27 June 2005
A select group of firms has won roles in what promises to be a busy year of privatisations in France.
On 8 June, the French government announced that the delayed IPO of state gas company Gaz de France (GDF) was back on track and set for later in the month. Held up by the recent referendum on the European Constitution, the IPO will be the first of three big flotations planned by the French state of its major energy companies: GDF, Electricité de France (EDF) and nuclear operator Areva. The privatisations have been sparked by new European directives in the energy sector aimed at creating a more open market.
Although there are three prime roles going on each flotation, just five law firms have won work. It is a list dominated by the US.
Cleary Gottlieb Steen & Hamilton, a long-established player in the French market, has roles on the GDF privatisation for the company and on Areva for the underwriting banks, HSBC, Citigroup, Lazard and Société Générale. Corporate star Pierre-Yves Chabert is leading both deals.
Shearman & Sterling is next, advising both Areva and EDF. Paris managing partner Robert Treuhold has the mandate from Areva, while corporate partner Hervé Letréguilly is looking after EDF.
The US trinity is completed with the presence of Sullivan & Cromwell. Dominique Bompoint, a recent arrival from Clifford Chance, won the firm the work for the French government on Areva, and partners Nikolaos Andronikos and Richard Vilanova are acting for EDF's underwriters, ABN Amro, BNP Paribas, Morgan Stanley and Calyon. During 2002 and 2003, Bompoint acted for the French government on the sale of bank Crédit Lyonnais and the restructuring of engineering group Alstom. Sullivan's instruction is a perfect example of an occasion where a lateral hire pays off, and quickly.
The appointment of Cleary, Shearman and Sullivan is a further indication - if any were needed - of US success in France. For the companies, US capability could also come into play in the future if they follow former state airline Air France to a New York listing.
French law firms are represented exclusively by Gide Loyrette Nouel, but in fine form. The French international has bagged a role on each of the three flotations. Partner Jean-Emmanuel Skovron is advising the state on both EDF and GDF, assisted by Antoine Bonnasse and Arnaud Duhamel on EDF and Jean-Marc Desaché for GDF. Bonnasse is also working on Areva, alongside Shearman for the company.
Of the UK firms present in Paris, only Linklaters got a look-in. Philippe Herbelin is acting for the banks underwriting GDF's IPO - Calyon, Lazard-Ixis, Merrill Lynch and Société Générale - together with US-qualified capital markets partner Tom O'Neill. It is a return to form for the firm, which advised on a long series of French IPOs in the 1990s. However, its last one prior to GDF was the float of insurance company CNP Assurances in 1998.
The three privatisations are in very different states of play at the moment. For GDF, it is all go as the market gears up for the flotation, which seems set to take place before Paris disperses on the grandes vacances of August. EDF is likely to follow either this autumn or early in 2006.
Areva is, for the moment, in limbo. Sullivan, Shearman, Gide and Cleary know that they are officially acting, but nobody knows quite when the flotation will be scheduled. 2006 has been mentioned in press coverage as a possible date. If GDF, and later EDF, both complete successfully, Areva's IPO is more likely to take place.
Getting the nod to advise on one of the largest floats a jurisdiction has seen (both GDF and EDF are expected to raise several billion euros) is clearly a significant win for any firm.
But according to some sources, acting for the state in these French flotations has a catch. It does not generate anything like the same sort of fees as advisers to the company, or even the underwriters, can expect. What the firm wins is heightened visibility and all-important contacts.
With firms such as Bredin Prat, which advises the state regularly on a variety of matters, currently riding high in the league tables, it is obvious the pay-off can be high. "It's very positive in terms of reputation," one lawyer said. His comments are echoed by others.
One reason for the gap in generated income is that advice to the state naturally does not include the work-heavy drafting and due diligence exercises carried out by advisers to the company and the underwriters.
Competition for work on the privatisations is fierce, with many firms tendering for the few spots available. France's market has been quiet for a couple of years now, particularly in M&A, but also on the stock exchange, and the IPOs could be a sign of rejuvenation.
Linklaters' Herbelin thinks so, saying: "The more large transactions we have, the better for the market."
And the better for the firms scoring key roles on the deals.
Advisers on the three French privatisations
Counsel to the state Counsel to the company Counsel to the banks
Areva Sullivan & Cromwell (Dominique Bompoint) Shearman & Sterling (Robert Treuhold) Cleary Gottlieb Steen & Hamilton Gide Loyrette Nouel (Antoine Bonnasse) (Pierre-Yves Chabert)
Electricité de France Gide Loyrette Nouel (Antoine Bonnasse, Shearman & Sterling (Hervé Letréguilly) Sullivan & Cromwell (Nikolaos
Arnaud Duhamel, Jean-Emmanuel Skovron) Andronikos, Richard Vilanova)
Gaz de France Gide Loyrette Nouel (Jean-Marc Desaché, Cleary Gottlieb Steen & Hamilton Linklaters (Philippe Herbelin, Tom O'Neill)
Jean-Emmanuel Skovron) (Pierre-Yves Chabert)