The deal is the first cross-border acquisition of a telecoms business by a Chinese state-owned company. Shearman won the instruction after participating in a secret tender process.
AGC is 59 per cent owned by bankrupt US company Global Crossing. The company filed for bankruptcy protection with the US Bankruptcy Court for the Southern District of New York, which is coordinating proceedings with the Supreme Court of Bermuda. Consequently, the deal is subject to approval by both courts. However, the parties expect the deal to be completed by 31 March 2003.
Under the terms of the deal, Asia Netcom Corporation, a new company created by China Netcom with backing from Newbridge Capital and the Softbank Asia Infrastructure Fund, will buy most of AGC’s assets and operations. One of the main assets to be bought by Asia Netcom is a 18,740km sub-sea cable that links Hong Kong, Taiwan, South Korea, the Phillippines and Malaysia.
Asia Netcom will also assume certain liabilities relating to the provision of telecommunications services in the Asia Pacific, following completion of the bankruptcy proceedings, which involve the restructuring of $750m (£476.5m) of debt.
It is estimated that in order to finance AGC’s future operations, Asia Netcom will require $270m (£171.6m). The consortium will provide $120m (£76.2m) of new equity; the remaining $170m (£108m) will be borrowed from the Industrial & Commercial Bank of China (Asia).
Hong Kong managing partner Edward Turner is leading the deal for Shearman, with support from Etienne Gelencsér, Siew Fong Yiap, Christopher Wang and Mark Harty.
AGC is being advised by Gibson Dunn & Crutcher‘s Los Angeles office on corporate aspects of the deal, with Kasowitz Benson Torres & Friedman’s New York office acting as bankruptcy counsel. Additionally, Conyers Dill & Pearman and Milligan-Whyte & Smith are advising China Netcom and AGC respectively on Bermudian law.