2012 international brochure

AustrAliAnPErsPEctivEs 2012

gtlaw.com.au

GtlAW.cOM.Au PAGE 1

The last 18 months have seen significant change in the Australian legal

market. A range of foreign firms have arrived in Sydney and Perth

through acquisitions and alliances of various types and scale. This has

created a more competitive Australian legal market, and also a different

environment for our friends in law firms around the world who do not

have an Australian presence but have clients with commercial interests

in Australia.

From our perspective, the increased competition is good for clients and

good for us. In this environment, our share of leading mergers and

acquisitions transactions in Australia has grown, which enhances our

reputation as the go-to independent firm in Australia. We have also

benefited from consolidating relationships with the many great law

firms around the world who do not compete in Australia.

In the last quarter of 2012, we are seeing some of the weakness and

uncertainty in other economies affect sentiment in Australia more than

ever before. As a consequence, the cautious optimism that has prevailed

among investors in Australia is being reduced simply to caution.

We are fortunate in all of this to have remained very busy. Our finance

team has just helped refinance one of our largest iron ore producers

and finance Australia’s largest, recent public private partnership. In

M&A, we have worked on the majority of high-profile public

transactions in Australia this year. Our litigators are commencing

Australia’s most recent class action and our restructuring team is

currently leading Nine Entertainment Co.’s restructure – the largest in

Australia’s history.

In common with many jurisdictions, Australia’s regulators are also

becoming much more proactive, and as a result our market-leading

competition + regulation practice is in peak demand. That practice,

along with our communications + technology group, has also been

instrumental in the progression of the A$40+ billion National

Broadband Network project, which is touted as the single largest

nation-building infrastructure project in the country’s history.

In this booklet, each of our practice groups has laid out its perspective

on the Australian market at this point of 2012. We think there will be

something of interest inside for clients and friends both in Australia and

around the world. As with previous editions, we also hope you get a

sense of what we are building at Gilbert + Tobin and what makes us

different: that we are ambitious – both for our clients and for the

success of our firm; that we believe the most difficult matters require

not only excellence and market-leading expertise but also courage,

commerciality and creativity; and that we apply ourselves to the

responsibility of strengthening civil society and helping the

disadvantaged in Australia with the same conviction as our largest

corporate work.

In all of this we aim to be not just an independent alternative to our

competitors, but to be Australia’s leading corporate law firm.

Danny gilbert am

Managing Partner

intrOductiOn

Market volatility in China, Europe and the United States has affected investor sentiment, and as a result, M&A deal flow across the globe is down.

Against this background, Australia is negotiating the challenges of a two-speed economy – while the mining and energy sectors continue to underpin the national economy, manufacturing and retail face many uncertainties and challenges. However, there is still life in the Australian M&A market and deals are getting done, albeit not with the speed or certainty they were before the global financial crisis (GFC).

Some key features of our M&A market are as follows.

Energy and resources are still key

The energy and resources sector represents a large

part of the M&A market. In 2011, energy and

resources M&A represented 53% by number and

59% by transaction value of total Australian public

M&A deals. Asian bidder interest in this sector also

remains strong.

While energy and resources deals are commonly

centred on coal, iron ore and gold assets, deals relating

to liquefied natural gas (LNG) and coal seam gas

have also been significant. Apart from pure resources

M&A, the mining services industry has also been in

focus with recent high-profile deals including

FLSmidth’s takeover of Ludowici, and Orica’s joint

venture with Yara International and Apache to build

an ammonium nitrate plant on the Burrup Peninsula in

Western Australia.

Whether the energy and resources sector will

continue as strongly remains to be seen, with some

industry and other commentators claiming the

resources boom is over. Certainly, prices for some

commodities are down and, accordingly, share prices

for many resources stocks have been under pressure.

Infrastructure opportunities abound

The infrastructure sector has also seen significant

M&A activity over the past 12 months. As a result of

the resources boom, there is a need to develop

mining infrastructure, particularly rail and port

connections in Queensland and Western Australia.

This should result in significant activity in Australia’s

infrastructure sector for some years to come.

The relatively safe long-term returns from regulated

infrastructure investments – such as gas and electricity

transmission lines, toll roads and other similar

investments – are attractive to investment funds,

particularly superannuation and pension funds with

their long-term investment horizon. The willingness of

super funds to invest directly in infrastructure assets

could result in an increase in M&A competition and

liquidity in this asset class.

Joint bids are increasingly prevalent

A key trend to emerge over the last 18 months has been the announcement and execution of a number of joint bids. Given the current market difficulties in completing deals, and the Australian Competition and Consumer Commission’s (ACCC’s) approach to mergers in certain sectors, the joint-bid structure is proving advantageous, since it spreads acquisition costs and lowers regulatory risk. Moreover, teaming up with an existing shareholder in the target can be an excellent technique for unlocking a difficult target share register.

Recent examples of joint bid transactions include a consortium led by Noble Group and Posco on their proposed takeover of Arrium Limited, the takeover by Peabody Energy and ArcelorMittal of Macarthur Coal, and the bid by FOXTEL (a joint venture between Telstra, News Corporation and Consolidated Media Holdings) for AUSTAR.

Foreign bidders remain very important Despite the high Australian dollar, Australia remains an attractive destination for foreign investors. In 2011, there was a record A$65 billion in inbound foreign investment into Australia. We expect direct foreign investment to continue to strengthen as foreign bidders, particularly those from Asia and North America, continue to be attracted to Australian resources and agribusiness companies, and Australia’s standing as a stable, developed economy with mostly transparent regulation and low political risk.

MERGERS + ACQUISITIONSSimilar to the state of mergers and acquisitions worldwide, the M&A landscape in Australia remains challenging.

