Legal Intelligence

The race to be head of the table

City report

The race to be head of the table

The half-year point means just one thing for corporate lawyers who love their statistics: the M&A league tables. And with Mergermarket and Thomson Financial half-year rankings out already, there are more stats than you can shake a stick at.

The problem is, depending on how you slice and dice law firms’ involvement on M&A deals, it seems you can order the top 20 pretty much as you like.

Take Skadden Arps Slate Meagher & Flom, for instance. The New York-based M&A powerhouse, which leapt to the top of Mergermarket’s first quarter European rankings (by value), has held onto the number one spot. But according to Thomson, the firm only managed fourth place behind Linklaters, Clifford Chance and Freshfields Bruckhaus Deringer, which took the first, second and third spots respectively.

As first reported on (5 July) Linklaters topped the European M&A tables for the first half of 2006, advising on $259.3bn (£140.96bn) worth of deals in 136 transactions, according to data from Thomson.

One area where both data providers agree, however, is the performance of Freshfields’ corporate practice during the past six months. The magic circle firm has been an astounding deal machine of late and has consequently shot up the rankings to take the number one spot in both the Thomson and Mergermarket UK tables.

Not only did the firm advise on Ferrovial’s successful £12bn takeover of UK airport operator BAA last month, it is also acting for the Goldman Sachs-led consortium that is poised to win the fiercely fought battle to take over Associated British Ports, which is advised by Slaughter and May.

Indeed, after its lacklustre performance last year, Freshfields’ corporate practice has been so keen to improve its public image it entered into a spat with Lovells over the Hemscott legal adviser rankings and its relationship with key Lovells client ITV (The Lawyer, 12 June).

Away from the league tables, June also proved to be a fruitful month for Milbank Tweed Hadley & McCloy partner Tim Emmerson. As first reported by The Lawyer last Monday (3 July), Milbank scooped an instruction to advise Macquarie Bank on its acquisition of Stagecoach’s London bus operations for £263.6m. Milbank won the mandate thanks to its role advising Goldman Sachs, Macquarie’s financial adviser, on the Australian bank’s unsuccessful hostile offer for the London Stock Exchange (LSE) in March.

Milbank’s role on the LSE bid also gifted the New York firm with a mandate to advise Dresdner Bank (Macquarie’s lender on the LSE bid) on all the loan financing work arising out of the unsuccessful offer made by the Goldman Sachs consortium for BAA. Goldman Sachs and BAA were advised by Ashurst and Herbert Smith respectively.

Meanwhile, the Warner/EMI deal has just got exciting. Fresh from his success at The Lawyer Awards on 27 June, Freshfields’ Mark Rawlinson, winner of the M&A Team of the Year gong, is now leading the team advising longstanding client EMI. During June Warner Music, advised by Herbert Smith, launched two counter-bids for its smaller rival. The second offer of 320p a share, submitted on the evening of 27 June, was immediately rejected by the EMI board.

Regulatory roundup

The decision by UK and US authorities to investigate fuel surcharges imposed by some of the world’s largest airlines may be bad news for the air industry, but it has provided work for just about every competition practice in the City. This investigation, along with an earlier investigation into price-fixing in airline cargo businesses, has drawn in a number of firms. Much of the attention has been focused on British Airways, whose advisers include Slaughter and May and Sulllivan & Cromwell. Other airlines that have come under the authorities gaze are thought to include, Air France, American Airlines, Lufthansa, KLM, SAS, United Airlines and Virgin Atlantic. This is generating work for competition partners at Allen & Overy, Clifford Chance, Ashurst, Freshfields Bruckhaus Deringer, Herbert Smith and Lovells are also at work on these investigations.

Meanwhile, Ashurst, Jones Day and Lovells were celebrating a decision by the Competition Appeal Tribunal (CAT) in June, which upheld their clients’ appeals on interchange arrangement fees. The CAT set a September 2005 Office of Fair Trading (OFT) decision aside after the OFT had made the unprecedented move of withdrawing its decision anyway. Interchange fees are paid by acquiring banks to issuing banks when a credit card purchase is made. Lovells client MasterCard UK Members Forum (MMF), MasterCard International, represented by Jones Day, and Ashurst client Royal Bank of Scotland will have been relieved by the judgment.

The Microsoft saga rumbles on and the software giant is moving closer to fines of €2m (£1.39m) a day for breaking EU competition rules. The European Commission’s antitrust directorate has reportedly drafted a ruling finding the software giant guilty of failing to implement changes from the the EU’s 2004 decision, when it was found in breach of competition rules. Microsoft’s US counsel Sullivan & Cromwell continues to advise on the case along with White & Case and Brussels competition firm Van Bael & Bellis.

Partner of the month

Firm: Macfarlanes
Partner since: 1990
University of Bristol, 1979; Lancaster Gate Law School, 1983
Key clients: Vision Capital, Oaktree Capital Management, Alchemy, Candover

If innovative M&A work is the most fun to do, then Macfarlanes partner Charles Martin must be having a ball with private equity house Oaktree Capital Management.

