Legal Intelligence

City report – A flying start for M&A in 2007

Despite forecasts of doom and gloom at the beginning of the year (as well as collective hand-wringing as stockmarkets worldwide experienced a freefall on 27 February), according to Thomson Financial global M&A activity is actually up by 16 per cent so far this year on the same period in 2006. Deals totalling a whopping $610bn (£315.85bn) were announced in January and February, a statistic topped only by the $816bn (£504.79bn) raised in the first two months of 2000.

The good times have been boosted by Spanish bank Banco Bilbao Vizcaya Argentaria’s £4.89bn acquisition of US bank Compass Bancshares, on which New York giants Cleary Gottlieb Steen & Hamilton and Wachtell Lipton Rosen & Katz landed instructions.

And February brought two ‘world’s biggest buyouts’, with Simpson Thacher & Bartlett advising marquee client Blackstone on its successful $38.9bn (£20.13bn) bid for Sidley Austin client Equity Office Properties on 8 February. Three weeks later Simpson Thacher was back, advising on the new ‘biggest leveraged buyout ever’, as Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) made a $44.5bn (£23.03bn) offer for Texan utilities company TXU. Simpson Thacher, with Covington & Burling and Vinson & Elkins, among others, advised KKR and TPG, while Sullivan & Cromwell advised TXU and Cravath Swaine & Moore advised its board.

KKR, TPG and Blackstone are just as busy this side of the Atlantic, confirming on 5 February that they had teamed up with CVC Capital Partners to form a consortium interested in the UK’s third-largest supermarket J Sainsbury. The consortium is being advised by Clifford Chance, while Linklaters is representing longstanding client J Sainsbury. No formal offer has been made, and it was only on 6 March that the Takeover Panel issued a ‘put up or shut up’ notice to the consortium, but analysts are predicting an offer of at least £10bn.

February also saw its fair share of exits. TPG popped up once again with Apax in the sale of Greek mobile phone operator TIM Hellas to Egyptian entrepreneur Naguib Sawiris’s Weather Investments for £4.89bn. TPG and Apax turned to Cleary and Ashurst respectively, while Weather Investments was advised by White & Case.

Meanwhile, Lion Capital, the owner of Jimmy Choo, effected a tertiary buyout, for which the management team turned to Travers Smith. The silver circle firm first struck up a relationship with the management after it advised on the original management buyout of Jimmy Choo, backed by the firm’s longstanding client Phoenix Equity Partners, in 2001.

As far as trade buyers were concerned, the MyTravel-Thomas Cook merger on 19 February marked corporate star Tim Emmerson’s first deal at Sullivan, advising Thomas Cook. MyTravel turned to Slaughter and May. Instead of a reverse takeover by MyTravel, a new company was created that will buy both MyTravel and Thomas Cook, the former through a scheme of arrangement. No wonder Goldman Sachs – financial adviser to Thomas Cook – asked Emmerson to join Sullivan a month early.

Regulatory roundup

A notable first was achieved in February with a ministerial intervention to Ofcom, requesting the media regulator investigate BSkyB’s stake in ITV.

Secretary of State for Trade and Industry Alistair Darling asked Ofcom to look into whether or not BSkyB’s purchase of a 17.9 per cent stake in ITV last November presented a threat to public interest – the first time an intervention notice has been served by the Department of Trade and Industry since the Enterprise Act was passed in 2002.

The news came as a boon to the newly formed (between NTL and Virgin Mobile) Virgin Media, which had lobbied hard for an investigation. Advising Virgin Media is NTL’s old counsel Ashurst and Fried Frank Harris Shriver & Jacobson, with Macfarlanes advising the Virgin Group. For BSkyB is Allen & Overy, while ITV is advised jointly by Freshfields Bruckhaus Deringer and Lovells. Darling will have to decide by 27 April whether or not to clear BSkyB’s stake or refer the matter to the Competition Commission.

City lawyers were scrutinising closely minsterial intervention of a different kind later in February. With mounting pressure from powerful trade unions such as the GMB, Treasury Secretary Ed Balls announced on 8 March that tax deductability on particular advantages relating to private equity will be under review.

Under the spotlight will be the tax relief on shareholder loans in highly leveraged deals.

The announcement came days after a Treasury select committee said that it would look into a Financial Services Authority paper into potential regulation of private equity.

Lawyers have advised against any tax tinkering, with Macfarlanes corporate partner Charles Martin saying it would disadvantage the UK and cause private equity to seek other jurisdictions.

Meanwhile, tax partner Rupert Shiers at McGrigors said: “Companies in which the private equity groups already invest will potentially feel the worst effects.”

Lawyer of the month

Chris Ancliff, EMI Group

EMI Group general counsel Chris Ancliff took over from his boss Charles Ashcroft, who stepped aside to focus on the company secretary role in January.

Not only has EMI decided to embark on an ambitious group-wide and global restructuring plan that has the legal department at its heart, but its rival Warner Music continues to flirt and make takeover approaches.

The last such approach on 1 March, which saw Herbert Smith client Warner value EMI at £2.1bn, was rejected by EMI’s board, but it is all making for a busy period for Ancliff and his chief corporate counsel Freshfields Bruckhaus Deringer.