Julie athanasoff Partnert +61 8 9413 8406E [email protected]

tony BancroftPartnert +61 2 9263 4025 E [email protected]

Rachael BassilPartnert +61 2 9263 4733 E [email protected]

charles BoglePartnert +61 2 9263 4367 E [email protected]

andrew BullockPartnert +61 2 9263 4126 E [email protected]

marcello cardaciPartnert +61 8 9413 8403E [email protected]

GtlAW.cOM.Au PAGE 3

DULUXGROUP

Hostile takeover offer for

Alesco Corp

a$200 million

PACIFIC EQUITY PARTNERS

Acquisition of Spotless Group by

scheme of arrangement

a$1.1 billion

GrAincOrP

Aquisition of Gardner Smith Group

a$302 million

tElstrA

As 50% partner in FOXTEL on

FOXTEL’s aquisition of AUSTAR

a$1.9 billion

COUNTRY ROAD

Acquisition of Witchery Group

a$192 million

tElstrA

Sale of TelstraClear to Vodafone in

New Zealand

a$750 million

OricA

Pilbara ammonium nitrate joint

venture with Yara

a$800 million

CHAMP PRIVATE EQUITY

Aquisition of Gerard Lighting

a$277 million

GrAincOrP

Defence against a takeover from

Archer Daniel Midlands

a$3 billion

EXXARO RESOURCES

Takeover of African Iron

a$388 million

silvEr lAkE rEsOurcEs

Acquisition of Integra Mining

a$426 million

stEElMAkErs AustrAliA

cOnsOrtiuM

Proposed takeover of Arrium

a$3.2 billion

Neil PathakPartnert +61 3 8656 3344E [email protected]

Bryan PointonPartnert +61 2 9263 4286 E [email protected]

Bill SpainPartnert +61 2 9263 4009 E [email protected]

[email protected]

David cleePartnert +61 2 9263 4368E [email protected]

Peter cookPartnert +61 2 9263 4774 E [email protected]

andrew crookPartnert +61 2 9263 4209 E [email protected]

chris FlynnPartnert +61 2 9263 4321 E [email protected]

Deborah JohnsPartnert +61 2 9263 4120 E [email protected]

Rachel laundersPartnert +61 2 9263 4143 E [email protected]

Sarah turnerPartnert +61 8 9413 8433E [email protected]

John williamson-NoblePartnert +61 2 9263 4030 E

adam lauraPartnert +61 2 9263 4144 E [email protected]

Ben macdonald Partnert +61 3 8656 3351 E [email protected]

Hiroshi Narushima Partnert +61 2 9263 4188E [email protected]

the concept of ‘national interest’

The term ‘national interest’ is deliberately not defined in the legislation or the policy, to ensure that

the Treasurer has the flexibility to assess each transaction according to its circumstances. However,

due to the lack of transparency surrounding the assessment process, there have been calls for

increased rigour around the national interest test to assure all stakeholders that relevant criteria

have been considered. Despite this, we do not expect any significant changes to the national

interest test.

Investments by foreign government–related entities

The second issue we are encountering with increasing frequency involves the application of

Australia’s foreign investment regime to foreign government–related entities. Most transactions

involving foreign government–related entities must be notified under this regime. While recent

iterations of the policy have clarified what constitutes a foreign government–related entity, there

can still be some surprises around how it is applied.

This is particularly the case where sovereign wealth funds and pension funds for foreign public

sector employees are large investors in pooled investment funds.

Investments by foreign entities in agricultural land

Another issue that has arisen recently relates to the acquisition of agricultural land in Australia.

Historically, there have been relatively tight restrictions on acquiring urban land (which is any land

that is not exclusively involved in agriculture), but acquisitions of agricultural land have been less

regulated. In light of recent acquisitions and a heightened awareness of issues such as food and

water security, the Government has recently announced that a new register of agricultural land will

be established to help track foreign ownership of such land. Further initiatives, such as reduced

thresholds for acquisitions of urban land may follow.

Visit www.gtlaw.com.au/publications/doing-business-in-australia/ to download a copy of our guide,

Doing Business in Australia.

FOrEiGn invEstMEnt






There are three issues currently dominating

Australia’s foreign investment horizon from a

regulatory perspective:

• the concept of ‘national interest’

• investments by foreign government–related entities

(particularly as this affects private equity funds)

• investments by foreign entities in agricultural land.

Australia’s foreign investment approval regime

continues to comprise a mix of legislation and policy.

The foreign investment policy (which has no legislative

force, but with which prospective investors are

expected to comply) was designed to plug significant

gaps in the legislation but is itself often unclear. Much of

the uncertainty in recent years stems from the lack of

transparency in how the Foreign Investment Review

Board (FIRB) applies both the law and the policy to

evolving transaction structures.

In general, the Treasurer (acting on advice from the

FIRB) has the power to stop or unwind certain

transactions that are deemed to be contrary to the

national interest. The Treasurer ceases to have this

power in respect of a covered transaction if the

transaction is notified to the FIRB and a statement of no

objection is obtained.

Despite positive developments, Australia’s foreign investment approval process can still be opaque and influenced by political sentiment.

GtlAW.cOM.Au PAGE 5

After several years of subdued market activity, many

hoped 2012 would herald the ‘reopening’ of

Australian capital markets, particularly for initial

public offerings (IPOs).

In fact, 2012 has witnessed one of the weakest

markets in Australian equity in the past decade.

However, despite the difficult market and low

volumes, Gilbert + Tobin was delighted to be

involved in many of Australia’s leading transactions.

Initial public offerings and listings

In 2010–12, a pipeline of potential IPOs came

and went, with insufficient demand at the

desired multiple.

With a few notable exceptions, the IPOs that have

come to market have been very disappointing for

the institutional investors that supported them,

leaving market sentiment and investor confidence at

an all-time low.

