Reviewed by Stephen MulrenanThe Australian Government's US$3.2bn (A$5.58bn) divestment of the Kingsford Smith Airport (Sydney Airport) to the Southern Cross Airports consortium was the largest announced transaction in 2002.
A mammoth deal in any year, the Sydney Airport sale (which represented the world's largest trade sale of an airport, the largest government sale in Australian history and the largest privatisation in Australia since 1997) provided welcome relief from a succession of corporate scandals.
But it could not hide the fact that 2002 was a very challenging year for most.
A slump in global stock markets, precipitated by the September 11 attacks in the US, meant the year started catastrophically, with the world's financial markets frozen and investor confidence the main casualty of the new 'War on Terror'.
Many offerings were postponed, with the net result that many companies found it difficult to raise the necessary capital to fund deals.
Announced merger & acquisition activity in Australia and New Zealand dived 30.68% - from US$39.50bn in 2001 to US$27.38bn in 2002 - according to Thomson Financial, while completed M&A volumes fared only slightly better, dipping 26.24% - from US$40.36bn in 2001 to US$29.77bn in 2002.
Lawyer participation too was down 27.8% - from last year's US$35.54bn to US$25.66bn - while transactions with legal advisers accounted for 97 deals out of the 128 total deal announcements.
The most active industries in 2002 meanwhile were the electric, gas, and water distribution sector (with 13 deal announcements amounting to US$3.81bn), the air transportation and shipping sector (with deals totalling US$3.7bn), and the mining sector (which accrued US$3.32bn for 10 deal completions).
Special mention goes to
Mallesons Stephen Jaques, which acted on seven of the 10 transactions reviewed. Just behind this trailblazer come
Allens Arthur Robinson and
Freehills, which each have six deals to their credit.
Clayton Utz sits just behind these two firms, having acted on five of the Top 10 Deals of the Year.
Despite the aforementioned gloom, 2002 was a pretty good year for
Mallesons. In addition to bolstering its overseas offices in London and Hong Kong, it also dominated the Thomson announced tables, with 33 transactions totalling US$14.82bn.
Freehills ranked number two, with 37 advisory deals totalling US$13.04bn, while
Allens Arthur Robinson came in third, with 26 deal announcements worth US$11.09bn.
The same three firms dominated Thomson's completed tables, albeit in a different order.
Allens Arthur Robinson this time claimed top spot, advising on 34 transactions with an aggregate value of US$15.25bn.
Freehills was the next busiest firm, closing 36 transactions worth US$13.94bn, while
Mallesons took third spot, with 31 deals totalling US$12.49bn.
Methodology
Australian Legal Business would like to thank all those firms that assisted with the research for this article. The criteria used to select the Top 10 Deals of 2002 is subjective. Rather than being a quantitative survey of transactions in Australia, we have sought to recognise those deals that made the headlines. Particular emphasis was given to the number and profile of the clients, the size of the transaction, its complexity and its significance for Australia and the region.
• To begin with, we asked law firms in Australia to nominate the 10 most significant transactions of 2002 on which they played a role. Deals eligible for consideration included: debt and equity-linked deals; equity transactions; M&A; project financings; restructurings; securitisations and structured financings.
• The list of nominated transactions was then collated and reviewed before being forwarded to ALB's independent panel of judges made up of senior in-house figures from both Australia and the Asia-Pacific region.
N.B. Confidential transactions were excluded from consideration.
Securitisation / Structured finance - SMART
What makes it a 2002 Top 10 deal?
SMART was Australia's first synthetic securitisation deal to receive capital relief from the Australian Prudential Regulation Authority (APRA). In addition, according to Macquarie Bank, it was the first time motor vehicle and equipment lease and hire purchase contracts had been securitised synthetically anywhere in the world.
The SMART transaction was not the first synthetic securitisation in Australia. That honour goes to a Commonwealth Bank of Australia (CBA) sponsored transaction in July 1999, in which CBA securitised a A$1.5bn portfolio of Australian and offshore corporate loans with the use of a credit-default swap via the Series 1999-1 Medallion Credit Linked Trust.
But although not the first in Australia, the SMART transaction - which launched in March 2002 and was arranged and lead managed by Macquarie Bank - is significant, as it was the first synthetic securitisation in the country to obtain regulatory capital relief under the prudential standards administered by APRA.
Clayton Utz was the principal deal law firm, with structured capital markets partner Ninian Lewis leading the firm's team advising Macquarie Bank in the synthetic auto and equipment lease transaction from its SMART vehicle.
Lewis recently returned to Sydney following a secondment at the New York office of US firm Skadden Arps Slate Meagher & Flom, which also acted on the SMART transaction. Lewis worked on a variety of structured finance transactions in the US capital markets.
