the Olympic Village to a joint venture by property companies Delancey and Qatari Diar. Projects partner Tessa Kimber and corporate partner Adam Bogdanor led for the ODA in a deal that encapsulates the 2012 Games’ ideology of sustainability.
- Scottish firm Burness is shortlisted for its role advising Aberdeen-based SeaEnergy on the sale of its interests in three offshore wind farm projects to Spain’s Repsol Nuevas Energías for £50m, one of Scotland’s largest corporate finance deals in 2011. Edinburgh corporate finance partner Chris Gotts led for SeaEnergy.
- Olswang advised BBC Worldwide on the £121m sale of its global magazine business, which allowed the company to keep its most prized titles and control over licensing arrangements. Corporate partner Simon Morgan led the Olswang team.
- Reynolds Porter Chamberlain (RPC) punched above its weight to advise Swedish consumer goods company Svenska Cellulosa Aktiebolaget on its $1.8bn (£1.1bn) acquisition of Georgia-Pacific’s European tissue operations opposite Latham & Watkins in a deal that spanned 22 jurisdictions. Corporate duo James Mee and Davis Wallis led the RPC team.
- Thomas Eggar is shortlisted for its advice to Lonrho on the Africa-focused conglomerate’s London main-market IPO plus £26.9m firm placing and a placing and open offer using a ’cashbox’ structure. Gatwick corporate partner Daniel Bastide led the team.
- The pre-pack administration of Blacks Leisure, one of a string of UK retailers to go under, gave Travers Smith an impressive mandate as adviser to the company and administrators at KPMG, with most of the company’s assets sold to JD Sports for £20m. Corporate finance head Spencer Summerfield and banking and corporate recovery head Jeremy Walsh led the team.