In the absence of a strong equity market, private

equity has been forced to look for other exit

opportunities and to hold assets longer than

expected. When the market does open up again,

we expect that the days of a full private equity exit

by IPO are behind us and that private equity

owners will, more likely than not, need to retain

a significant holding.

acquisition-related raisings For companies that are already listed and looking to tap existing shareholders to raise capital, the story has been more positive. 2012 equity capital markets activity has been dominated by acquisition-related raisings which shows that equity is available for companies with a strong earnings history or a good growth story.

Australian Securities Exchange (ASX) listing rule amendments should assist secondary raisings. These amendments allow entities that have a market capitalisation of A$300 million or less and that are not in the S&P/ASX 300 market index to seek shareholder approval to expand their placement capacity from 15% to 25%.

Hybrids and debt instruments Over the last 12 months we’ve seen the re-emergence of hybrid offerings, with a number of significant hybrid and debt security raisings, predominantly by blue-chip corporations and big banks.

‘low doc’ continues to rule The low-doc regime, which allows companies to raise capital through a pro-rata offer to existing shareholders without lodging a prospectus, continues to provide companies with a quick and relatively easy way to raise money.

As companies look to balance their desires to raise

funds from institutions quickly and to minimise the

dilutive or value-depleting impact on retail

shareholders, two new structures have emerged.

The first is the PAITREO, which allows settlement

of the institutional component to be accelerated

but gives retail holders the ability to realise value for

their rights early, through the addition of rights

trading to the normal structure.

The second is the combination of an accelerated

low-doc entitlement offer, institutional placements

and a prospectus, which gives retail shareholders an

opportunity to top-up their take-up to avoid

dilution caused by the institutional placements.

cAPitAl MArkEts

Sarah turnerPartnert +61 8 9413 8433E [email protected]




GrAincOrP

Underwritten placement and accelerated

entitlement offer

a$170 million

COUNTRY ROAD

Renounceable entitlement offer

a$192 million

M2 tElEcOMMunicAtiOns GrOuP

A$83 million underwritten accelerated

entitlement offer

a$192.4 million

cAlibrE GrOuP

Advising UBS and Goldman Sachs on the underwritten

IPO and ASX listing of Calibre Group

a$75 million

[email protected]


tony BancroftPartnert +61 2 9263 4025 E [email protected]



Janine RyanPartnert +61 2 9263 4051 E [email protected]

Some of the most significant public market M&A deals in the last 12 months were led by financial sponsors who continue to provide liquidity and tension for most sale processes in the Australian market.

Key features of the Australian market in 2012 from our perspective are set out below.

Public-to-private transactions In Australia’s private equity industry, public-to-private (P2P) transactions have historically been more difficult to execute than private acquisitions. However, the last 12 months saw CHAMP Private Equity acquire two public companies through schemes of arrangement; Crescent Capital launch a hostile bid; and Pacific Equity Partners acquire Spotless Group after a very public tussle with its board.

We are fortunate to have worked on all of these transactions. While all are different, we believe their successful completion reflects the following developments in the P2P space:

• Key domestic sponsors have lost their coyness regarding public deals and are now happy to take an aggressive and even hostile approach to public M&A .

• This approach has been encouraged by better relationships with value-based institutional shareholders who, in turn, are becoming more activist and willing to support whole-of-Company transactions.

• Debt markets are supporting schemes of arrangement with timetables and levels of debt that have allowed transactions to close smoothly.

Venture and expansion capital is attracting renewed interest The general view in Australia is that venture capital has not provided the same quality of returns to investors as private equity. As a result, it is difficult to access institutional investment in venture capital funds in Australia, meaning that new funds have been raised primarily with high net worth support and that early-stage companies have often had to look offshore for expansion capital.

Through a combination of changes in market opportunities and in outlook for both internet-based business models and life science–focused businesses, we are now seeing renewed interest in the venture space. We hope this trend will develop strongly and that domestic institutional LPs can be attracted back to this asset class.

Distressed funds are increasingly active and are changing the outcomes for over-leveraged companies Oaktree, Apollo and Sankaty are not names universally recognised among Australia’s investment community. However, we have no doubt they soon will be. As players in all of Australia’s key distressed debt situations, these companies are changing the way over-leveraged businesses are restructured;

buying debt on a ‘loan-to-own’ basis and avoiding receivership in favour of schemes of arrangement. To date, Nine Entertainment Co. is the largest of these loan-to-own opportunities, which is set to play out over the next few months.



Hiroshi Narushima Partnert +61 2 9263 4188E [email protected]

Bryan PointonPartnert +61 2 9263 4286 E [email protected]


PRIVATE EQUITY

[email protected]


charles BoglePartnert +61 2 9263 4367 E [email protected]



andrew crookPartnerT +61 2 9263 4209 E [email protected]


Acquisition of Spotless Group

a$1.1 billion

QUADRANT PRIVATE EQUITY

Acquisition of Macquarie Group’s and Tom Meyers’

stakes in CQMS

a$140 million

irOnbridGE cAPitAl

Acquisition of Southern Cross Dental Laboratories

a$95 million

CHAMP PRIVATE EQUITY

Acquisition of a 33.2% stake in Miclyn Express Offshore

a$199 million

Acquisition of Gerard Lighting Group

a$277 million

GtlAW.cOM.Au PAGE 7

invEstMEnt Funds

allocation issues The so-called ‘denominator effect’ has affected fund managers globally, exacerbated by the fact that Australian superannuation funds (a major source of investment for Australian investment funds) generally have smaller allocations to alternative assets than their overseas counterparts.

While this allocation issue appears to be easing, there is speculation that Australian superannuation funds may be looking to diversify their alternative assets geographically by investing in offshore funds rather than Australian funds.

In the absence of available funds from traditional investors, Australian fund managers are creating smaller funds and, for the first time, targeting high net worth individuals in a significant way.

