DEAL OF THE WEEK – LATTICE-NATIONAL GRID MERGER

Camerons and Linklaters on Lattice-National Grid merger. But which firm will become the top adviser to the merged company?

CMS Cameron McKenna and Linklaters have scooped the key roles in the merger of Lattice and National Grid, which will create a transatlantic utilities giant worth around £14.8bn. Both firms are acting for long-term clients and once the merger is complete both will face a challenge to persuade National Grid Transco, as the merged entity will be known, that they should be retained as primary corporate adviser.
The merger attracted widespread approval from industry analysts when it was announced earlier this week. The shares of both companies rose with news of the merger, as the markets greeted plans for consolidation in the UK and expansion in the US with approval. National Grid Transco is expected to rank in the top 20 UK companies.
A Camerons team, led by the primary relationship partner Sean Watson, is handling the deal for National Grid. The team includes Gary Green, Robert Lane and Amanda Seaton. Camerons has worked for National Grid since its flotation in November 1995.
On the Linklaters side, Roger Barron led the team for Lattice, which has been a client since its demerger from British Gas in 2000. Mark Stamp and the main Lattice relationship partner Anthony Cann were also involved, alongside Tom Scott and Michael Cutting.
Lattice and National Grid shareholders will vote on the merger at their respective AGMs in mid-July. At this stage, no rival bidders are expected to come forward. Aside from the consent of the shareholders, a raft of regulatory clearances and the consent of the UK courts are required because the merger is by way of scheme of arrangement.
Watson said: “The regulatory issues needed very careful analysis in order to ensure the deal was well-received. It was a crucial part of the preparation.” Around 60 per cent of National Grid's business is in the US and the company is already registered under the US energy regime Pukka. The scheme of arrangement stipulates that Lattice's issued shares will be cancelled and reissued to the National Grid. Pukka registrations are complicated and a merger with National Grid on top means that no reregistration will be required.
Aside from the US regulatory issues, the deal will also require clearance from the UK regulators. Watson said: “The OFT [Office of Fair Trading] and Ofgem are inextricably intertwined in this process.”
There is a further hurdle because the UK Government holds golden shares in both Lattice and National Grid, so theoretically the Department of Trade and Industry could veto the deal.
Lattice has only minimal US assets, but Shearman & Sterling advised it on its filing with the Securities and Exchange Commission (SEC). Shearman has acted as the Lattice US counsel since before Linklaters offered SEC registration.
National Grid used its US counsel LeBoeuf Lamb Greene & MacRae for all the work, while Lattice used Pukka specialist Huber Lawrence & Abell alongside Shearman. Given that the rationale behind the merger is careful consolidation in the UK but predatory expansion in the US, the battle to get National Grid Transco's US work is also becoming an interesting one.