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7 January 2014
February proved to be another bumper month for corporate finance lawyers with the biggest M&A deal of the year (Suez’s €70bn (£47.96bn) merger with Gaz de France) being announced. Despite being a short month, 253 deals involving any UK element worth $29.85bn (£17.2bn) were announced during February, according to Thomson Financial. There was more drama in the M&A arena last month than Shelley Rudman winning silver at the Winter Olympics. The takeover of P&O by DP World dominated most of the headlines after the £3.9bn deal provoked security fears in the US. The Court of Appeal approved the takeover last Monday (6 March), ending the court battle that dragged the deal into March.
Eller & Co, a US company that operates the port of Miami with P&O, tried to block the takeover amid fears that the deal may destroy its ports business if port authorities cancel terminal leases over security issues. The Court of Appeal rejected Eller’s petition to appeal the High Court’s 2 March decision to approve the takeover. Eller was advised by HBJ Gateley Wareing, instructing Paul Downs and Tom Montagu-Smith of 2 Temple Gardens. Meanwhile, Freshfields Bruckhaus Deringer drafted in Martin Moore QC of Erskine Chambers. Corporate partner Jeremy Parr led the Linklaters team advising DP World.
Meanwhile, Macquarie Bank surprised the market with its decision to pull out of the race to buy the London Stock Exchange (LSE). At the start of February, Macquarie, represented by Baker & McKenzie partner Helen Bradley, was the only solid bidder left at the table, but two weeks later the Australian investment bank conceded defeat.
The LSE, represented by Freshfields partner Graham Nicholson, was never keen on Macquarie, and the board strongly recommended rejecting the bank’s offer. Deutsche Börse, represented by Ashurst corporate heavyweight Adrian Clark and competition partner Mat Hughes, and Euronext, advised by Slaughter and May partners Frances Murphy and Nilufer von Bismarck, as well as Cleary Gottlieb Steen & Hamilton partner John Brinitzer and competition partner Nick Levy, are still sorting through undertakings by the Competition Commission.
The assault on UK-listed companies by foreign bidders continued throughout February, with Spanish construction group Grupo Ferrovial, advised by Freshfields, confirming that it is considering making a takeover bid for BAA, advised by Herbert Smith and Allen & Overy (A&O). Meanwhile, Slaughters client Pilkington finally succumbed to Nippon Sheet Glass’s (NSG) advances. Pilkington’s board recommended the takeover at the end of February after the first offer by the Japanese bidder was rejected last November. NSG was advised by A&O.
Meanwhile, the battle to take over Endesa has just become even more interesting after German power giant E.ON made a rival bid for the Spanish power producer. Gas Natural made a €22.5bn (£15.4bn) bid for Endesa last September. E.ON’s decision to enter the takeover battle was bad news for the company’s principal legal advisers Freshfields and Shearman & Sterling, as both firms were conflicted from advising on the Endesa deal. The magic circle firm is already advising Spain’s Gas Natural alongside Linklaters, while Shearman represents Spanish energy producer Iberdrola, which is buying Endesa assets in a separate transaction. However, the firms’ loss was Cravath Swaine & Moore’s gain as it stepped in to plug the gap. Clifford Chance is representing Endesa.
With deals such as the mammoth $67bn (£38.6bn) merger between AT&T and BellSouth hitting the headlines, prospects for the M&A market continue to look rosy.
Husnara Begum, City editor
PARTNER OF THE MONTH
Firm: Gide Loyrette Nouel
Partner since: 2002
Educated: University of Paris I and II
Key clients: French state, La Poste
Once again Gide Loyrette Nouel corporate partner Jean- Emmanuel Skovron has ensured his firm is present on France’s biggest ongoing deal. Skovron is leading a team of three partners in advising the French government on the €70bn (£47.96bn) merger between Gaz de France (GdF) and Suez. Gide has already advised the French government on the partial IPOs of GdF, Electricité de France and the motorway system. Skovron also fitted in work for the French post office on the establishment of the post office bank. The instructions are further proof of Skovron’s grip on the role of adviser to the state as it continues an intensive programme of privatisation. The deals are helping Gide raise its profile in France, ensuring it has a role on all the big transactions as the market continues to liven up after a prolonged quiet period.
The competition teams at Allen & Overy (A&O) and Slaughter and May celebrated a surprise victory last month, after the Office of Fair Trading (OFT) indicated that it would clear the £8.1bn merger between pharmaceutical giants Boots and Alliance Unichem. In an unexpected announcement, the OFT said it would not refer the proposed acquisition by Boots of Alliance Unichem to the Competition Commission on the condition that the retailer agree to sell 100 stores. A&O corporate antitrust partner Mark Friend led the competition side of the transaction for Alliance Unichem, while Slaughters’ Claire Jeffs scooped the mandate to act for Boots. Competition lawyers close to the deal feared it would be referred to the commission because the merger is estimated to consume 40 per cent of the drug wholesale market in the UK. Heinz also had cause for a sigh of relief. The Competition Commission provisionally cleared Heinz’s takeover of HP Food Group last month. Heinz appointed Slaughters over usual adviser Clifford Chance as its leading legal team last October after the pending acquisition was referred to the commission. Clifford Chance acted for Heinz in a supporting role.
