Firm rises to grid challenge

Herbert Smith's massive task of floating the National Grid reached its conclusion when trading in the privatised utility started on 11 December.

The flotation involved at least 35 lawyers, including a dozen partners, in a deal valued at more than £5 billion. Together with related demergers by the regional electricity companies (RECs), it was one of the biggest and most complex transactions of the year.

Herbert Smith acted for the 12 RECs which owned the grid and has been solicitor to the issue since May 1994. It is also acting in the demerger and eventual sale of the pump storage power stations.

The firm carried out the final stages of the deal at its offices, where eight board meetings were held simultaneously.

The sell-off has also drawn in other top legal names including Linklaters & Paines for Kleinwort Benson, the grid's financial adviser; Ashurst Morris Crisp, which advised parts of the grid on employment matters, including benefits and share options; and McKenna & Co, which advised the grid company itself.

In addition to the Impact Board Meeting for the national Grid, Herbert Smith advised in seven committee meetings to approve circulars for seven RECs not taken over in recent bids. The circulars propose to demerge the REC's grid holdings to existing shareholders.

Partner David Willis, leading the Herbert Smith team, said the “constantly changing status” of the REC clients, involving bids and takeovers, made the deal more complex.

“With this degree of volatility in the sector, our task was particularly challenging,” he said.

The flotation was structured to give each REC the freedom to demerge its holdings in the National Grid to its shareholders, to sell its shareholding, or to retain its shareholding.

At least seven said they would demerge, while five proposed to retain their holdings for subsequent sale.

Prior to flotation, a complex capital restructuring of the grid company was carried out, involving payment of four tranches of dividend, a rights issue and the demerger of its pumped storage stations.