Lawyers pull off media merger

The cross-media merger of United News & Media and MAI was made possible by a legal 'warehousing' or 'deadlock' structure of the shareholding by scores of lawyers at Allen & Overy, Ashurst Morris Crisp and Norton Rose.

The deal, thought to be the first marriage of a national newspaper group to a TV company and done by way of an offer from United News with requirements over acceptance conditions, creates a new international group with a capitalisation of £2.9 billion.

Its interests will include television, newspapers, magazines, money and securities broking exhibitions and information services.

“We have all spent a lot of time on this because there are aspects to this deal that are complex and challenging,” said Ashurst Morris Crisp corporate partner John Ashworth, whose team, jointly led with partner Adrian Clark, acts for Lord Hollick's MAI.

Other media companies may now consider similar deals, after the forthcoming Broadcasting Bill which will relax rules on cross-media ownership. Under current law, Lord Stevens' United would not be allowed to own more than 20 per cent of a television company like MAI.

Allen & Overy partner Don McGown, who led a 20-25-strong team for United with Charles McKenna, said: “It's likely there will be other consolidations within the industry. Whether they do so before the Act depends on how practicable it is for the companies.”

Ashworth and McGown stressed the important role of regulatory lawyers when both teams worked out the deadlock structure.

Margaret Coltman, corporate finance partner at Norton Rose, acted for JO Hambro Magan, United's financial advisers.

She said the way round current legal restrictions was to reorganise United's holding in its national newspaper business, Express Newspapers, so that it ceases to control it for the purposes of the Broadcasting Act 1990.

United will transfer all the Express Newspapers share capital to two new subsidiaries of United, after which brokers UBS will subscribe for shares carrying 50 per cent of the voting rights of each of these new companies. However, the economic rights of UBS will be negligible.

“United News ceases to control the newspapers, but only in the technical sense required by the Act. It will continue to retain substantially all the economic interests, which will continue to appear in the accounts,” said Coltman.

“When the new Act comes in, the boards of the two companies intend to exercise options to acquire shares in the deadlock companies from UBS,” said Coltman.