Another source of funds is the Australian Government’s Innovation Investment Fund program, under which the Government invests A$20 million in funds managed by licensed fund managers. The fund must raise matching capital for investment in early-stage Australian businesses, with the aim of commercialising Australian research and development.

changes and uncertainty in taxation

2012 has been punctuated by a number of announcements and publications relating to the taxation of collective investment vehicles, but little

in the way of substantive immediate reform. These include:

• the increase, effective 1 July 2012, to the rate of MIT withholding from 7.5% to 15% (in what is a negative development for property fund managers and their foreign investors)

• the deferral until 1 July 2014 (originally proposed to be 1 July 2013) of the rewrite of the trust taxation provisions of the tax law

• the deferral until 1 July 2014 of the tax provisions for the proposed MIT regime (together with associated amendments to other parts of the tax law)

• the release of a discussion paper on ‘fixed trusts’. Fixed trust status is important for many collective investment vehicles. Among other things, it allows imputation credits to flow through to investors, exemption of capital gains in certain circumstances, and the carry forward of tax losses in the trust and investee companies held by the trust

• the enactment of a number of elements of the new ‘investment manager regime’. Among other features, this regime excludes from Australian taxation certain foreign funds where (subject to meeting certain requirements) such taxation is a result of having a permanent establishment in Australia, solely from the use of an Australia-based agent, manager or service provider.

Fund managers and sponsors eagerly await clarity on these developments so they can provide certainty to their investors.


Peter FerosPartnerT +61 2 9263 4163 E [email protected]



Janine RyanPartnert +61 2 9263 4051 E [email protected]

John williamson-NoblePartnert +61 2 9263 4030 E [email protected]

crEscEnt cAPitAl PArtnErs

Establishment of Crescent Fund IV

INDUSTRY FUNDS MANAGEMENT

Investment in Archer Capital Fund 5

MACQUARIE BANK

Secondary sale of client interests in domestic

private equity funds to offshore buyers

Two issues have continued to dominate Australian investment fund raising in the past year: allocation issues and uncertainty with regard to tax.

RESTRUCTURING + INSOLVENCY

On the international level, this is illustrated by

factors such as China’s decreased demand and

consumption, and the changes required by the

third installment of the Basel Accords.

Domestically, the push to deleverage at both a

commercial and personal level has affected

attitudes in the market, and the retail and

property sectors continue to underperform.

Within this landscape, the secondary debt

trading market has flourished, leading to a

growth in consensual restructurings particularly

as borrowers find it difficult to refinance.

opportunities abound

The relative stability of the Australian banking

sector, robust prudential regulations and the

willingness of par lenders to exit their positions

has promoted increased activity in the secondary

debt trading market since 2009.

This increase has also been driven by

factors including:

• the large number of underperforming loan

portfolios in the market

• large numbers of over-leveraged project

finance deals

• the stressed export market conditions for

Australian producers and manufacturers

• an ongoing supply of 2007 – 08 leveraged

buyout (LBO) debt coming through the system

for refinancing

• the expiry of temporary measures put in place

by distressed businesses post-GFC

• a shrinking pool of participants willing to refinance

• the common focus of banks on the need to

recycle unproductive capital quickly, in light of

capital allocation and opportunity costs.

This increased willingness to trade has seen a

number of international players enter the market,

commonly in the form of hedge funds and private

equity funds. These funds can have very different

goals, timeframes and strategies to the previous

local players. These circumstances in combination

have also given rise to an increase in the pursuit of

‘debt for equity’ restructures. Given that the

ultimate goal of this strategy can be ownership of

the business, hedge fund participants are more

conscious of enterprise value destruction and

there has been a reluctance to proceed to formal

insolvency in these circumstances (particularly at

the higher end of the market). As a result, schemes

of arrangement are becoming increasingly

common to employ these strategies, although the

threat of insolvency is still used as a bargaining tool.

Almost every large Australian restructure of the

last two years has involved the complexities of

debt trading on some level. Centro Properties

Group, Alinta Energy, Colorado Group and

more recently Nine Entertainment Co. have all

had a large number of hedge fund participants.

Managing expectations through this process can

be challenging, as traditional dynamics between

stakeholders have evolved. The change of

dynamics is highlighted within lender groups with

hedge funds more willing than traditional banks

to take equity positions.

changing of the guard

A large number of the traditional foreign banks

with exposures in Australia (predominantly from

the United States, United Kingdom and

continental Europe) continue to take active steps

to reduce their current exposure. Foreign banks’

share of Australian bank assets (including

commercial loans and securities) was

approximately 22% in 2007 compared to 12% at

the end of 2011. This decline is due largely to the

pressure on foreign banks to retract foreign

exposures as a result of problems at home, and is

also a reflection of the opportunities in the

current Australian market for banks to relieve

themselves of ‘bad’ debt. This decline has seen a

parallel (albeit not equal) rise in Asian bank

exposure in Australia. This has been by way of

both an increase in exposure for pre-existing

market participants and new participants

entering the market, particularly out of China.

Vulnerability

Despite the commentary around a booming

Australian economy, there are areas of increased

vulnerability in the marketplace, particularly as

the resources boom slows. Corporate collapses

are occurring throughout Australia, due largely

to slackening demand, cash-flow concerns and

ongoing inability to refinance. Sectors that have

been hit particularly hard in recent times include

property, retail and the construction sector,

which has been a victim of cash-flow problems as

government stimulus moneys are exhausted and

industrial action escalates.

Despite Australia emerging from the post-Lehman collapse in better shape than most countries, the market has recently been susceptible to growing pressures at both the domestic and international levels.

GtlAW.cOM.Au PAGE 9

Informed boards

The increased activity on the secondary debt

market, vulnerabilities for specific industry

sectors and new financiers in the market have

meant directors must be well advised of their

duties and options as they navigate through the

restructure steps, knowing the alternative is

insolvency. Despite the onerous laws that govern

directors’ duties and insolvent trading in

Australia, stakeholders involved in distressed

situations are currently more willing to work

collaboratively to achieve an outcome. This often

involves providing comfort to directors on a

personal level.

