Among many large and complex deals closing in June, one of the standouts is a $2.3 billion energy sector M&A transaction. LINN Energy, represented by Baker Botts, acquired 900,000 acres throughout the western and southern United States, containing 4,500 wells, from Devon Energy Corporation. Simpson Thacher & Bartlett advised members of a consortium of banks that included Barclays, RBC Capital Markets, and Wells Fargo.
In an exclusive interview with IFLR1000, the lead Baker Botts partner on the deal, Kelly Rose, described a long-time acquisition strategy on the part of LINN Energy. “They’ve been growing through acquisitions since they went public in 2006. We’ve been their regular outside counsel for a long time. Because they’re such a busy acquirer, they have a very robust in-house legal staff. They do the majority of the purchase and sale agreement work themselves. We provide tax advice on the deals, and we also provide whatever other ancillary outside counsel advice they need – sometimes it’s antitrust, sometimes other issues.”
This transaction was not a cookie-cutter deal in any sense. Baker Botts attorneys did the financing work, and helped the client get its commitment papers in place, Rose noted. “We had two tax partners on the deal, one in Houston and one in Dallas, a finance partner here in Houston, and a finance partner in New York as well. Simpson Thacher represented the banks here and in New York.”
In another energy sector M&A deal, Skadden Arps Slate Meagher & Flom announced that it is advising Wisconsin Energy in its $9.1 billion acquisition of Integrys Energy Group, a deal announced on June 23. Outside the energy sector, Morrison & Foerster is representing TMI Hospitality in its sale to funds managed by Starwood Capital Group for an undisclosed amount. Kirkland & Ellis is advising private equity leader Gryphon Investors in an agreement to sell one of its portfolio companies, Flagstone Foods, to TreeHouse Foods for $860 million. In a share repurchase deal, Davis Polk & Wardwell advised Goldman Sachs and JPMorgan Chase with respect to Monsanto Company’s repurchase of $6 billion of its common stock. Bryan Cave is acting as counsel to Monsanto.
Norton Rose Fulbright advised SNC-Lavalin Group, a Toronto Stock Exchange-listed engineering and construction conglomerate, on its C$2.1 billion acquisition of Kentz Corporation. Yet another June M&A highlight occurred in the tech sector, with Weil Gotshal & Manges advising Oracle in its $5.3 billion acquisition of MICROS Systems, a company developing hardware and software for the retail and hospitality sectors.
Davis Polk has continued to be highly active on the capital markets front, advising Merrill Lynch and Jefferies as representatives of the initial purchasers in Acadia Healthcare Company’s $300 million high-yield notes offering. The firm also advised Deutsche Bank Securities, Merrill Lynch, and Morgan Stanley as representatives of the underwriters in relation to Hilton Worldwide Holdings’s $2.3 billion common stock offering.
In another high-yield transaction, Paul Hastings acted as counsel to RBC Capital Markets and Credit Suisse Securities as joint bookrunning managers in relation to Sanchez Energy Corporation’s offering of $850 million of 6.12% senior notes due 2023. Much like Davis Polk, Paul Hastings shows considerable versatility in the capital markets. Another June highlight saw lawyers in the New York office of Paul Hastings advising Piper Jaffray and Credit Suisse as joint book-running managers in Belgian firm Materialise NV’s initial public offering of 8 million American depositary shares with a $12 unit price.
In a separate deal, Orrick Herrington & Sutcliffe got in on June’s capital markets action, advising Southern Star Central Corporation, the owner of Southern Star Gas Pipeline, in a $450 million private offering of 5.12% senior notes due 2022.
Brazil’s Veirano Advogados acted as deal counsel in the recent issuance of commercial notes by Empresa Brasileira de Telecomunicações - Embratel, with Banco Bradesco BBI acting as underwriter. The R$3 billion issuance was finalised on June 25. Partner Alberto Bragança and associates Bruno Ramos de Sousa Viviane Faria and Diego Yago Rodrigues worked on the deal. On a similar transaction, Bragança and his team acted as deal counsel in the recent issuance of debentures by Star One worth R$950 million. Banco Bradesco BBI also acted as underwriter on the issuance that was finalized on June 25.