Corrs Chambers Westgarth partner John Munton led the firm's team advising Permanent Trustees, the trustee of the special purpose vehicle, while Corrs partner Nicholas Diacos led the team acting for Ambac, the monoline insurer.
Corrs negotiated all principal documents on behalf of these two clients as well as, in the case of Ambac, advising in respect of the back-to-back credit derivative supporting the credit derivative entered into between the trustee and the counter-party.
The SMART transaction involved various issues in respect of the law of credit derivatives and financial guarantees in Australia, including whether they constituted insurance, and the applicability of various provisions in the standard ISDA credit derivative schedule.
The deal involved Macquarie Leasing purchasing credit protection from a special purpose trust (SMART) on a A$1bn portfolio of auto and equipment leases and hire-purchase contracts. Under a financial guarantee issued to it by SMART, Macquarie Leasing retained the first A$20m of risk of losses on the portfolio and assigned the balance of the risk to SMART. SMART in turn transferred this risk by issuing credit-linked notes (to cover the first A$130m of risk) and entering into a credit default swap with Ambac in relation to the remaining A$850m of risk.
By entering into the SMART transaction and effectively transferring the credit risk on the portfolio of receivables to third parties, Macquarie was required by APRA only to hold capital against Macquarie Leasing's A$20m first loss exposure and its exposure to the credit swap counter-party which, being an OECD bank, had a risk-weighted capital requirement of 20%. In other words, the transaction enabled Macquarie to reduce its capital requirement from 8% of the A$1bn portfolio to 3.36%.
Principal legal advisers
Law firm (lawyers): Clayton Utz
Role: Acted for the arranger, Macquarie Bank Limited, (Ninian Lewis, Sonia Goumenis) and the Trust Manager. Documented the transaction
Corrs Chambers Westgarth Acted for the trustee of the special purpose vehicle, Permanent Trustees, and the monoline insurer, Ambac, providing the enhancement for the credit derivative
Skadden Arps Slate Meagher & Flom Acted for the senior swap provider
Debt and equity linked - Amcor capital raising
What makes it a 2002 Top 10 deal?
At A$2.875bn, the Amcor capital raising was one of the largest and most complex capital raisings in Australia in 2002.
The Amcor capital raising was a significant example of the Jumbo offer structure that is increasingly being used for capital raisings.
Amcor Limited made an institutional placement and entitlement offer of ordinary shares, while Amcor Investments (New Zealand) Limited made an offer of Perpetual Amcor Convertible Reset Securities, to partially fund Amcor's acquisition of the PET containers and closure assets of Schmalbach-Lubeca for A$2.875bn.
The transaction was complex because of its size - a total ordinary equity raising of approximately A$1.2bn and a further A$200m pursuant to the Perpetual Amcor Convertible Reset Securities (PACRS) offer - and because of the simultaneous offer of PACRS.
Allens Arthur Robinson partner Robert Simkiss led the firm's equity team advising Amcor on the institutional placement, entitlement offer and the offer of PACRS, while Stephen Spargo led the firm's debt team advising Amcor on its A$900m and €470m syndicated multi-currency acquisition facilities to fund the Schmalbach-Lubeca AG acquisition.
Freehills partner Philippa Stone led the firm's team advising UBS Warburg Australia Ltd and JBWere Limited as joint lead managers and underwriters. Freehills acted on this matter from March 2002 and claims to have further refined the Jumbo offer mechanism to deliver a series of successful outcomes for both the underwriters and their client Amcor.
The underwriting agreements were signed in May 2002.
In a "jumbo" offer structure, the institutional component is done "up front" on a placement timetable, with the retail offer occurring later. According to Freehills' Stone, the structure gives the issuer certainly of receipt of most of the funding much earlier than a traditional rights issue and is easier to underwrite. Freehills, UBS Warburg and ABN AMRO developed the structure for the Adsteam Marine Offer to fund the Howard Smith Towage acquisition in early 2001, and the firm has been involved in most of the subsequent jumbos.
Stone said there had been a number of refinements to the structure over time. The Amcor deal incorporated one of the key refinements, being the first "bookbuild" jumbo, where the price paid by the institutions was determined by a bookbuild undertaken during the institutional offer period.
Principal legal advisers
Law firm (lawyers): Allens Arthur Robinson
Role: Acted for Amcor on the funding package for the
(Robert Simkiss, Stephen Spargo) acquisition of the Schmalbach-Lubeca PET container and bottle caps business
Freehills(Philippa Stone) Acted as underwriters' counsel for the institutional
placement, the entitlement offer and the offer of
Perpetual Amcor Convertible Reset Securities
Project finance - Duke Energy Pipeline
What makes it a 2002 Top 10 deal?