Ancliff also uses Addleshaw Goddard, Clifford Chance, Latham & Watkins and Mayer Brown Rowe & Maw.


1984: University of Exeter, LLB
1988: College of Law, Guildford
1989: Trainee, Linklaters
1991: Corporate associate, Linklaters
1993: In-house counsel, Polygram
1998: Head of business affairs, international and Europe, EMI
2002: Associate general counsel, EMI
2007: General counsel, EMI

M&A highlights (any European involvement)
February 2007

Target name: Compass Bancshares

Bidder: Banco Bilbao Vizcaya Argentaria (BBVA)

Legal adviser(s):Compass – Wachtell Lipton Rosen & Katz (Ed Herlihy). BBVA – Cleary Gottlieb Steen & Hamilton (Victor Lewkow, Jack Murphy, Derek Bush, Sarah ten Siethoff).

Description: BBVA undertook its biggest-ever purchase with the $9.6bn (£4.89bn) acquisition of Compass Bancshares, a decisive move into the US market by the Spanish bank. BBVA said the deal would make it a top 20 bank in the US, and it is hoped that 10 per cent of BBVA’s global revenue will now come from the US.



Value(£): 4.89bn

Target name: TIM Hellas (owned by Apax and Texas Pacific Group)


Weather Investments

Legal adviser(s):

Apax – Ashurst (Charlie Geffen). TPG – Cleary Gottlieb Steen & Hamilton (William Groll); Shearman & Sterling.
Weather Investments – White & Case (Mats Sacklen, David Eisenberg, Mark Powell, Brian Conway); TJ Koutalidis (Tryfon Koutalidis).


Egyptian entrepreneur Naguib Sawiris’s Weather Investments made a €3.4bn (£2.28bn) purchase of Greece’s third-largest mobile phone operator TIM Hellas from private equity houses Apax Partners and Texas Pacific Group. Weather will assume €2.9bn (£1.94bn) worth of debt. Banca IMI and Deutsche Bank are providing the acquisition financing for Weather, with Clifford Chance advising the banks.




Target name: EMI


Warner Music

Legal adviser(s):

EMI – Freshfields Bruckhaus Deringer (Mark Rawlinson, Rachel Brandenburger). Warner – Herbert Smith (James Palmer).


EMI rejected Warner Music’s newest all-cash approach at 260p a share, the fourth time this decade a takeover between the two has been mooted. In 2006 both groups tried to buy each other out, with Freshfields launching a ‘Pac-Man defence’ for EMI.




Target name: Laidlaw


First Group

Legal adviser(s):

Laidlaw – Skadden Arps Slate Meagher & Flom (Peter Atkins, Bill Kunkel, Michael Hatchard, Linda Davies). First Group – Slaughter and May (Nigel Boardman, Andrew Jolly); Davis Polk & Wardwell (Phillip Mills, Marc Williams).

Description:Bus giant First Group made its second US acquisition by buying Laidlaw, the US’s largest –operator of school buses and the owner of Greyhound coaches. The acquisition will be
financed through new bank facilities and equity issues of approximately £375m, including a £200m placing.



Value(£): 1.9bn

Target name: Countrywide

Bidder: Castle Holdco 4 (takeover vehicle for Apollo)

Legal adviser(s):

Countrywide – Ashurst (Adrian Clark, Robert Ogilvy-Watson, Nigel Parr).

Castle Holdco – Slaughters (Charles Randell).


Apollo, through its UK-incorporated company Castle Holdco 4, has tabled a billion pound-plus offer for Countrywide, whose portfolio includes estate agents Bairstow Eves. The offer, structured as a scheme of arrangement, values Countrywide at 590p a share, which represents a 28 per cent premium on Countrywide’s share price on 13 September 2006.





Target name: The Tussauds Group (majority owned by Dubai International Capital (DIC))



Legal adviser(s): DIC – Freshfields (David Higgins). Tussauds – Travers Smith (Paul Dolman). Blackstone – Ashurst (Charlie Geffen, Gavin Gordon).


Blackstone continued its theme park acquisitions as its company Merlin bought a majority stake in The Tussauds Group from DIC. Under the terms of the offer, DIC will retain a 20 per cent stake in Tussauds.





Target name: Commonwealth Brands

Bidder: Imperial Tobacco

Legal adviser(s):

Commonwealth – Wyatt Tarrant & Combs (Franklin Jelsma). Imperial – Allen & Overy (A&O) (Jeremy Parr, Mike Gilligan, Michael Jahnke).

Description: Imperial, the world’s fourth-largest tobacco company, made its first US acquisition by buying Kentucky-based Commonwealth, the maker of USA Gold and Sonoma.





Target name: Egg Banking



Legal adviser(s):

Egg – Slaughters (Oliver Wareham, William Underhill, Robert Chapin). Citigroup – Linklaters (Nick Rees).


Citigroup finally acquired online company Egg Banking, which has three million customers, for cash from Prudential after the insurer initially rebuffed Citigroup last December.