Slaughters competition head Malcolm Nicholson led the team for Heinz with competition partner Bertrand Louveaux. Clifford Chance has bagged the key mandate to advise Barclays on the OFT investigation into bank services to small businesses. Clifford Chance pitched for the much-soughtafter mandate against Freshfields Bruckhaus Deringer and Simmons & Simmons. Barclays put the instruction out to tender after its former competition adviser, ex-Simmons partner Peter Freeman, left to join the Competition Commission. The Royal Bank of Scotland has instructed Linklaters after it replaced Freshfields as the bank’s chief legal adviser. Norton Rose is advising HSBC, while Herbert Smith is acting for Lloyds TSB.
TOP INTERNATIONAL DEALS
February was a good month for New York firms, with Sullivan & Cromwell and Skadden Arps Meagher & Flom advising on the $16bn (£9.2bn) mega-merger of Merrill Lynch’s asset management business and fixed-income manager BlackRock. Sullivan advised Merrill Lynch, led by corporate partners Mitchell Eitel and John O’Brien. Skadden represented BlackRock, led by investment partner Richard Prins.
It was also a good month in Iberia, with some of the peninsula’s largest firms defending Portugal Telecom in what could result as Portugal’s largest-ever deal. The company rejected a €10.7bn (£7.33bn) bid from conglomerate Sonae early last month and called in top Spanish firms Garrigues and Cuatrecasas and Portuguese players PLMJ and Vieira de Almeida to keep it at bay. The Garrigues team is headed by partner Diogo Leonidas Rocha, while partner Maria João Ricou leads the team from Cuatrecasas’s local arm Goncalves Pereira Castelo Branco & Associados. The PLMJ team is led by capital markets head Jorge de Brito Pereira, and technology and regulatory head Margarida Couto leads the team for Vieira de Almeida. Sonae is being represented by the Porto office of Osório de Castro Verde Pinho Vieira Peres Lobo Xavier & Associados, led by partner Carlos Osorio De Castro.
There was disappointing news for Freshfield Bruckhaus Deringer and Shearman & Sterling last month, however, after they found themselves conflicted out of German power company E.ON’s €29.1bn (£19.9bn) rival bid for Endesa, Spain’s largest energy provider. Freshfields was conflicted because it is advising Spain’s Gas Natural, which made a €22.5bn (£15.3bn) hostile bid for Endesa in September. Meanwhile, Shearman was conflicted because it represents Spanish energy producer Iberdrola, which is buying Endesa assets in a separate transaction. However, the two firms’ loss was Cravath Swaine & Moore’s gain, which surged ahead to fill in for the company’s preferred international advisers. The world’s largest private power company was also represented by Slaughter and May best friend Hengeler Mueller and preferred Spanish domestic Perez Llorca. The Cravath team was led by corporate partner Richard Hall, Hengeler by partner Dr Maximillian Schiessl and Perez Llorca by partner Pedro Pérez-Llorca Zamora. Clifford Chance is acting for Endesa, led by Madrid co-managing partner Ignacio Ojanguren.
Herbert Smith and alliance firms Gleiss Lutz (Germany) and Stibbe (Netherlands) celebrated last month after helping their client, US drinks company Fortune Brands, on its £2.6bn acquisition of parts of Allied Domecq. Fortune bought Allied Domecq’s spirit and wine brands, including Courvoisier, Harvey’s, Laphroig, Maker’s Mark and Teacher’s, as well as the company’s distribution businesses in Germany, Spain and the UK. The deal represents the concluding part of Fortune Brands’ lengthy involvement in Pernod Ricard’s £7.4bn takeover of Allied Domecq. The Herbert Smith team was led by corporate partner Richard Fleck. Chadbourne & Parke advised Fortune Brands on US law, led by partners William Cavanagh, Charles Hord and Edward Smith. Linklaters, led by partner Dominic Welham, advised Allied Domecq.
ACQUISITION FINANCE UPDATE
You wait months for a big investmentgrade deal and then two come along at once. The chunkiest deals brewing in February saw the involvement not of the magic circle, but of acquisition finance challenger White & Case, whose recent performance underlines how far it has come. London banking co-head Maurice Allen is advising Goldman Sachs, Citibank and Société Générale on the €8bn (£5.48bn) financing for the cash portion of Mittal Steel’s bid to acquire Arcelor. Allen is working with London partner Magda Bayim-Adomako on the deal. White & Case reprised its familiar role as counsel to Deutsche Bank on the month’s other big cross-border deal: the financing of Linde’s £8.2bn bid for BOC Group, which allowed the German company to make an all-cash offer of 1,600p per share. Along with Deutsche Bank in-house counsel Joachim Walgenbach, White & Case partners Chris Kandel and Morgan Stanley’s Dan Maze and Mike Goetz are also working with Commerzbank, Dresdner, and Royal Bank of Scotland as mandated lead arrangers.
The theme of UK companies being snapped up by foreign bidders dominated February. Nippon Sheet Glass’s £1.82bn credit facility was arranged by UBS and SMBC. They were advised by Clifford Chance. Allen & Overy (A&O) had a quieter February, but the publicity on its headline deal of the month struck a patriotic note. It advised Merrill Lynch on the financing of Tussauds Group’s acquisition of shares in the London Eye Company from BA, among others. An A&O statement said it had “helped secure the future of [the] iconic London landmark”. Partner Sanjeev Dhuna advised.