Duke Energy Australia's A$900m gas pipeline financing included concepts not seen before in the project financing market.
In March 2002, Duke Energy Australia financed its Australian gas projects currently operational (primarily the Queensland Gas Pipeline and the Eastern Gas Pipeline) and to come on-line (initially the Tasmania Natural Gas Pipeline) using a corporate and project finance facility.
The financing was available to borrowers in Australia or New Zealand and involved both guaranteed and non-recourse project tranches aggregated together to a maximum amount of A$900m.
Minter Ellison partner Andrew Venables led the team advising Duke Energy International and related entities on the following:
• a A$900m facility, which involved the issue of transferable loan certificates by Duke Australia Pipeline Finance Pty Ltd to various participants and, in the case of NZD borrowings, cash advances to Duke Energy NZ Finance Pty Ltd;
• interest rate swap documentation to hedge the interest rate exposure;
• the guarantee and indemnity given by Duke Capital Corporation (DCC) in respect of moneys owing under the DCC Tranche;
• the guarantee and indemnity given by the Project Guarantors to guarantee all moneys owing under the financing documents other than under the DCC Tranche (recourse tranche);
• undertakings and representations given by the Project Guarantors to the Agent in respect of their respective gas projects and other ancillary matters;
• tripartite agreements and DEATM tripartite agreements;
• fixed and floating charges and share mortgages;
• subordination documentation to regulate the relationship between the providers of the senior debt and the Duke inter-company debt; and
• security sharing and inter-creditor arrangements.
Mallesons Stephen Jaques partners Tony Holland and Richard Hoskins led the firm's team, which included senior associate Lucy Hone, advising a consortium of banks as joint lead arrangers of the A$900m gas pipeline financing.
The consortium comprised National Australia Bank Limited, Citibank, NA and The Toronto Dominion Bank, with Mallesons working very closely with the latter in devising and structuring the financing.
The facility was truly multi-option, including multi-borrower, multi-currency and jurisdictional drawing capacity, a standby facility to support Duke's Australian commercial paper programme, recourse (to US entity Duke Capital Corporation) and non-recourse drawing capability. Drawings under the recourse tranche could be switched to the non-recourse tranche on satisfaction of certain conditions precedent relating to the acquisition, completion or expansion of gas pipelines.
The facility provided for maximum flexibility on a number of fronts, including in respect of the future introduction of mezzanine, leasing and other types of debt both on a secured (through the Security Trust) and an unsecured basis. It was also structured to be stamp duty efficient.
The facility was unique in that it incorporated a regime to allow new projects to be funded quickly and easily (and for projects to be sold). This included a Previously Identified Risk concept, which prevented the Agent from refusing to accept a risk on a new project that has been accepted on a previous project.
Principal legal advisers
Law firm (lawyers): Minter Ellison(Andrew Venables)
Role: Acted for Duke Energy International and related entities
Mallesons Stephen Jaques Acted for The Toronto Dominion Bank, National Australia (Tony Holland, Richard Hoskins) Bank Limited and Citibank NA as the joint lead arrangers of the financing
Project finance - Guangdong's US$14bn LNG supply contract
What makes it a 2002 Top 10 deal?
It will be China's first liquefied natural gas (LNG) import project and among the first energy projects open to foreign participation. Slated for completion in 2005, it will need three million tonnes of LNG every year for the next 25 years. It is also the largest single export deal in Australia's history.
Australia emerged victorious in the battle to secure China's first liquefied natural gas (LNG) supply contract, worth US$14bn (A$25bn) in export income over the 25-year supply period. The US$600m Guangdong LNG Terminal and Trunkline Project is one of the largest gas development projects underway in China.
The contract was hard-won. Six companies - from Australia, Indonesia, Malaysia, Qatar, Russia and Yemen - entered the bidding race in November 2001, but by the start of 2002, only Australia, Indonesia and Qatar remained.
The winning consortium - The North West Shelf Venture - comprised six equal participants: Woodside Energy Ltd (operator); BHP Billiton (North West Shelf) Pty Ltd; BP Developments Australia Pty Ltd; Chevron Texaco Australia Pty Ltd; Japan Australia LNG (MIMI) Pty Ltd and Shell Development (Australia) Pty Ltd.
For 18 months during the two-stage bid process, Minter Ellison, led by Hong Kong-based partner Sam Farrands, took the lead role as principal legal adviser to Australia LNG Pty Ltd (ALNG), the North West Shelf Venture's marketing group for China, which led the bidding for the supply contract. The Minters team advised ALNG on the tender processes in China, legal and commercial risk identification and allocation, all the project documentation, tax effective structuring and all aspects of Chinese law relevant to the project.