Target name: Liverpool FC


Kop Football

Legal adviser(s):

Liverpool – DLA Piper (Michael Prince). Kop – A&O (Andrew Ballheimer, Gareth Price, Edward Barnett); Weil Gotshal & Manges (Mike Francies, Richard Ginsburg, Ian Hamilton, Glenn West).


Kop Football is the English private limited company vehicle of US sports tycoons George Gillett and Tom Hicks. Under the terms of the offer – which gazumped that of DIC – Kop Football pays £5,000 per share, valuing Liverpool FC at some £174m. Kop Football also assumed £44.8m of debt.




Target name: Jimmy Choo


Gala Capital and TowerBrook Capital Partners

Legal adviser(s): Jimmy Choo – Travers Smith (Philip Sanderson, Andrew Roberts). Lion Capital – SJ Berwin (Richard Lever, Steven Davis, Rebecca Simmons). TowerBrook – Kirkland & Ellis (Erik Dahl). UBS – Clifford Chance (Malcolm Sweeting).

Description: Jimmy Choo’s management effected a management buyout backed by TowerBrook and Gala from the owners of the company Lion Capital.





Deals volume

Acquisition finance update

Allen & Overy (A&O) partner Jacqui Evans had a busy month advising Welcome Break on its £300m leveraged recapitalisation and US-based consortium Kop Football on the financing of its £470m acquisition of Liverpool FC.

A&O partner Andrew Trahair advised Goldman Sachs, Lehman Brothers and HypoVereinsbank on Blackstone’s £1bn Tussauds buy.

Meanwhile, partner Robin Harvey advised longtime client PAI Partners on the financing of the acquisition of the roofing division of Lafarge for €2.4bn (£1.64bn). Acting for senior lenders BNP Paribas, JPMorgan, Mizuho and Société Générale was Clifford Chance partner Lee Cullinane.

Clifford Chance partner Richard Sharples advised Deutsche Bank on the refinancing of CVC Capital Partners’ investment in Lecta Group through a combination of the €1bn (£683.84m) unsecured and €60m (£41.03m) secured floating-rate notes of revolving credit facilities. The firm also advised UBS on the $59.9m (£31m) and £55m of senior facilities (plus a $24.6m (£12.73m) second-lien piece) for TowerBrook Capital Partners on the acquisition of Jimmy Choo.

At Herbert Smith, partner Chris Fanner advised ABN Amro on the £100m term loan and revolving credit facility for Acteon Group, in which US oil and gas private equity fund First Reserve acquired a majority stake in November 2006. Acteon and First Reserve were advised by Simpson Thacher & Bartlett.

Top international deals

The first Chinese acquisition of an AIM-listed mining company happened when Xiamen Zijin Tongguan bought Monterrico Metals in early February for £94.6m. Xiamen turned to Lawrence Graham, with a team led by head of financial services Victoria Younghusband. Monterrico was advised by Linklaters, with mining sector head Charlie Jacobs leading the deal. The transaction represented the third mining-based deal that Jacobs had advised on in February after also scooping Impala’s £297m takeover by Simmons & Simmons client Afplats, as well as an equity deal worth £600m for Gold Fields..

Abu Dhabi
Denton Wilde Sapte (DWS) bagged a plum role advising the joint lead managers Barclays Capital, Credit Suisse and the National Bank of Abu Dhabi on Aldar Properties’ $2.53bn (£1.31bn) exchangeable sukuk issue.

The deal generated further instructions for Clifford Chance and Simmons & Simmons, which bothadvised the issuer from their Dubai and Abu Dhabi offices respectively.

London-based DWS banking and finance partner Matthew Sapte reprised his role as adviser to Barclays, having advised the bank in last year’s $3.52bn (£1.82bn) Nakheel and $3.5bn (£1.81bn) Dubai Ports World sukuk issues.

The Aldar sukuk is the first sukuk to be listed on the London Stock Exchange’s Professional Securities Market.

Saudi Arabia
The Dubai offices of Allen & Overy (A&O), Clifford Chance and Trowers & Hamlins all proved their worth on the $2bn (£1.04bn) Shuqaiq Independent Water and Power Project (IWPP).

A&O advised the banks and credit agencies financing the deal, Clifford Chance advised the Kingdom of Saudi Arabia, while Trowers advised the consortium that will build the project. For Trowers’ Dubai-based head of projects Leroy Levy the deal was especially pleasing. The firm advised the consortium on the first such deal, the Shuaiba IWPP, in 2006, but saw the consortium bring in A&O to advise on its dealings with the banks.

More loom on the horizon; after these first three initial government IWPPs, at least 20 are planned for the future.

Enel has appointed relationship firm Bonelli Erede Pappalardo for its daring raid on Endesa. The Italian electricity company has boosted its holding in Spain’s Endesa to 16.9 per cent and is likely to buy up more in the near future. Enel is working with Bonelli co-founder Sergio Erede on the deal.

The move could rupture Germany energy giant E.ON’s €37bn (£25.2bn) proposed takeover of Endesa, which had been on course to take place in the summer. Clifford Chance is Endesa’s sole adviser, while E.ON has Spain’s Perez-Llorca fighting its corner.