San José, Costa Rica-based firm Pacheco Coto advised European investment fund Cinven in all legal aspects related to Costa Rica in the acquisition of Gas Natural Fenosa Telecomunicaciones who has operations in Spain and Latin America. Freshfields Bruckhaus Deringer acted as international lead firm on behalf of the buyer. Pacheco Coto's team was led by partner Freddy Fachler and included associates Ana Saenz and Gloriana Alvarado.
Partner Mariana Posse and associates María Fernanda Flórez and Miguel Torres of Colombia’s Posse Herrera Ruiz counselled Grupo de Inversiones Suramericana in the structuring and regulatory authorisation of the issuance of ordinary bonds and commercial papers for up to $340 million.
Pinheiro Neto advised Banco do Brasil, Caixa Econômica Federal, Banco Bradesco, Banco Santander (Brasil), Itaú Unibanco, Banco BTG Pactual, Banco de Investimentos Credit Suisse (Brasil), Banco Citibank, Banco JPMorgan and Bank of America Merrill Lynch Banco Múltiplo in a syndicated loan to the electricity distributors in Brazil, CCEE, for R$11.2 billion. The loan is intended to bailout the electricity distributors, which were struggling with high power costs caused by weather conditions and electricity prices in the spot market, being structured to mitigate such losses. Partners Enrico Bentivegna and Ricardo Levy led the team that included associates Felipe Tucunduva Heemstede, José Roberto Oliva Junior and Leonardo Baptista Rodrigues Cruz. Led by Eduardo Soares, Soares Bumachar Chagas Barros was external counsel CCEE.
Baker & McKenzie has been involved in the largest single office tower sale and purchase transaction in Hong Kong to date. The firm acted as counsel to Wheelock Properties in the $700 million landmark sale of One Bay East - East Tower to Citi. Hong Kong-based property partner and head of Greater China real estate Edmond Chan led the firm’s team alongside Shiu Man Wan, special counsel based in Hong Kong.
Elsewhere Mayer Brown JSM advised Hong Kong Huafa Investment Holdings on itsRmb850 million ($137 million) issue of 4.25% credit enhanced bonds due 2017 backed by a standby letter of credit issued by the Agricultural Bank of China. The joint lead managers were ABC International and the Hong Kong and Singapore branches of Agricultural Bank of China and OCBC.
In a deal involving a mainland concern, Skadden Arps Slate Meagher & Flom advised 58.com – a Chinese online marketplace for local merchants and consumers - on Tencent Holdings’s $736 million investment in exchange for 20% equity interest in the web platform. The team included Hong Kong corporate partners Julie Gao and Will Cai.
Sullivan & Cromwell acted for Goldman Sachs, who are advising MMG in its $6 billion acquisition of the Las Bambas copper project by an MMG-led consortium including three China state-owned companies - China Minmetals, Guoxin International Investment and CITIC Metal - from Glencore Xstrata. The team on the transaction includes William Chua in Hong Kong and Waldo Jones in Sydney.
In Thailand Clifford Chance acted for PTT Exploration and Production Public - Thailand’s largest oil and gas company - in its corporate hybrid bond offering totalling $1 billion. Matt Fairclough, Crawford Brickley and counsels Tom Kollar and Doungporn Prasertsomsuk were involved in the transaction. Allen & Overy advised the joint bookrunners formed by Bank of America Merrill Lynch, Credit Suisse, JPMorgan and HSBC.
In Malaysia Zul Rafique & Partners and Bill Jamieson from Singaporean firm Colin Ng & Partners acted for DBS Bank in its $60 million grant of a revolving credit facility to NV Multi Corporation. Jamieson was also involved in the establishment of a $200 million China-focused medical fund. Lim Wei Ting from Allen & Gledhill acted for DBS Bank and HSBC in a loan grant to Mapletree TY for the financing of the development of its new logistics centre in Hong Kong.