A team of lawyers drawn from Denton Wilde Sapte's Hong Kong office (advising on energy and financing issues) and from Jones Day's Shanghai office (advising on China issues) advised the Guangdong LNG Joint Executive Office (JEO) on all aspects of the Guangdong LNG Terminal and Trunkline Project. This was the first time Denton Wilde Sapte and Jones Day had teamed up for a project. The two firms developed a package of contracts that were sent to the Government in Beijing for approval.
Energy partner Susan Farmer led the Dentons team, which included Hong Kong-based partner Nicholas Grandage, while Mitch Dudek, Shanghai partner in charge, led the Jones Day team.
Jones Day's Hong Kong-based energy partner Peter Roberts was responsible for the overall project management of the Denton Wilde Sapte/Jones Day input.
Leading the Dentons team advising CNOOC was corporate partner Tom Deegan and head of energy for Asia David Moroney.
Principal legal advisers
Law firm (lawyers): Minter Ellison
Role: Principal legal advisers to the Australia LNG Pty Ltd (ALNG)
Denton Wilde Sapte
Together with Jones Day, DWS advised the Guangdong LNG Joint Executive Office (JEO). Denton's also advised CNOOC on its acquisition of a 25% interest in the Project
Jones Day
Together with DWS, Jones Day advised the Guangdong (Peter Roberts, Mitch Dudek) LNG Joint Executive Office (JEO) on all aspects of the Guangdong LNG Terminal and Trunkline Project.
Linklaters (Michael Tam, James Douglass)
Advised Hong Kong Electric Holdings
Herbert Smith (Terence Grady, David Renton)
Advised China Construction Bank
Freehills (Mick Dulaney)
Advised the North West Shelf Venture
Phillips Fox (Peter Reid led a team of 12 lawyers)
Advised Denton Wilde Sapte on Australian legal matters
White & Case
Advised on shipping matters
Project finance/securitisation - National Grid Transco/Basslink submarine cable
What makes it a 2002 Top 10 deal?
The Basslink inter-connector will run from Loy Yang in Gippsland, Victoria, across the Bass Strait to Bell Bay in northern Tasmania. When implemented, the 280km undersea cable component will be the world's longest sub-sea inter-connector. Completion of the Basslink project will be the final step in the formation of a national electricity market.
The Basslink project is a major initiative that will allow the trade of electricity between Tasmania and mainland Australia and allow Tasmania to enter the National Electricity Market (NEM), the wholesale market in electricity that allows energy companies to trade across State borders.
A subsidiary of National Grid Transco plc (NGT) was selected by the Tasmanian Government to build, own and operate the direct current transmission system. Basslink will have the capacity to operate at 480MW continuously or up to 600MW capacity for some hours to provide for peak export demand.
NGT sold certain rights to capacity on the system to Hydro Tasmania in an arrangement believed to be the first of its kind in the world. The deal, signed on 29 November 2002 and with a value speculated at between A$500m and A$1bn, allowed Hydro to optimise its flexible generation assets to take advantage of peak Victorian trading, as well as low-priced off peak conditions associated with Victoria's largely brown coal-fired system. NGT will see a more stable revenue stream incentivised around operating performance.
Freehills partners Robert Nicholson and Brendan Quinn led the firm's team advising National Grid Transco. The firm helped devise the contractual framework having regard to market and regulatory considerations, as well as handling financing and a challenging environmental process.
Allen & Overy partner Alex Pease led the firm's work for NGT in negotiating with EPC contractors Siemens and Pirelli, based in Europe.
Clayton Utz partner Brian Doyle led the firm's team advising Hydro Tasmania.
Features of the Basslink project that make it significant include the following:
• It will be the world's longest sub-sea inter-connector to date with innovative plant capability, able to move dynamically around a continuous rating;
• The innovative 'swap' like contractual structure aligning generation and transmission capabilities and economics with electricity market structures;
• The complex security structure to support customer as well as financier rights (corporate facility during construction, moving to project facility post commissioning);
• Legal innovation in accommodating market design (developed during the bid process), 'swap' concept and supporting contractual framework, risk allocation, security structure, financing structure (both now and post commissioning);
• Negotiation of strongly contested environmental process, including both land based and marine issues; and
• Cross-border in two ways - UK investment into an Australian asset, which crosses state borders (as well as Commonwealth waters).
Principal legal advisers
Law firm (lawyers): Freehills
Role: Acted for National Grid Transco, the infrastructure developer, (Robert Nicholson, owner and operator
Brendan Quinn)
Clayton Utz (Brian Doyle)
Acted for Hydro Tasmania on the Basslink project
Allen & Overy (Alex Pease)
Acted for National Grid Transco in respect of the EPC contract
Debt and equity-linked; equity; project financing - Western Sydney Orbital
What makes it a 2002 Top 10 deal?
