Malaysian investment in Battersea power station is indicative of the country’s growing influence both internationally and as a regional force
As the Duke and Duchess of Cambridge were concluding their recent four-day visit to Malaysia many City firms were busy helping that country’s companies raise funds and invest internationally.
On one cool summer night last month around 160 bigwigs from a Malaysian consortium enjoyed a party within the towering walls of London’s landmark Battersea power station. On their guest list were a raft of well-known names in the City’s legal industry including Linklaters partner Mark Burgess-Smith and Norton Rose London real estate head David Sinclair.
The party was to celebrate the completion of the consortium’s £400m purchase of the 39-acre power station site earlier that day. The consortium, which consists of Malaysian property developer SP Setia, Malaysian conglomerate Sime Darby and Employees Provident Fund (EPF), won the bid against rivals that included Chelsea FC to lead the iconic power station’s £8bn regeneration project.
The redevelopment is set to see 3,700 homes, a shopping centre, hotels, offices and an arts space added in the next 12 years. It has generated – and will continue to provide – ample work to City law firms.
The deal is one of a long list of recent cross-border transactions involving Malaysia, which has become a jewel of South East Asia and a ray of light in an otherwise dismal international landscape.
The Malaysian consortium’s purchase of Battersea power station has kept two City firms – Norton Rose and Linklaters – particularly busy. The Norton Rose team which acted for the consortium as international counsel in the deal consisted of 11 London-based partners including real estate lawyers Sinclair, Dan Wagerfield and Charlotte Bijlani, infrastructure partner Chris Hill and environment specialist Caroline May.
Ernst & Young, the administrators and receivers of the site, instructed Linklaters for the sale. The magic circle firm’s sizeable team was led by London-based real estate partner Burgess-Smith.
Two Malaysian firms, Shearn Delamore & Co and Wong & Partners (Baker & McKenzie’s Malaysian member firm), were also involved, representing SP Setia and Sime Darby respectively.
“Malaysia has a relatively small domestic market – many of the country’s capital-rich conglomerates are looking abroad to diversify their investments and spur growth,” says Brian Chia, head of Wong & Partners’ corporate and commercial practice based in Kuala Lumpur, who led the firm’s team in the Battersea project. “The slump in euro and sterling exchange rates made large overseas acquisitions possible. There’s a renewed sense of confidence among Malaysian multinational companies.”
Chia is a longstanding adviser to Sime Darby, a Malaysian-based diversified multinational involved in sectors such as property, motors, industrial equipment, energy and utilities, and healthcare. When Sime Darby decided to invest in the Battersea project, which is the company’s first foray into the European property market, Chia was engaged to provide legal assistance. He worked alongside Baker & McKenzie’s London office on certain aspects of the deal.
In addition to Europe, Malaysian companies have made large acquisitions in Canada, Australia and South East Asia in the past year. The largest Malaysian outbound investment so far this year is Malaysian oil and gas company Petronas’ $5.4bn (£3.5n) acquisition of Canadian gas exploration company Progress Energy Resources.
Norton Rose won the role as international legal counsel to Petronas in the transaction, largely due to its merger with Canadian firm Macleod Dixon in January. Calgary-based energy partners Chrysten Perry and Kevin Johnson, both from legacy Macleod Dixon, led the Norton Rose team. Prior to the merger the two partners advised Petronas on its 2011 investment in Progress Energy, valued at $1.1bn. Progress Energy was represented by Canadian firm Burnet Duckworth & Palmer in both transactions. The firm’s team was led by Calgary-based partners John Cuthbertson and Jody Wivcharuk.
In the Asia Pacific region Malaysian companies are also increasingly active. Malaysian bank CIMB Group’s April acquisition of RBS’ cash equities and associated investment banking business in the region for £88m is one of the highlight deals.
Slaughter and May, together with 10 local firms, were the beneficiaries of the Malaysian bank’s regional expansion. The City firm, fielding Hong Kong partners David Watkins and Laurence Rudge, acted as lead international counsel to CIMB. Linklaters, a longstanding legal counsel to RBS, advised the bank on the sale as lead counsel. The firm’s team was headed by Hong Kong partner Matthew Middleditch.
While the magic circle firms have been leading the charge in large cross-border transactions by Malaysian companies, other City firms, particularly those with strong real estate practices, are making headway in representing Malaysian clients in London.