Future developments

There will be a continued willingness on the part

of both Australian institutional banks and

traditional foreign banks to trade debt as a

means of complying with Basel III capital

requirements and exiting distressed scenarios

with some value.

We anticipate that large-scale restructures will

continue to occur outside formal insolvency

procedures. This ensures preservation, as far as

possible, of enterprise value. The pursuit of debt

for equity strategies will continue at the instigation

of hedge funds willing to be more involved in a

company (including by taking on management

roles). This debt for equity play is likely to extend

to bilateral arrangements over time if required.

The number of formal insolvency appointments at

the small- to mid-cap level of business will increase

towards the end of the financial year as companies

continue to struggle with liquidity problems and

waning demand.

tim castlePartnert +61 2 9263 4062 E [email protected]

Dominic EmmettPartnert +61 2 9263 4328 E [email protected]

colleen PlatfordPartnert +61 2 9263 4026 E [email protected]

John SchembriPartnert +61 2 9263 4752 E [email protected]

ninE EntErtAinMEnt cO.

Advising Nine Entertainment Co. on

its restructure by scheme of arrangement (current)

a$2.2 billion

TOP RYDE SHOPPING CENTRE

Advising lending syndicate, receivers and managers

a$600 million

rEliAncE rAil

Refinancing of Australia’s largest PPP

a$3.6 billion

RIVERCITY MOTORWAY GROUP

Advising the receivers of RiverCity Motorway Group

on operations and maintenance and related issues

a$1+ billion

Domestic and international banks continued to support corporate, M&A and project finance lending at close to 2006 levels. The appetite was particularly strong for resources and infrastructure deals. Debt capital markets continued to gain strength, while corporate and financial institutions managed their capital and balance sheet exposure by tapping markets for funding.

While the effects of the GFC are still felt in certain terms (for example, upfront fees and margins have continued to be higher than pre-2008 levels), strong sponsors, particularly in the infrastructure and resources space, have been able to negotiate good terms. The market is still seeing more club than underwritten deals, although the syndication market is picking up from 2009 and 2010 levels.

While new money deal volumes (new loans or new corporate debt issuances) remained high, 2011 saw a strong focus on refinancing existing corporate debt. With many borrowers facing maturity profiles in 2012 and 2013, refinancing will continue to play a big role in the market in 2013.

Banks in Australia continue to provide funding certainty on a more regular basis. The bankability of transactions, particularly in a multi-bid context, remains one of the key considerations at the very outset of a transaction.

Leveraged finance Activity in Australia’s leveraged finance market remained strong throughout 2011. While there was more activity at mid-market level, the first half of 2012 saw some significant private equity transactions. Domestic and international banks showed a healthy appetite for market share by supporting businesses with good opportunities.

Current trends in the Australian leveraged finance

market include:

• average starting leverage levels of around 4.0x

EBITDA, with sponsor equity contributions of

between 40–50% of value. Financial covenant

headroom has remained between 20% and

25%, and amortising A tranches continue to be

popular with banks

• the return of dedicated acquisition and capital

growth facilities (albeit with stringent conditions

for use)

• a focus on assignment and debt transfer

provisions, in light of a more favourable

syndication environment with particular

negotiations around transfer consent rights

for borrowers

• variance in upfront and structuring fees being

based on bank commitment levels, rather than

on a flat percentage.

Project finance

Project and infrastructure financing has remained an

active area of the Australian market, notwithstanding

the challenging market conditions post-GFC. Ageing

infrastructure assets coupled with the continuing

resources boom in Australia has kept a healthy flow

of project and infrastructure transactions in the

pipeline, although falling commodity prices have

recently impacted the market.

Current project finance trends include:

• The number of PPP projects being brought to

market in Australia remains robust. Queensland

and Western Australia continue to be strong in this

area, with renewed activity in New South Wales.

• A number of state governments are looking at

ways of developing the PPP funding model to

better identify, address and allocate risks – for

example, patronage risk, which has impacted on

the success of a number of toll road PPPs in

Australia. This indicates a continued interest by

state governments in accessing private funding.

• There is increasing participation by export credit

agencies (ECAs) (both domestic and offshore) in

financing Australian infrastructure and projects.

Borrowers are looking to ECA funding to obtain

competitive margins, long debt tenor and

certainty of funds.

• State governments are selling or privatising

existing assets to fund new infrastructure

projects. Recent examples include the

privatisation of the Sydney Desalination Plant, the

Port of Brisbane and the NSW electricity

networks; and the proposed privatisation of Port

Botany and Port Kembla in NSW.

• Offshore pension funds have become active in

financing Australian infrastructure. The longer

debt tenor and stable cash flows associated with

infrastructure projects are attractive to pension

funds, which are often based on a long-term

defined benefit model. There is also discussion in

the market around potential Australian

superannuation fund investment in infrastructure

projects as a new funding source.

BANKING + FINANCEThe Australian bank syndication market remained very active in 2011 and the first half of 2012, despite challenging global economic conditions.

GtlAW.cOM.Au PAGE 11

alexander DannePartnert +61 3 8656 3373E [email protected]

Dominic EmmettPartnert +61 2 9263 4328 E [email protected]

Nicholas grambasPartnert +61 3 8656 3388E [email protected]

James lewisPartnert +61 2 9263 4084 E [email protected]

Debt capital markets

Debt capital markets continue to gain strength, with

a number of significant transactions already

completed this year and further transactions coming

to market. The ongoing impact of Basel III,

ever-increasing foreign regulation (such as

Dodd-Frank, Foreign Account Tax Compliance Act

(FATCA) and over-the-counter (OTC) clearing)

and forthcoming revisions to securitisation

prudential standards, are also keeping market

participants busy.