The Western Sydney Orbital will be the longest toll road in Australia and the first fully electronic free-flow toll road in New South Wales. It is the State's largest privately funded infrastructure project to date (with a construction cost of A$1.54bn) and among the largest in Australia. Financing costs and interest bring the total cost of the project to A$2.23bn, funded by A$1.25bn of debt and A$980m of equity.
The Western Sydney Orbital (WSO) is a 39km four-lane toll road that will connect three existing motorways - the M2 at West Baulkham Hills in the north, the M4 at Minchinbury and the M5 at Prestons in the south.
The WSO deal was structured as a BOOT arrangement, with control of the motorway to revert back to the Roads and Traffic Authority (RTA) of NSW (the sponsor agency) in 34 years' time. The deal involved the RTA's granting to the WestLink Consortium a concession to build, finance, operate and toll the WSO, and also involved related financing, contractual and regulatory arrangements.
Financial close was achieved in record time for a deal of this type, just 19 months after the RTA called for expressions of interest in July 2001. Over 60 separate contracts were negotiated and signed at contractual close. Financial close occurred on 14 February 2003.
Clayton Utz partner Doug Jones led the firm's team advising the RTA on all aspects of the transaction.
Mallesons partner David Storr led the firm's team advising the successful bidder, WestLink Motorway Partnership (a consortium comprising Leighton Contractors Pty Limited, Abigroup Limited, Macquarie Infrastructure Group and Transurban).
Allens partner Steve Pemberton led the firm's team advising Bank of America, WestLB and RBS Australia as financiers to the WestLink Motorway consortium. Freehills projects partners Alan Rosengarten and John Curtis led the firm's team advising the Transurban Group.
Baker & McKenzie acted for Macquarie Equity Capital Markets as joint underwriter of the A$430m CARS issue, a relatively novel funding arrangement.
Principal legal advisers
Law firm (lawyers): Clayton Utz
Role: Acted for the RTA of NSW (the sponsor agency)
Mallesons Stephen Jaques
Acted for the successful bidder, the WestLink Consortium (and (David Storr, Yuen-Yee Cho, also for Macquarie providing bridging finance to Transurban) Peter Doyle, Andrew Chew)
Allens Arthur Robinson
Acted for the project lenders / senior debt financiers to the (Steve Pemberton) WestLink Motorway consortium
Freehills (Alan Rosengarten, John Curtis)
Acted for Transurban Infrastructure Developments Limited
Baker & McKenzie
Acted for Macquarie Infrastructure Group
Blake Dawson Waldron
Acted for Leighton Contractors
Project finance - A$1.9bn Stanwell Magnesium Project
What makes it a 2002 Top 10 deal?
The Stanwell Magnesium Project was one of the largest 'greenfield' project financings completed in Australia, at nearly A$1.9bn. Stationed at Stanwell in central Queensland, it will be the world's largest magnesium metal plant.
The A$1.9bn Stanwell Magnesium Project was almost 10 years in the making, which in itself deserves recognition. Closing in December last year, it represents one of the largest 'greenfield' project financing transactions ever completed in Australia.
The market risk of the Project was mitigated by a long-term contract with Ford Motor Company to take 45,000 tpa of magnesium.
Due to its significance, the Project received high levels of government funding from the Federal and Queensland governments. The A$932m senior bank debt facility underpinning the deal was arranged by ABN AMRO, ANZ Investment Bank, JPMorgan and West LB.
The diverse group of sub-underwriters included BOS International, Mizuho Bank, China Construction Bank and HSBC.
Mallesons Stephen Jaques partners Martin James and Geoff Wood led the firm's team, acting on behalf of joint lead arrangers ABN AMRO, JP Morgan, ANZ and West LB. The firm's involvement included assisting in preparing and reviewing novel documentation to co-ordinate private sector financing, Federal and State Government support (which raised WTO issues relating to subsidies) and off-take requirements, and resolving complex risk allocation and bankability issues relating to new technology risk, construction risk and insurance.
Allens Arthur Robinson acted as finance counsel for the sponsor, Australian Magnesium Corporation, on the senior debt-raising and sponsor equity commitments for the plant's construction.
The Brisbane office of Corrs Chambers Westgarth acted as project counsel for the sponsor.
Clayton Utz advised the plant's constructors, Leighton Contractors, and also advised the State of Queensland on its funding involvement.
Minter Ellison's Gillian Brown advised Stanwell Corporation.
Australian Magnesium Corporation will process 97,000 tonnes of magnesium metal each year at the plant, which will be used to manufacture lightweight automotive parts.