In Australia Gilbert + Tobin advised a consortium made up of TPG Asia, PAG Asia Capital and Canada’s Ontario Teachers’ Pension Plan, on its $1.2 billion acquisition of DTZ, a global property services business of UGL. Neil Pathak led the team together with John Schembri, Cameron Whittfield, Andrew Bullock and Peter Feros.
Europe, Middle East & Africa
The headline deal on the Austrian market in June was FACC’s €213 million IPO on the Vienna Stock Exchange. The first IPO of a European Chinese-owned company in Europe, the deal was also the first IPO in Austria since 2011. The developer of reinforced fibre components and systems for the aviation industry was advised by a Frankfurt team at Skadden Arps Slate Meagher & Flom led by Stephan Hutter and Katja Kaulamo.
Over the past month the French market has seen a number of big ticket M&A transactions being both agreed and floated. The deals reflect a wave of large inbound investment.
Cleary Gottlieb Steen & Hamilton, led by Pierre-Yves Chabert on the corporate side and Valérie Lemaitre on the financing, has been advising Global Resorts consortium on its hostile public bid for Club Med, valuing the company at €790 million. Behind the bid is Italian investor and former Lazard banker Andrea Bonomi, senior partner of Investindustrial, the consortium’s majority shareholder. Also in the consortium are South African Sol Kerzner, PortAventura and Latin American GP Investments, meaning that a flagship French company may pass into foreign hands.
Clifford Chance was advising the financiers, with finance head Thierry Arachtingi leading teams for a UniCredit Bank and Banca IMI-led syndicate.
Another large M&A deal saw Orrick Rambaud Martel advise Alstom on offers by General Electric (GE) and a counter offer by Mitsubishi Heavy Industries and Siemens, who were advised by McDermott Will & Emery’s Jacques Buhart, Bertrand Delafaye et Nicolas Lafont in Paris. Alstom accepted the offer by GE which consisted of the acquisition of Alstom Energy, the power and grid business, for €12 billion and an agreement to form a transport and energy alliance.
Again the deal sees a flagship French company potentially moving into foreign control but the French government gave its blessing after reaching its own deal to become Alstom’s largest shareholder through an option to buy 20% in the French engineering company. Political sensitive businesses will be held in 50/50 joint venture with Alstom.
Another interesting deal saw Cleary advise US clothing company HanesBrand on its acquisition of DBApparel from Sun Capital Partners. The deal valued the European clothing company at €400 million. The Cleary team was primarily based in London but Paris partner Charles Masson led a French effort.
Elsewhere, Matthieu Rambaud from Altana and Frédéric Cazals from Weil Gotshal & Manges have been representing Casino Group, which signed an exclusivity agreement to acquire 63 stores from Les Coopérateurs de Normandie-Picardie for a value of €37 million. Patrick Jaïs was leading a team from De Pardieu Brocas Maffei to assist the Cooperative. The deal is interesting for the consistent stream of transactions from France’s big retailers.
On the banking side, Accor secured a syndicated facility worth €1.8 billion from a group of 18 banks, including CA-CIB, BNP Paribas, Bank of Tokyo-Mitsubishi and Commerzbank as coordinators and Société Générale as agent. The facility replaces a €1.5 billion facility signed in May 2011 but it was oversubscribed, allowing the borrower to increase the figure. Herbert Smith Freehills advised Accor with a team led by Louis de Longeaux.
On the capital markets side, Intercontinental Exchange and Euronext announced the closing of its IPO and sale of shares listed on the Euronext Paris, Brussels and Amsterdam. The IPO brought in €1.4 billion. Shearman & Sterling advised the issuers, Linklaters acted for the banks and Willkie Farr & Gallagher assisted the shareholders.
Inbound investment from Asia has been a trend in Germany for several years, yet the number of transactions that have closed has never quite matched expectations. German lawyers insist this year will be different, and there is evidence that gives credence to their confidence. One recent example of an Asian company acquiring assets in the country was Chinese state-owned company AVIC’s purchase of Frankfurt based automotive supplier KOKINETICS. A team from Gleiss Lutz led by Michael Burian and Jana Glock represented the buyer.