Recent trends in the market include:

• a surge in new retail debt and hybrid issuance

from corporate and financial institutions

• a renewed interest in private transactions, with

financial institutions considering and entering

into private trades, repo structures and

collateralised debt obligations (CDO) structures

• increased whole portfolio transactions

(mortgage loans, credit cards and other

receivables), and trade receivables financing.

What these transactions have in common is the aim

of corporate and financial institutions to efficiently

manage their capital and balance sheet exposure.

With the impact of Basel III, we would expect these

trends to continue and for more corporate issuers

to look to debt capital markets for alternative

sources of funding.

Robert mcDonnellPartnert +61 2 9263 4021 E [email protected]

Duncan mcgrathPartnert +61 2 9263 4340 E [email protected]

Ros o’mallyPartnert +61 2 9263 4743E ro’[email protected]

John SchembriPartnert +61 2 9263 4752 E [email protected]

SYDNEY DESALINATION PLANT

Advising the successful consortium’s financiers on

project and aquisition finance

a$2.3 billion

FOrtEscuE MEtAls GrOuP

Advising senior financiers on the restructure of

secured debt facilities

a$5 billion


Financing of Spotless Group acquisition

a$1.1 billion

industriAl And cOMMErciAl bAnk

OF CHINA

Establishment of, and amendments to, its debt

instrument program

uS$4 billion

PPPs

Advising finance consortia on the following PPPs:

Sydney International Convention, Exhibition and

Entertainment Precinct, Sunshine Coast University

Hospital, Eastern Goldfields Regional Prison, Wiri

Prison (New Zealand), Royal Adelaide Hospital and

the QEII Medical Centre Car Park

As the world takes up new technology such as cloud

computing and smart devices, it is not only

traditional business models that change, but the way

we conduct our everyday lives.

up in the cloud

‘Cloud computing’ is a broad term that describes a

range of different technologies – from web-based

services such as Google Docs and hosted enterprise

applications like Salesforce.com, through to bare

server capacity provided in dedicated, private

virtual environments.

We are still seeing a gap between the hype and

reality. Large customers have been slow to embrace

cloud offerings, particularly in regulated industries

such as banking. This is not helped by vendors

whose contractual commitments regarding

performance, confidentiality and security often fail

to meet customer expectations.

There is no doubt that cloud computing is here to

stay for the foreseeable future. However, the

technologies and delivery models are still evolving,

and care needs to be taken with the associated

contractual risks.

changing face of outsourcing

We are witnessing the fragmentation of ‘whole-of-

business’ service arrangements, with organisations

preferring best-of-breed vendors that provide the

optimum fit for particular services. Newer

outsourcing arrangements are focusing on flexibility

and transparency.

Vendors’ ability to deploy services through a

mixture of onshore and offshore resources has

enabled the development of economies of scale. In

addition to efficiency and productivity gains, these

economies of scale provide compelling business-

case advantages when compared to current

in-house delivery.

The outsourcing of business functions is becoming

more established, especially in Southeast Asia. For

many corporations this sourcing activity is

considered just another way to do business.

Vendor management

The traditional focus of the corporate customer has

been on vendor micro-management. This was

focused on monitoring and managing vendors’

day-to-day delivery, and measuring performance

against prescriptive requirements and hard metrics.

Businesses are star ting to realise the importance

of ‘soft skills’ in vendor relationship management

to achieve optimum outcomes and extract the

best service.

Near field communication

With digital goods payments tipped to account for

nearly 40% of the market by 2015, near field

communication (NFC) technology, has the potential

to re-invent the physical point of sale (POS)

experience for staff and customers.

However, as with many new technologies the

widespread adoption of NFC is faced with a number

of challenges, from the modernisation of merchant

POS networks, to device upgrades and, perhaps

most critically, the development of global

technology standards.

towards a more mobile workforce

An increasing number of employees want to use

personal devices at work and to access corporate

networks from remote locations. But before this

new, flexible workplace can be realised, businesses

need policies to ensure software compatibility and

security requirements are met.

Many Asian countries are characterised by their

adoption of mobile technologies over fixed

platforms. A recent survey found that the Asia Pacific

region leads the world in mobile usage and

penetration, surpassing even the US market.1

For businesses, mobile devices increasingly act as

an extended workbench as they strive to ensure their

processes are as efficient as possible. For individuals,

mobile handsets are more than a mere phone, but

often act as the user’s primary internet access device

and are used to access value-added services.

This emphasis on mobility has seen Asia lead the

world in mobile-related projects. As an example,

TECHNOLOGY

michael caplanPartnert +61 3 8656 3333E [email protected]

tim golePartnert +61 2 9263 4077 E [email protected]

Bernadette JewPartnert +61 2 9263 4032 E [email protected]

Peter JonesPartnert +61 2 9263 4125 E [email protected]

Peter leonardPartnert +61 2 9263 4003E [email protected]

Sheila mcgregorPartnert +61 2 9263 4152 E [email protected]

Ken SaurajenPartnert +61 2 9263 4154E [email protected]

Just as some cities never sleep, the information technology industry never stands still.


1 Smartphone Research on Mobile Internet and Market Trends, a joint study conducted by Google and Ipsos, 2011.

Focus on the Asia Pacific region

In an era of globalisation, we see Australia’s future on an international scale with inextricable links to the future of Asian nations. For many businesses involved in the technology sector, the Asian region is rightly seen as the growth frontier – synonymous with rapid technology adoption and seemingly endless opportunities, and largely unencumbered by legacy systems and processes.

To speak of Asia as a homogenous entity is disingenuous – it is a region of great diversity. From a legal perspective, this adds a challenging, yet exciting dimension to cross-border, technology-related transactions. Each transaction must respond to unique internal governance requirements, market and social forces, and regulatory mandates.