Principal legal advisers
Law firm (lawyers): Mallesons Stephen Jaques
Role: Acted for ABN AMRO, JP Morgan, ANZ and West LB as (Martin James, Geoff Wood) joint lead arrangers
Corrs Chambers Westgarth Acted as project counsel for the sponsor, Australian (Cameron Jorrs, Peter Schenk) Magnesium Corporation
Allens Arthur Robinson
Acted as finance counsel for the sponsor, Australian (Phillip Cornwell) Magnesium Corporation
Clayton Utz
Acted as counsel for Leighton Contractors, EPC contractor (Arch Fletcher)
Minter Ellison
Acted as counsel for Stanwell Corporation
(Gillian Brown)
M&A - Sydney Airport's A$5.58bn (US$3.2bn) acquisition
What makes it a 2002 Top 10 deal?
The sale of Sydney Airport was one of the largest Asia Pacific M&A deals in 2002. It was also the world's largest trade sale of an airport, the largest government sale in Australian history and the largest privatisation in Australia since 1997.
Blake Dawson Waldron advised Southern Cross Corporation on its successful A$5.58bn bid to acquire Sydney Airport. Partner David Somervaille and special counsel Jeremy Kriewaldt, former banking and finance partner Fred Pucci and projects partner Tony Hill were the key members of the Blakes team.
Macquarie Bank led the Southern Cross Consortium, which also included the airports arm of German construction company Hochtief and the Commonwealth Bank of Australia (CBA), that outbid rival groups.
Allens Arthur Robinson acted for CBA, Barclays Bank, RBS Australia (Royal Bank of Scotland) and SG Australia (Société Générale) as providers of around A$4bn in senior facilities and related interest rate hedging facilities in connection with the acquisition. Also on the debt side, a separate team of Allens lawyers acted for HypoVereinsbank, who are funding a A$200m portion of the equity contributed by Hochtief in its role as airport operator and a shareholder in the Southern Cross Consortium.
Mallesons Stephen Jaques, meanwhile, was appointed in January 2001 as principal legal adviser to Sydney Airports Corporation Limited (SACL) on a scoping study to determine how the Sydney Basin Airport should be privatised. It subsequently advised in connection with the trade sale decided on by the Commonwealth, and was appointed following a competitive tender process.
Mallesons also acted for SACL in connection with its successful application to the ACCC to substantially increase the aeronautical charges in relation to the use of facilities by airlines at Sydney Airport.
Principal legal advisers
Law firm (lawyers): - Buy Side Role Blake Dawson Waldron
Role: Advised Southern Cross Corporation
Allens Arthur Robinson
Advised the Commonwealth Bank of Australia, Barclays Bank, RBS Australia (Royal Bank of Scotland) and SG Australia (Société Générale); on the debt side, a separate team of AAR lawyers acted for HypoVereinsbank
Freshfields Bruckhaus Deringer Berlin partner Heidbrink led the firm's team advising (Alfried Heidbrink) Hochtief Airport as a major sponsor of the acquiring consortium
Gilbert + Tobin (Robert Simpson)
Advised Hochtief Airport
Deacons
Advised Ontario Teachers' Pension Plan Board on its acquisition of a 5% stake in Southern Cross Airports
Law firm (lawyers) - Sell Side Role
Freehills (John O'Sullivan)
Advised the Commonwealth Government
Mallesons Stephen Jaques
Advised the Sydney Airports Corporation Limited
(Paul Ellis, David Rohr, David Friedlander)
M&A - Newmont Mining/Franco-Nevada Mining/Normandy Mining
What makes it a 2002 Top 10 deal?
The acquisition of Normandy Mining, Australia's largest gold miner, and Canada's Franco-Nevada Mining by Newmont Mining Corporation, now the world's largest gold company, was one of the two largest M&A deals in Australia in 2002.
The hotly contested battle for the title of world's largest gold miner was predictably bloody, with the Takeover Panel receiving no fewer than six applications - two started by Newmont, the remainder by Anglogold.
Newmont succeeded on each application, and in doing so, leapfrogged Anglogold to become the world's largest gold company.
The deal, announced on 14 September 2001 and completed on 26 February last year, involved two transactions with a total value of US$9bn.
At the start of the bid, Newmont had a stake in Normandy of almost 20% through a call option (entered into as a precursor to the deal - prior to that, Newmont did not have a stake). This was a significant pre-bid stake in the bidding war with Anglogold for control of Normandy. Newmont issued CDIs, not commonly issued in Australia, as part of the bid consideration.
Also marking the transaction as novel was the fact that the Newmont bid, like the Anglogold bid, had a two-tier structure, with a separate offer being available for US and Canadian shareholders or ADR holders. This offer required the registration of the Bidders Statement with the SEC - as a consequence, US and Canadian shareholders of Normandy were able to receive the scrip consideration under the bid without having, as is usual, their entitlement to scrip consideration cashed out.