Oaktree is buying Sara Lee’s European packaged meats business for $575m (£312.58m) and Martin is leading the deal.

The mandate comes after Oaktree’s acquisition of Richmond foods, which was Macfarlanes’ first deal for the private equity house (see page 16).

But this is just the tip of the iceberg for Martin, who has also been working flat out on Bank of America Equity Partners’ E625m (£339.76m) disposal of Paroc and on Ottakar’s £63m agreed bid with HMV.

Martin has spent his career at Macfarlanes. His seniority is reflected by his role as chairman of the six-strong international practice group, which aims to build relationships with non-UK independents.

How Martin manages this with all the deals he is working on is anyone’s guess.

M&A highlights (any European involvement) June 2006

Target name: Nokia, Siemens
Bidder: Nokia Siemens Networks
Legal adviser(s):
Siemens – Clifford Chance (Peter Charlton, Joel Ziff).
Nokia – Shearman & Sterling (Jonathan Coppin, Iain Scoon, Ian Nisse).
Finnish telecoms group Nokia and German electronics business Siemens have announced the formation of a 50:50 joint venture to merge the Networks Business Group of Nokia and the carrier-related operations of Siemens into a new company to be called Nokia Siemens Networks.
Value(€): 18.1bn
Value(£): 12.56bn

Target name: Winterthur Group
Bidder: Axa
Legal adviser(s):
Winterthur – Dewey Ballantine (Jeff Liebmann).
Credit Suisse – Lenz & Staehelin (Rudolf Tschaeni).
Axa – Sullivan & Cromwell (William Torchiana); Bär & Karrer (Rolf Watter); Linklaters (Gilles Endréo, Severin Robillard).
French insurance group Axa has agreed to buy Swiss insurance group Winterthur from Credit Suisse for cash. Axa will finance the acquisition through a €4.1bn (£2.84bn) rights issue and a hybrid bond, which will include senior and subordinated issues.
Value(€): 7.9bn
Value(£): 5.48bn

Target name: Abbey National
Bidder: Resolution
Legal adviser(s):
Resolution – Herbert Smith (Geoffrey Maddock, Michael Shaw, Mike Kingston).
Resolution financial advisers Citigroup and Goldman Sachs – Allen & Overy (Andrew Ballheimer).
Abbey – Slaughter and May (Mark Bennett, Simon Robinson, Robert Chaplin).
UK insurance company Resolution has agreed to buy the life insurance business of Abbey National for a cash consideration. Resolution will finance the deal through a £1.54bn rights issue and a mixture of bridge and term facilities totalling £2.2bn. The rights issue was unusual because it was underwriten at a price range of between 440p and 520p rather than a fixed price because the prospectus was not ready at the time the deal was announced and because of market volatility.
Value(€): 5.22bn
Value(£): 3.62bn

Target name: Warner Music
Bidder: EMI
Legal adviser(s):
Warner Music – Herbert Smith (James Palmer).
EMI – Freshfields Bruckhaus Deringer (Mark Rawlinson).
Warner Music, which received a bid approach from EMI on 3 May, launched a bid for its smaller rival on 14 June. Warner Music’s initial alternative proposal to buy EMI for 315p a share was unanimously rejected by EMI’s board. EMI hit back on 23 June and made second takeover approach for Warner Music at $31 (£16.85) a share in cash. Subsequently, on the evening of 27 June, Warner Music submitted to EMI a revised pre-conditional offer to take over the UK company at 320p a share. The revised offer was immediately rejected by the EMI board.
Value(€): 3.6bn
Value(£): 2.5bn

Target name: Associated British Ports (ABP)
Bidder: Admiral Acquisition (a newly created acquisition vehicle)
Legal adviser(s):
ABP – Slaughter and May (Richard de Carle, Stephen Cooke).
Admiral – Freshfields Bruckhaus Deringer (David Higgins, Edward Braham).
Borealis Infrastructure – Torys.
GIC Special Investments – O’Melveny & Myers (Chris Ashworth).
Macquarie – Clifford Chance (Adam Signy).
Admiral, the consortium formed by Borealis Infrastructure, GIC Special Investments, Goldman Sachs and Prudential Corporation, has won the bidding war for ABP. Admiral posted its scheme document setting out a recommended 840p-a-share offer on 24 June. The scheme included a supplemental letter recommending a higher offer of 9.10p a share. Britannia Ports, a consortium including Macquarie European Infrastructure Fund which was preparing a rival bid for ABP, pulled out the race on 30 June.
Value(€): 4.04bn
Value(£): 2.8bn