Another trend observed in Germany is that funds are acquiring real estate loan books. Last month saw a large deal of this kind when Hypothekenbank Frankfurt sold its commercial real-estate loans in Spain and Portugal to Lone Star and JPMorgan for €4.4 billion. German law governed the purchase agreement with Hengeler Mueller partner Martin Geiger, who was recently elected managing partner, leading the team acting for the buyer.
In Greece the country awarded its first oil and gas exploration leases for over 20 years in June. The contracts allow for exploration in Western Greece where there is an anticipated 300 million barrels of oil.
King & Spalding (Garry Pegg and Hywel Jones) and M&P Bernitsas (Yannis Kourniotis) acted for the Greek Government. Berwin Leighton Piasner (Adam Dann) and PotamitisVekris (Euripides Ioannou) acted for Hellenic Petroleum, which won the lease for an area in the Gulf of Patraikos. Charalambides & Partners acted for Energean, which won the lease for the offshore Katakolon block.
Pharma and medical related M&A has been driving up deal volume exponentially across the globe in 2014. With several of the deals, there has been an Irish law element because one of the parties has had their holding companies in the jurisdiction to benefit from its favourable tax regime.
The largest transaction of the year so far was Medtronic’s $43 billion acquisition of Covidien in June, which is expected to save the company $850 million annually before tax. A trio of Irish firms had roles on the lucrative deal. Working alongside US counsel Cleary Gottlieb, A&L Goodbody acted Medtronic. New York resident partner Cian McCourt and Dublin partners Alan Casey and Mark Ward handled the corporate work, Paul Fahy and Peter Maher advised on tax, and Séamus Ó Cróinín and James Grennan were responsible for the finance aspects on the Irish side. Covidien used Wachtell and Arthur Cox. Managing partner of the latter, Brian O’Gorman, headed the team on the deal. Completing the trio was Matheson, which advised Medtronic’s financial adviser Perella Weinberg Partners. Corporate partners Patrick Spicer and George Brady, financial institutions head Tim Scanlon and banking partner Libby Garvey formed the core of the team.
In Guernsey The Royal Court of Guernsey delivered a potentially significant decision in approving an application for Guernsey's first pre-pack administration. The application was made on behalf of Esquire Realty Holdings and confirmed on April 16 2014. The company, which formed part of a healthcare group, had approximately 3,200 customers and 5000 staff.
The decision should provide a useful precedent with the Court laying down clear guidelines as to what they would expect from future applications. Bedell Cristin and Hogan Lovells acted on the application.
On the UK mainland meanwhile IPOs remained the story of 2014 with more listings seen on the LSE. UK health services operator Spire Healthcare was one such example. The group, which is controlled by Cinven, announced its intention to list with the aim of raising £315 million. The company owns 39 hospitals and 13 clinics in the UK and will use the funds from the listings to reduce its debt.
Freshfields Bruckhaus Deringer (David Higgins, Doug Smith, Mark Austin, and Chris Davis) acted for the issuer with Allen & Overy (Andrew Ballheimer, James Roe and Michael Bloch) advising the banks, which include Bank of America Merrill Lynch, JPMorgan Cazenove, Morgan Stanley and Numis.
Elsewhere, intellectual property company Allied Minds has also listed on the LSE's main market and premium listing segment. The Boston company's price was set at 190p valuing the company at £398 million. 30% of the stock is being floated. The company is focused on taking ideas and discoveries from US universities and Government research to market. it was formed in 2004 by Mark Pritchard. DLA Piper (Charles Severs, Alex Tamlyn, Martin Penn and Louise Barber) acted for the issuer while Sullivan & Cromwell (Tim Emmerson and David Rockwell) advised the underwriter Jefferies International.