The Newmont bid represented the first test in Australia of break fees and 'no shop' arrangements before the Panel. These arrangements were put in place while the Panel's policy on these matters was still in draft form, yet the arrangements, which offered substantial break fees and a bank guarantee to secure the payment, were upheld despite being challenged.
Newmont Mining Corporation's acquisition of Normandy Mining and Franco Nevada Mining was achieved through a three-way merger between the entities, under a process akin to a scheme of arrangement. It was complicated because of the inter-dependence of the Franco-Nevada side of the transaction, implemented in Canada.
Gilbert + Tobin partners Garry Besson and Gary Lawler led the firm's team acting for Newmont Mining Corporation. Allens Arthur Robinson partner Peter Cameron led the firm's team advising Normandy Mining Limited. And Freehills' Rodd Levy led the team advising Anglogold Limited.
Mallesons Stephen Jaques partners Ian Cochrane, Geoff Rogers, Alison Lansley and Greg Golding led the firm's team, which included senior associate Richard Maltman, acting for Franco-Nevada. This was firstly in relation to the takeover of Normandy by Newmont - a transaction valued at US$1.89bn (Franco held 20% of the issued capital of Normandy) - and secondly, in a merger of Franco-Nevada and Newmont by Plan of Arrangement in Canada with a transaction value of US$7.19bn. The firm also represented Franco-Nevada in the various applications before the Takeover Panel in relation to Anglogold's competing bid for Normandy.
Principal legal advisers
Law firm (lawyers): Gilbert + Tobin (Garry Besson, Gary Lawler)
Role: Acted for Newmont Mining Corporation
Allens Arthur Robinson (Peter Cameron)
Acted for Normandy Mining Limited
Mallesons Stephen Jaques
Acted for Franco-Nevada Mining
(Ian Cochrane, Geoff Rogers, Alison Lansley, Greg Golding)
Freehills (Rodd Levy)
Acted for Anglogold Limited
M&A - Xstrata plc US$2.5bn acquisition of Aussie coal interests
What makes it a 2002 Top 10 deal?
Xstrata AG's US$2.5bn acquisition of the Australian and South African coal businesses of Glencore International AG was a complex cross-border transaction and the second largest deal of the year. In addition to the acquisition, the transaction involved the merger of Xstrata AG and Xstrata plc under the Swiss Code of Obligations, the syndication of a new US$1.4bn loan facility and a global offering of Xstrata plc ordinary shares, listed on the London and Swiss stock exchanges.
In 2001, Glencore International AG - the largest shareholder of Swiss coal company Xstrata AG - indicated its intention to bundle its coal businesses and float them on the Australian Stock Exchange as Enex Resources. It had hoped to raise A$2.3bn. Then came the September 11 attacks, which left local demand for the issue crushed, and the Enex Resources IPO was put on hold.
The silver lining came in the shape of Xstrata AG's new CEO, who had been appointed to the position in October 2001 and who approached Glencore with a proposal to transform the Xstrata group. Glencore agreed, concluding that its Australian coal assets would attract more value within the ever-expanding Xstrata.
It was right. The US$2.5bn (A$4.14bn) acquisition of Australian and South African coal businesses (Enex Resources and Duiker Mining) from Glencore, agreed on 20 February 2002 but effective from 1 January that year, was just one part of Xstrata's strategy to double in size, with the intention of perhaps becoming a mini-BHP Billiton. Its plan to create a new mid-sized global coal and metals company also saw it merge with UK-company Xstrata plc and list on the London Stock Exchange in March 2002.
The merger created a company with coal, vanadium, zinc and magnesium assets, with Xstrata shareholders receiving 10 new UK shares for every Swiss share held under the cash and stock deal.
The initial public offering, which raised approximately £1.58bn (A$4.08bn) and was more than seven times oversubscribed, was the biggest flotation on the London market since July 2001. The IPO and the associated acquisitions transformed Xstrata into a member of the UK FTSE 100 index. With a pre-transaction market capitalisation of approximately US$800m and a listing on the Swiss Stock Exchange, Xstrata AG was - prior to this deal - a relatively small player in an industry dominated by multinationals such as BHP Billiton, Alcoa, Rio Tinto and Anglo American. Post-transaction, Xstrata plc is one of the largest thermal coal producers in the world, with a market capitalisation of over US$3bn.
With around 40%, Glencore remained the largest shareholder of the new company, which sought a secondary listing on the Swiss Exchange that saw it become a member of the all-share Swiss Performance Index.