For more than 20 years Gilbert + Tobin has been a leader in technology law in the Asia Pacific region. We have advised on some of the region’s most complex and first-of-a-kind transactions. We ensure that our teams are capable of working in an integrated manner with client teams. We focus on the importance of cross-cultural sensitivities, adapting our processes and methodologies as necessary to fit with local requirements. Our experience absolutely confirms that one size does not fit all.

THE WESTPAC GROUP

Advising on its IT&T transformation program

nsW GOvErnMEnt

Advising on its procurement

of a new, multimodal smartcard ticketing system

NRMA (MOTORING)

Advising Australia’s largest member-based organisation

on its transformation program, including ERP initiatives

QANTAS

Advising on its current and future IT

sourcing strategy

MALAYAN BANKING BERHAD (MAYBANK)

Advising on a banking technology transformation and

systems integration project with IBM

tElstrA

Advising on various commercial arrangements to support

Telstra’s cloud service offering to customers

Gilbert + Tobin recently advised Axiata – one of the

largest mobile operators in the Asia Pacific region

– on a mobile payment hub solution between

various Axiata operating companies to allow

international remittances and phone recharges

through mobile devices.

NBN Co, wholly owned by the Australian

Government, is deploying a fibre-to-the-premises

(FTTP) network to 93% of Australian homes and

offices – with high-speed wireless and satellite

covering the rest of the National Broadband

Network (NBN).

Telstra has agreed – in return for A$11 billion in

compensation and other value – to progressively

decommission its copper network within the fibre

footprint. This will leave Telstra as a service provider

on the NBN just like its competitors (i.e. it will be

structurally separated).

NBN Co will be the de facto monopoly provider of

network infrastructure and basic connectivity

services. The NBN project turns on its head the

basic model of private sector investment and

infrastructure competition on which

telecommunications regulation has been based

over the last 20 years.

As the NBN is progressively rolled out, retail and

wholesale customers will have 18 months to

migrate from copper to fibre before their services

are mandatorily disconnected. A temporary

exception will apply to more complex services

until NBN Co creates substitutes for them on the

NBN fibre network.

Focus on the applications layer

With NBN Co as the de facto network monopoly,

tElEcOMMunicAtiOns

michael caplanPartnert +61 3 8656 3333E [email protected]


moya DoddPartnert +61 2 9263 4432 E [email protected]

Peter leonardPartnert +61 2 9263 4003 E [email protected]


Peter watersPartnert +61 2 9263 4233E [email protected]

Cameron WhittfieldPartnert +61 3 8656 3311E [email protected]

GILBERT + TOBIN ADVISES TELSTRA

Gilbert + Tobin acted as the lead competition and

regulatory adviser to Telstra on the largest and

most complex competition law restructure in

Australian history.

We assisted Telstra in obtaining approval for the

Telstra Structural Separation Undertaking, which

was required under the Australian Government’s

NBN legislation. The complexity of these

arrangements rivalled the break-up of AT&T and

the British Telecom separation undertakings.

We advised Telstra on:

• the legislative changes to the

Telecommunications Act 1997 and Competition

and Consumer Act 2010

• the universal service obligation regime and the

introduction of a new Telecommunications

Universal Service Agency to administer the

universal service regime

• greenfields estate network deployment

• the structural separation undertaking to be

given by Telstra to the ACCC

• the statutory instruments that will regulate the

migration of Telstra copper network customers

to the nbn

• the regulation of NBN Co more broadly,

including through the National Broadband

Network Companies Act 2011

• various funding arrangements between Telstra

and the Australian Government to facilitate the

transition to the NBN, including a

A$100 million fund to re-train Telstra staff in

fibre-related skills.

Australia has embarked on a huge, unique experiment in its communications sector – a A$40+ billion bet on the future.

the focus of competition should shift to the applications layer. The advantage of FTTP over other broadband technologies, such as fibre-to-the-node or 4G wireless, is not just its greater bandwidth “but also the ‘fat pipe’ out of and into the home (upchannel)”.

Countries with high fibre penetration have as much or more traffic in the up channel as the down channel. In other words, they have shifted from being fairly passive ‘downloaders’ to more active ‘uploaders’. This should encourage a new generation of rich applications with potential mass-market appeal – Australians just need to start inventing them.


cOntEnt dEAls

Advising Home Box Office Inc (including with Apple),

Time Warner, Turner Broadcasting, Nine Entertainment

Co. and Sony Universal

HOMETRACK

Joint venture with Residex Australia

MAXIS

IPTV services and distribution arrangements

in Malaysia

GOOGlE

Content-related issues including copyright issues, privacy

and data protection, access by law enforcement agencies,

and limiting access to obscene and objectionable content

Digital disruption is fundamentally transforming

the media and content industries in Australia and

the Asia Pacific region. The uptake of smart

phones and tablets has created new platforms

for content distribution and escalated the value

of sport and other time-sensitive content.

Repurposing of content across multiple

platforms and the use of social media to promote

media consumption have transformed traditional

print and electronic media, advertising agencies

and media-buying intermediaries. The disruption

is accentuated by the entry of new players such as

Google and FetchTV, data analytics providers

such as Experian and Quantium.

The integration of technology, data analytics,

content distribution platforms, and smart

phones and tablets has created new business

models and driven novel business alliances,

testing traditional concepts of competition

policy, media ownership and control regulation,

and telecommunications and content

classification requirements. There is no doubt

that these challenges will continue through waves

of technological and business innovation,

challenging business, governments and

regulators alike. Some key themes which are

emerging are listed below.