Finally, property website Zoopla Property Group also undertook a IPO in London, which stood out for its adoption of a exclusive member’s arrangement, whereby the company’s real estate agent client base was offered the chance to purchase discount shares in the company. Freshfields (Mark Austin and Adrian Maguire, Martin Taylor and Doug Smith) acted for the issuer; Slaughter and May advised majority shareholder DMGT (Jeff Twentyman) and minority shareholders LSL Property Services, Countrywide and Connells (Richard Smith). Gibson Dunn & Crutcher (James Barabas) advised shareholder Atlas and Herbert Smith Freehills (Chris Haynes and Alex Bafi) picked up a role for the underwriters.
Central and Eastern Europe (CEE)
In Azerbaijan the state-controlled International Bank of Azerbaijan was involved in the highest-value Eurobond issuance in the history of the Azerbaijani banking system. Baker & McKenzie advised the bank on a $500 million Eurobond offering listed in Ireland and Berlin with joint bookrunners JPMorgan and Citi advised by White & Case.
In Poland there was notable activity in the energy sector in June including the acquisition by Terna Energy Group (a Greek renewables company) of three wind farms in the north of the country. Linklaters (Agnieszka Koniewicz and Krzysztof Gorny) acted for Terna on the project.
In the same sector but in the capital markets, state owned power company Polska Grupa Energetyczna (PGE) undertook an accelerated book building exercise followed by the sale of 65.4 million shares valued at Zl1.32 billion (€318 million). Greenberg Traurig Grzesiak (Federico Salinas, Pawel Piotrowski and Mateusz Chmielewski) acted for the coordinators and joint bookrunners, which included the likes of Deutsche Bank, Goldman Sachs, UniCredit, Espirito Santo Investment Bank, Bank Polski, and Société Générale.
Staying in capital markets Santandar Consumer Bank made its first foray into the auto loans space with a Zl1.36 billion securitisation issue. The notes were issued on the Irish stock exchange. Santander Global Banking & Markets and Citibank acted as arrangers and joint lead managers and were advised by Hogan Lovells (Julian Craughan and Piotr Zawislak). DLA Piper acted for the issuer on Polish and English law, while A&L Goodbody advised on Irish law.
In Russia the Norwegian group Seadrill agreed with Rosneft to an investment and co-operation agreement, which sees the majority-owned Seadrill subsidiary North Atlantic Drilling (NADL) entering the Russian onshore and offshore market through till at least 2022. As part of the deal Rosneft has acquired a significant equity share in NADL, though Seadrill remains the majority shareholder. Slaughter and May was the main adviser to Seadrill and NADL. Wiersholm also assisted on the Norwegian aspects of the deal and Alrud on the Russian. Baker Botts advised Rosneft.
Elsewhere in the Russian oil and gas market Debevoise & Plimpton advised Titan Group on the establishment of Poliom, a joint venture based on the Omsk Polypropylene Plant. As part of the deal, Sibgazpolimer, a joint venture between Sibur and Gazprom Neft, acquired a 50% stake in Poliom from Titan Group.
Also in Russia Orrick Herrington & Sutcliffe advised Sberbank on the refinancing of MLP Group, a warehouse distribution operator with facilities near Moscow, St Petersburg and Kiev, in a deal worth more than $500 million.
Scandinavia and the Baltic
The Baltic countries are seeing an increased amount of activity in the market as they continue their post-crisis recovery.
In Lithuania Glimstedt advised the State of Lithuania on the acquisition of stakes in three energy companies from German group EON Ruhrgas International. The acquisition, made through state-controlled entities EPSO-G and Lietuvos energija, involved taking a 38.9% share of Amber Grid, 38.9% share of Lietuvos dujos and 11.76% share of LESTO.
In Latvia Sorainen has seen a number of deals this month including advising Dasos Timberland Fund II on its acquisition of a large forest property portfolio in Latvia and Visma on the acquisition of all shares of the FMS Group companies.