Mallesons worked closely with UK law firms on the UK listing particulars for Xstrata plc and the US$1.4bn finance facility. Partners Nick Pappas and Richard Marshall led the firm's team, which also undertook the due diligence for the IPO of Xstrata plc.
Clayton Utz partner Graham Taylor led the firm's team advising Xstrata AG.
Freshfields acted for Xstrata PLC, Xstrata (Scheiz) AG (Switzerland), and Xstrata South Africa.
JP Morgan plc acted as financial adviser to Xstrata AG and Xstrata plc in relation to the acquisition and merger, and as sponsor to Xstrata plc in connection with its admission to the Official List of the UK Listing Authority.
Principal legal advisers
Law firm (lawyers): Mallesons Stephen Jaques
Role: Acted for Glencore International AG and Enex Resources Ltd
(Nick Pappas, Richard Marshall)
Allen & Overy
Acted for Enex Resources Ltd
Clayton Utz (Graham Taylor)
Acted for Xstrata AG
Barr & Karrer
Acted for Xstrata AG
Freshfields Bruckhaus Deringer
Acted for Xstrata plc, Xstrata (Scheiz) AG (Switzerland), (Ken Martin, Julian Makin) Xstrata South Africa
Linklaters
Acted for the financiers
Simmons & Simmons
Acted for Xstrata AG
The year ahead
The outlook for 2003 is positive on a number of fronts - M&A in particular.
According to the latest Thomson Financial reports, announced M&A activity in the first quarter involving an Australian target or acquiror surged 42% in value over the same period last year, from US$5.67bn (A$8.938bn) to US$8.07bn (A$12.722bn).
The number of announced deals, however, has remained fairly static at 319 transactions, compared to 318 in the first quarter of 2002. The rate of completed deals has risen slightly, from US$10.196bn in 2002 to US$10.205bn.
US-based Constellation Brands' US$1.42bn takeover offer for BRL Hardy Ltd tops the rank value tables so far this year, with Centro Properties' US$841.68m bid for AMP Shopping Centre Trust close behind, and Tabcorp Holding Ltd's US$587.93m offer for Jupiters Ltd coming in third.
In the construction sector, a number of major projects are also in the offing. The bidding race for the NSW government's A$815m Lane Cove tunnel project, which will link the Gore Hill freeway at Artarmon to the M2 motorway at East Ryde in Sydney's north-west, has come down to four consortia, including Macquarie Bank/Abigroup-led TunnelLink Ltd. Mallesons construction partner Geoff Wood, who is advising TunnelLink, is bullish about the prospects for significant construction sector activity this year.
"There's a lot of infrastructure that's been under-developed in recent years. I think governments are recognising that around the country," says Wood.
As part of its State Infrastructure Strategic Plan, the NSW government alone has plans to invest a further A$26.1bn in infrastructure projects over the next four years, a 26% increase over the previous four-year period. Meanwhile, the Victorian government recently called for expressions of interest in relation to the design, construction, finance, lease, maintenance and operation of the Mitcham-Frankston Freeway, a 40km link between Melbourne's eastern and south-eastern suburbs.
A recent Australian Industry Group survey revealed a projected 11% growth in non-residential construction activity for this financial year, based on projects already underway or in the advanced planning stages. "There's a lot more activity in the non-residential sector, with the obvious major boost being the Western Sydney Orbital," says Wood. "The real work [on that project] starts now."
Wood says despite predictions of a downturn, the residential construction sector should also experience strong growth. "We've seen a lot of work in the pipeline on the residential side with Australand and other developers," he says. Landcom, for example, is preparing to undertake a number of residential land development projects in 2004-05.
Asian Legal Business Top 10 Deals of 2002
Australian firms were well represented when Asian Legal Business reviewed Asia's top ten deals earlier this year (February issue).
The US$14bn Guangdong LNG supply contract made it onto the list, Minter Ellison advising the North West Shelf Venture's marketing group, Australian LNG Pty Ltd, and Freehills and Phillips Fox also having a hand in the deal.
The Sydney airport sale, a US$3.2bn deal, was another qualifier, with Allens Arthur Robinson, Blake Dawson Waldron, Gilbert + Tobin and Mallesons Stephen Jaques all playing a role.
The combined deal value of the Asian deals (excepting the Vietnam Phu project), was around US$35bn.
• Guangdong's US$14bn LNG supply contract
• Bharti Televentures' US$172m IPO
• US$2.7bn PRC ethylene cracker deal
• Bank of China's US$25bn IPO
• China Telecom's US$1.43bn global IPO
• Sydney Airport's US$3.2bn acquisition
• Samsung Life Insurance's cross-border MBS offering
• MobileOne IPO
• Vietnam's Phy My 2.2 project
• China Mobile's US$10.34bn acquisition of China Mobile Hong Kong (BVI)
