Imperial rule

A series of international acquisitions have transformed the UK’s leading tobacco company into a major global player. Kathryn Hobbs reports on Imperial’s five-strong legal team

Anyone who thinks that the corporate giants of the legal world can only be found in private practice should pay a visit to Charles Hamshaw Thomas and his team at Imperial Tobacco. In the six years since Imperial was formed following its demerger from Hanson, the company has been on an acquisitive rampage, buying up no fewer than six competing or related companies across the world.

For a lawyer with a transactional bent, the idea of being on the ground at a company seeking to expand by aggressive acquisition is a dream come true. In 1996, Imperial Tobacco was a strong player in the UK market. It was seeing off competition at the top end of the market thanks to its premium brand Embassy and hoovering up the low-cost end with brands such as Lambert & Butler, Superkings and John Player Special. At that point, more than 90 per cent of Imperial’s earnings came from the UK.

But domestic domination was not enough and Imperial set about boosting its international presence with a series of astute purchases. Since its 1996 inception, Imperial has spent more than £1.2bn on acquisitions. This figure is set to double when the e5.8bn (£3.57bn) purchase of Germany’s Reemtsma is completed later this year. In 1997, Imperial set the ball rolling when it bought cigarette paper manufacturer Rizla. This was followed in 1998 by the purchase of Dutch company Van Nelle Tabak.

Then in 1999, it bought a portfolio of brands in Australia and New Zealand. Mallesons picked up the instruction on the Australian aquisitions of 1999.

The company stamped down another geographical footprint in 2001 by acquiring a stake in Tobaccor, making it the leading company in eight African countries. The Reemtsma deal takes Imperial back to Europe and is its most dynamic transaction to date.

This acqusitive environment is one Hamshaw Thomas knows well. He joined Hanson in 1988 and says: “Hanson was a corporate predator and all we did there was buy and sell. It’s really what my expertise is. I joined Imperial Tobacco with the expectation that it would be doing similar things.”
So, Imperial is the name and, true to that moniker, empire-building seems to be its game. Despite the flurry of M&A activity in the past few years, Hamshaw Thomas is confident that this level of acquisitiveness is sustainable. “The tobacco industry is consolidating at a pace which will always throw up opportunities,” he says.

British American Tobacco and Rothmans joined forces in 1999 to form the world’s second largest tobacco company behind Philip Morris. Imperial’s merger with Reemtsma takes it closer to these competitors. Hamshaw Thomas cites global consumption levels and increasing restrictions and regulatory pressure as one reason why companies are scrabbling to buy up the best known brands as and when they become available. Combined with this jockeying for market share, some companies are moving out of the industry and so those players are up for grabs.

Hamshaw Thomas and his team are ready to start grabbing. What is particularly significant given the number of deals completed by Imperial is the size of the legal team. Even if the company did not engage in so much corporate activity, the combined numbers under the command of Hamshaw Thomas and his fellow head of legal Alan Porter would seem derisory. Imperial, a £5.9bn dual-listed company with employees in excess of 7,000 is served by just five lawyers.

“Lean and mean was the name of the game at Hanson,” says Hamshaw Thomas. And it is a maxim that he has taken with him to Imperial. “On the face of it, it might seem that people have disproportionate workloads,” he says. “I believe in doing as much as we can sensibly and efficiently manage between us.” He concedes that the sheer speed with which Imperial has expanded has put pressure on the legal resource, but argues that his team is fantastic and hungry for the challenge.

With only five lawyers handling not only the company’s M&A work, but regulatory, intellectual property, contracts and litigation issues endemic to any large company, external relationships are fundamental to Imperial’s in-house team.

By and large, the company is loyal to its traditional advisers. Ashurst Morris Crisp has acted for Imperial for years and partner Stephen Fox has continued a relationship bedded down by Jeremy Parr prior to his move to Allen & Overy (A&O).

Parr’s relationship with Imperial has continued at his new firm. Hamshaw Thomas says: “Jeremy Parr at A&O was at Ashursts, which is one of the reasons we selected the firm for our recent acquisition.”

But the traditional relationship with Ashursts remains strong and Fox has been working with A&O, handling the rights issues and regulatory aspects of the deal. Hamshaw Thomas adds: “We very much pick the right horse for the right course. The individual is the key and you go to the right individual for the job.”

Osborne Clarke also has a historical connection with Imperial as some of its partners were previously in-house at the company in one of its former guises.

In addition to Osborne Clarke as local counsel, Imperial also outsources work to Bristol firm TLT. “With me, it’s all performance-based,” says Hamshaw Thomas. “It is all to do with output and quality of work. We keep a close eye on our external suppliers, and, of course, cost is a factor.”
Hamshaw Thomas’s team boasts one trainee, who has spent time on secondment at Osborne Clarke to add to his experience in-house in order to qualify.

Outside the UK, Weil Gotshal & Manges handled the company’s listing on the New York Stock Exchange. Imperial is listed in the US to access investors, but it does not actually sell there. Hamshaw Thomas says that liability issues and the omnipresent threat of litigation has kept the firm out of the US tobacco market.

Following his own qualification with Slaughter and May, Hamshaw Thomas spent three years at Clifford Chance before moving away from private practice. He says: “I moved in-house in 1988 and at that time, Hanson was a tremendously sexy place to work. I moved in-house to see a more commercial side of the legal world.”

As his career has developed, Hamshaw Thomas has not been disappointed. He left Hanson in 1994 to become company secretary and legal counsel at Beazer Homes. He returned to Hanson in 1996 at just the right time to be part of the Imperial demerger and take responsibility for the fledgling company’s corporate activity.

As he focuses on corporate and M&A matters, Hamshaw Thomas has witnessed his legal role transform into something more akin to business development. “I work closely with the business development director and have a responsibility for all initiatives the company is interested in,” he says.

In comparison with his private practice peers, Hamshaw Thomas is right at the centre of a transaction. He does not simply join in when requested, but often helps identify potential targets. As a result, he says: “My role is more invigorating, more challenging and much more rewarding.”
But private practice is not on his agenda, nor does it seem to be for Porter. Porter has spent his entire 30-year legal career at Imperial, having taken the legal executive route into practice.

Hamshaw Thomas and Porter have more than enough on their collective plates. The Reemtsma deal will take Imperial into the big league. The UK’s leading tobacco company will become the fourth largest company in the world. For the in-house team this will be one deal where they cannot simply dot the i’s and cross the t’s before heading home.

According to Hamshaw Thomas, the Reemtsma deal has been all-consuming for his team for the past six months. And this is just the start, because in joining with Reemtsma, Imperial will have some serious reorganising to do at all levels. Reemtsma has its own legal team and Hamshaw Thomas says it is too early to tell exactly how the two in-house groups will come together. His challenge for the immediate future will not just be spotting the next deal, but along with Porter, making sure the last one does not cause too much upheaval for their small team.
Charles Hamshaw Thomas
Head of legal
Imperial Tabacco

Organisation Imperial Tabacco
Sector Tabacco
Turnover £5.9bn
Employees 7,500
Legal Capability Five
Head of legal Charles Hamshaw Thomas (corporate) and Alan Porter (litigation, regulatory and IP)
Reporting to Company secretary Richard Hannaford
Main location for lawyers Briston
Main law firms Allen & Overy, Ashurst Morris Crisp, Bristows, Gouldens, KLegal and Osborne Clark