It was also a busy month for Sorainen’s Estonia branch, as it advised Eesti Energia on its agreement to sell Eesti Energia Vorguehitus to Leonhard Weiss Baltic Holding as part of the company’s continuing program to divest non-core operations. Elsewhere in Estonia Lawin managed to secure a significant bankruptcy decision, advising Bankas Snoras in a dispute with Corvus Holding.
In the Nordics there was a big cross-border deal involving Norway, Sweden and Lithuania. Pan-European salted snack provider Intersnack Group successfully completed its acquisition of the Norwegian snack manufacturer Estrella Maarud from Herkules Private Equity Fund II. EY (Ernst & Young) advised intersnack, with counsel being provided by Wikborg Rein & Co in Norway, Mannheimer Swartling in Sweden and Borenius. ABG Sundal Collier, Wiersholm and PricewaterhouseCoopers advised Herkules.
A clear highlight in Turkey last month was the STAR refinery project, one of the most significant oil and gas projects to come out of Turkey in decades, it represents the largest project financing in Turkey’s history. Vinson & Elkins advised STAR Rafineri, a joint venture between the State Oil Company of Azerbaijan and the Ministry of Economy and Industry of Azerbaijan, on the deal and were supported for the Turkish legal aspects by YükselKarkınKüçük. Allen & Overy acted as the lenders’ counsel, which included six export credit agencies from five different countries, with Paksoy providing the Turkish legal advice.
In the Middle East, the bank finance market is looking buoyant. Among the high profile deals concluded in June was Emirates Steel Industries (ESI) $1.3 billion refinancing of a project financing provided to it in 2010 for expanding its steel production facility in Abu Dhabi. Oversubscribed by both conventional and Islamic banks, the transaction combined elements of corporate and project financing. Partners Margaret Cole and Shibeer Ahmed led the White & Case team acting for ESI.
Although borrowing in the Middle East is not a challenge for companies with good credit history, the sukuk market remains very active thanks to good pricing and strong appetite. Among the recent notable issuances was The Saudi Investment Bank’s (SAIB) maiden $533.2 million offering. Baker & McKenzie partners Bilal Kahlon and Nasser Alfaraj were lead counsel to the bank on the deal.
Conventional bonds are not overly popular among Middle East issuers but June saw a landmark transaction in this area when Etisalat launched its debut issuance of $4.3 billion, the largest ever corporate bond sold by a Middle East entity. The proceeds were used to refinance a bridge facility used to fund its $5.7 billion purchase of a majority stake in Morocco’s Maroc Telecom from France’s Vivendi. A team from Latham & Watkins team led by partners Nomaan Raja and Andrew Tarbuck advised Etisilat.
Another significant capital markets transaction in the Middle East concluded in June was DP World’s $1 billion convertible bond, the largest public equity-linked offering from Dubai and the second largest from the Middle East since the financial crisis began in 2007. Head of capital markets for the region at Clifford Chance, Debashis Dey, was lead counsel for DP World on the deal.
Willkie Farr & Gallagher advised Comilog, a subsidiary of Eramet, on the financing of rolling stock in Gabon. The deal saw Caterpillar Financial Services Corporation put up financing of €50 million to refinance equipment. Paris partner Amir Jahanguiri led the Willkie team while David Nanson from Trinity International advised Caterpillar Financial Services Corporation along with local law lawyer François Lecompte, from CAC International.
In Tunisia, Bird & Bird worked with local firm Dakhlaoui Avocats advising the World Bank, the Islamic Development Bank and the National Office for Health on the structuring of a public-private partnership (PPP) tender process for the design, construction and maintenance of a water treatment projects. The programme should see projects over the next 15 to 18 months. Paris-based Driss Bererhi led the Bird & Bird team.
Christopher Cooper - Latin America
Sam Duke - Greece, Poland, UK
Hill Choi Lee - Malaysia, Thailand
Adam Majeed - Australia, China, Hong Kong
Jon Moore - Azerbaijan, Russia, Scandinavia and the Baltics, Turkey
Ben Naylor - Austria, Germany, Ireland, Middle East
Michael Washburn - North America
James Wilson - Africa, France