Target name: Vue Entertainment
Bidder: Bank of Scotland Corporate
Legal adviser(s):
Boston Ventures, Clarity Partners – Freshfields Bruckhaus Deringer (Laurie McFadden); Ropes & Gray (Phil Smith).
Bank of Scotland – DLA Piper Rudnick Gray Cary (Mel Simms, Philip Butler). Management team – Travers Smith (David Innes).
US private equity houses Boston Ventures and Clarity, together with Legal & General Ventures, have sold their shareholdings in the cinema operator Vue to a management team led by chief executive Tim Richards. Bank of Scotland backed the incumbent management team, which acquired a controlling 51 per cent stake in the business.
Value(€): 504.46m
Value(£): 350m

Target name: Stagecoach London
Bidder: Macquarie Bank
Legal adviser(s):
Stagecoach – Herbert Smith (Ben Ward).
Macquarie – Milbank Tweed Hadley & McCloy (Tim Emmerson); SJ Berwin.
Acquisitive Australian bank Macquarie has signed a deal to buy Stagecoach London for cash. The sale is subject to regulatory approval and is expected to close within three months. Stagecoach London is made up of two companies that provide bus services on routes within and from London, principally under contract from Transport for London.
Value(€): 379.93m
Value(£): 263.6m

Deals volume

Acquisition finance update

There was a swathe of chunky deals this month, including Goldman Sachs’ bid for Associated British Ports, which saw Allen & Overy (A&O) take the helm on the financing. Banking and finance partner Sanjeev Dhuna led the team acting for Barclays Capital, Dexia Crédit Local, Goldman Sachs and Royal Bank of Scotland (RBS) on the senior facility.

Clifford Chance landed the financing for Ferrovial’s £12bn takeover of BAA. Banking and finance partner Michael Bates advised a consortium comprising Calyon, Citigroup, HSBC and RBS on a package that included senior, senior subordinated and junior subordinated debt.

Infrastructure may have captured the headlines, but other sectors are also seeing activity. White & Case was busy on telecoms with a mandate from Morgan Stanley and RBS as lead arrangers on the Kabel Baden-Württemberg buyout by EQT from Blackstone and the Caisse de Dépôt et Placement du Québec. Run by the firm’s German office, partner Annica Lindegreen led a team on the €1.27bn (£881.14m) financing.

Resolution’s acquisition of Abbey’s UK and offshore life insurance business handed A&O a £1.54bn rights issue and £2.3bn debt financing for underwriters and lead arrangers Citigroup and Goldman Sachs. Banking partner Andrew Trahair advised on the debt side, with corporate partners Andrew Ballheimer and Patrick Speller acting on the rights issue.

Top international deals

Germany’s Hengeler Mueller and New York’s Cravath Swaine & Moore advised German pharmaceutical company Schering on its E16.9bn (£11.73bn) acquisition by Bayer. Bayer announced on 21 June that it controls 88 per cent of Schering’s outstanding shares as of the end of the first acceptance period for its takeover offer.

From pharmaceuticals to biopharmeuticals, Shearman & Sterling acted as Italian and US counsel for the Credit Suisse-led underwriters on the Rule 144 offering and Swiss stock exchange listing of Italian biopharmaceutical company BioXell – the first ever IPO by an Italian company on the Swiss Exchange. The Shearman team was led by Rome-based capital markets partner Robert Ellison, and also involved lawyers from the firm’s international tax group, led by London partner Bernie Pistillo.

New York firms Cravath Swaine & Moore and Cadwalader Wickersham & Taft scooped the lead roles on Johnson & Johnson’s $16.6bn (£9.02bn) close-fought acquisition of Pfizer Consumer Healthcare. Cravath corporate partners Robert Townsend and George Schoen advised Johnson & Johnson, which beat off rival bids from GlaxoSmithKline, Colgate Palmolive and Reckitt Benckiser. Pfizer was advised by a Cadwalader team led by partners Dennis Block and William Mills.

Freshfields Bruckhaus Deringer and Herbert Smith scooped the Hong Kong roles on the estimated $12bn (£6.52bn) flotation of Industrial & Commercial Bank of China (ICBC) later this year – expected to be the largest IPO in Asia in 2006. Herbert Smith acted for ICBC, led by Beijing partners Michael Fosh and Jeremy Xiao and head of Asia Ashley Alder. Wall Street firm Davis Polk & Wardwell has been instructed by the issuer to advise on US law. Freshfields Hong Kong corporate partner Teresa Ko and Beijing partner Chris Wong are leading the Hong Kong law advice to the underwriters including Merrill Lynch, Deutsche Bank and Credit Suisse. Shearman is providing US law advice, with Asia managing partner Matthew Bersani leading the team.

Hengeler Mueller advised in the sale of Landesbank Berlin’s private and business client unit, the Berliner Bank, to Deutsche Bank for E680.5m (£472.14m). With 330,000 customers and a balance sheet of almost E5bn (£3.47bn), Berliner Bank’s sale marks the largest-ever asset transfer in German retail banking. Hengeler advised Landesbank Berlin, led by M&A partners Ulrich Blech, John Flüh and Kai-Steffen Scholz. Deutsche Bank was advised by in-house lawyers Voker Butzke and Peter Clouth.