“Malaysian companies are asset-rich and the country has recently liberalised its pensions market,” says Berwin Leighton Paisner (BLP) London real estate partner Chris de Pury. “The nation’s companies, asset managers and pension funds are making solid investment overseas. We’re seeing a growing number of Malaysian clients entering and investing in the London market. Many of these are pension funds investing in London’s real estate sector.”
According to de Pury, BLP’s real estate team is advising on two to three UK property deals involving Malaysian investors.
“As soon as a jurisdiction becomes capital-rich and starts to export capital it has much greater influence on the global economy and joins the international community quickly,” de Pury notes. “In addition, Malaysia and Singapore share many historical, cultural and legal system ties with the UK, so it makes developing relationships and doing business with firms and clients from these jurisdictions relatively easy.”
Nabarro and Trowers & Hamlins are two other City firms with experience in this field. In March this year the two completed a £500m City property deal by Malaysian state-owned asset management company Permodalan Nasional Berhad (PNB). The deal saw PNB acquire One Exchange Square and Olswang’s London offices at 90 High Holborn from German fund manager KanAm.
PNB instructed Trowers to represent it in the deal, with London projects partner Nicholas Edmondes leading, while KanAm turned to Nabarro City real estate partner Deborah Parry.
Having seen growing opportunities from Malaysia Trowers became one of the first Western law firms to open a non-trading office in the country’s capital Kuala Lumpur this July.
Malaysia’s capital markets have also attracted global attention, with a string of billion-dollar IPOs since the beginning of the year. The public offerings of Felda Global Ventures Holdings, which raised $3.3bn, IHH Healthcare ($2.1bn) and Astro ($1.5bn) are the three largest IPOs in the country so far this year.
All four magic circle firms won roles on these IPOs, with Linklaters being involved in all three. The firm’s presence in the Middle East and Singapore, combined with its strong relationships with international and regional financial institutions, have contributed to its leading market position in advising on Malaysia-centred deals.
“Malaysia’s been an active IPO market this year – it has many good companies that are highly profitable, but it’s long been a neglected market,” says Linklaters Singapore partner Kevin Wong. “In contrast to quieter markets elsewhere, particularly in Singapore and Hong Kong, Malaysia has become a bright spot in the global capital markets.”
Wong was Linklaters’ lead partner in two of the three equity capital markets deals, acting as international counsel to the issuer in the IHH IPO and in the same role to the underwriters in the Felda IPO.
Wong notes that the firm’s instruction on the IHH deal came as a result of its longstanding corporate relationship with Khazanah Nasional Berhad, the investment holding arm of the Malaysian government which held a controlling stake in IHH pre-listing. Most recently Linklaters, led by Wong, advised the underwriters in Khzanah’s 2009 issuance of Singapore dollar-denominated sukuk, which raised the equivalent of £754m.
Freshfields, which was also involved in the IHH IPO advising Abraaj Capital as the selling shareholder, won the role through its Middle East presence. In 2011 the firm’s Dubai-based relationship partner Pervez Akhtar represented Abraaj Capital, where Akhtar worked between 2008 and 2009, on its sale of a 50 per cent stake in Turkey’s leading hospital group Acibadem to IHH and Khazanah.
Freshfields’ team in the IHH IPO was jointly led by Akhtar and Singapore-based partner Stephen Revell.
“We’ve been working with Malaysian companies for a long time and there’s increasing work coming to us from Malaysia,” says Revell, who co-heads Freshfields’ global capital markets practice. “The spectrum of the work we’re doing in Malaysia is also expanding and a broad spread of our offices are getting involved.”
The IHH IPO coincided with the firm’s recent relaunch in Singapore. According to Revell, Freshfields has a 25-strong Malaysia desk. Although most of the team are based in Hong Kong, with the re-opening in Singapore a number will relocate to the new office.
“I’m bullish on Malaysia,” states Revell. “It will continue producing interesting work for international firms, particularly in light of the government’s innovative efforts to establish the country as an international Islamic finance centre in Asia.”
It is true that not everyone will share Revell’s bullish view. Some lawyers say Malaysia’s importance is overstated because the traditional hubs in Asia are experiencing a slowdown, and Malaysia is a lower margin market compared to Hong Kong and Singapore.
Nevertheless, in times like this, anything that keeps paying the bills can be seen as a strong market.