Behind the scenes of the BP buy-out

The $425 million price on the buy-out at BP's nutrition business made this the biggest UK buy-out since Gardner Merchant. But other statistics also made this deal huge: the business sold to the buy-out vehicle (now renamed Nutreco) included over 150 legal entities, in 19 jurisdictions, operating from over 250 main sites, and with a turnover of over $2 billion.

BP instructed Baker & McKenzie's London office to handle this sale, the sixth and last in the series which began with BP's announcement of its withdrawal from the nutrition sector in 1992.

Along with BP's own in-house resources, the team included over 20 lawyers in the London office and lawyers in 20 overseas offices and firms.

At the pre-bid stage a number of potential buyers were interested, including trade and financial buyers. This made it difficult to plan the sale process in detail since we were aware that a successful financial buyer would probably require more detailed financial information at the legal entity level than would a trade buyer. In the event, the handshake at the end of March confirming the CINVen/Barings-led consortium as the preferred bidder, marked the beginning of a major due diligence and structuring exercise.

The buyer wanted to consummate the transaction through transfers of the local operating groups to its new holding companies, so that interest payments on the acquisition debt matched operating cashflows. Equally, BP did not want to disturb its own structure (with the vast majority of the companies grouped under a group of Dutch holding companies).

The compromise was an unusually complicated mechanism under which the Dutch holding companies sold their shareholdings in local operating companies, followed by a sale of the shares of the holding companies.

Controversially, the deal was deemed to meet the size thresholds for EC merger regulations. Developing the reasoning first applied in the Tarkett acquisition, the Commission took into account the turnovers of British Coal and Barings as part of the buyer's control group, even though Nutreco's direct shareholders are venture funds which are simply advised by CINVen and Barings. The Commission is expected to come under pressure to rationalise its approach in cases like this.

The deal finally closed on 30 September, following two days of transfers, notarisations and movements between New York bank accounts, orchestrated by the four UK firms involved (Allen & Overy for the senior and mezzanine lenders, Ashursts for the buyer on debt, Dickson Minto for the buyer on equity and the acquisition, and Baker & McKenzie), and Dutch firms Stibbe Simont (for BP) and TrenitC van Doorne (acting for the buyers).

Christopher Bown is a corporate partner with Baker & McKenzie.