New competition and structures

In Australia, we are seeing the restructure of one

of the country’s largest free-to-air broadcasters,

the Nine Network, as the free-to-air TV industry

adapts to increased competition brought about

by the digital age. We have also witnessed

numerous restructures and commercial alliances

in the media and communications industry as

companies seek ways to increase efficiencies and

gain a competitive edge. For example, Gilbert +

Tobin recently advised Maxis Communications

(one of Malaysia’s largest mobile communications

services providers) on a partnership with Astro

(Malaysia’s largest pay-TV and content provider)

to develop and co-market fixed and mobile

broadband consumer packages.

In this space, we work with specialist

complementary firms that supplement our skills

– including law, economics and management

consultancy firms in Australia and internationally

– to provide an integrated service, and practical

communication of complex deals to national Asia

Pacific regulators, including Australian regulators.

This is essential for success in this industry.

convergence

Watch your favourite television program or hire

a movie, download a song, go shopping, read the

paper, ‘check-in’ on social media – all on the same

device. Technological convergence, brought

about largely by the proliferation of high-speed

internet, not only changes the way consumers

use content but also how it is regulated.

Governments around the world are looking at

new ways to regulate the media, focusing

particularly on ownership, content classification,

content standards (including responsibility for

user-generated content on media sites and use

of social media associated with media sites) and

use of customer data.

Privacy and ‘big data’

Privacy is also never far from the headlines.

Whether it is high-profile data breaches, consumer

concerns about offshoring of personal information,

recent concerns about ‘big data’ and customer

analytics, or moves to increase government

surveillance powers, privacy is a legal and policy

issue undoubtedly increasing in importance.

We advise our clients on data cleansing,

enhancement, sharing and management; address

inadvertent collection and data breach

notification; advise as to ‘good citizen’

compliance practices and procedures, including

practical workplace solutions; and advise on

privacy policies and statements.

MEDIA, CONTENT AND DATA

gina cass-gottliebPartnert +61 2 9263 4006 E [email protected]

moya DoddPartnert +61 2 9263 4432 E [email protected]

Kate HarrisonPartnert +61 2 9263 4335 E [email protected]

Peter leonardPartnert +61 2 9263 4003 E [email protected]

Sheila mcgregorPartnert +61 2 9263 4152 E [email protected]


Iron ore

During the last six months, we have seen a dramatic

change in the market perception of the commodities

market, with many commentators predicting that

commodity prices have peaked as a consequence of

falling demand from China. This assessment has

been supported by a number of iconic capital

projects being either deferred or abandoned.

During this period, the price of iron ore has dipped

substantially. This has shocked the market not

because of the dip itself, but rather the speed at

which the dip occurred. At the time of writing in late

2012, the iron ore price has recovered somewhat,

and is now at a level which a number of

commentators feel is more sustainable than the

previous highs.

The story regarding iron ore is really the story of

China. Although there is base demand out of

Europe and Japan, the real pricing pressure that has

driven the iron ore boom has been fuelled by

Chinese demand.

During the last 12 months, it appears that outbound

investment from China has become more selective in

its application. The Chinese authorities appear to be

imposing more rigour on where money is invested,

and as a consequence Chinese investors are

undertaking a greater level of due diligence before

making an investment and are seeking to have more

influence over the investments that they make.

We have also seen direct intervention by the

Chinese National Development and Reform

Commission (NDRC) in investments for which its

approval is required. For example, the NDRC

imposed conditions on its approval of Hanlong’s

investment in Sundance Resources, requiring there

to be a reasonable price agreed before it would give

its approval.

Platinum

Each of the other commodities has its own story;

some track iron ore, while others have commodity-

specific movements. In the case of platinum, the

industry has been in upheaval due to the falling

demand in the automotive and other industries, and

particular industrial challenges in South Africa.

South African mines have suffered a tragic turn of

events as a consequence of labour-force issues. The

issues are complex and are closely tied to social and

political issues and the conflict between two

competing unions. As a consequence there has

been a dramatic contraction in platinum production

in South Africa, which is flowing into the production

of other precious metals.

gold

Gold has continued to be the mineral of choice,

attracting high prices due to both demand and the

lack of new production. Gold continues to be

regarded as a haven for investors, despite

suggestions by commentators in years gone by that

its value as a store of wealth had diminished.

In Australia, the minerals industry has been under

pressure due to rising labour costs, a very strong

Australian dollar, and government action through the

introduction of the carbon tax, the Minerals Resource

Rent Tax (MRRT) and increased state royalties.

The effect of these events was initially masked by

high commodity prices, but as prices have fallen and

the Australian dollar has strengthened, the impact

has magnified. This has resulted in significant lay-offs,

some mine closures, and the abandonment and

shelving of major capital investments. Margins are

being squeezed and Australia is now searching for

ways to improve productivity to meet the

challenges ahead.

oil and gas

Shifts in the global economy and the oil and gas

market are reshaping Australia’s petroleum industry.

A growing focus on gas (both conventional and

unconventional) and LNG, together with new and

continuing investment in large integrated assets,

reflects those changes. Although the Australian

Government has indicated it will be reluctant to

approve any new greenfield LNG projects, Australia

remains on track to become the single largest

exporter of LNG by 2020.

ENERGY + RESOURCES

Julie athanasoff Partnert +61 8 9413 8406E [email protected]

michael BlakistonPartnert +61 8 9413 8401E [email protected]

claire BoydPartnert +61 8 9413 8404E [email protected]

anthony BurtonPartnert +61 8 9413 8402 E [email protected]


As terms of trade in iron ore and coal return to more modest levels and LNG developments progress, a new range of challenges and opportunities are emerging for energy and resources companies in Australia.


This year has seen a strong focus on upstream

companies in the unconventional exploration and

development space, particularly in the Cooper

Basin, which stretches across South West

Queensland and South Australia. LNG projects are

feeling the effects of funding pressures, economic

challenges resulting from the European debt crisis

and, in some cases, resource constraints

(particularly those on unconventional gas). New

unconventional exploration and development

activity is being slowed, or even stopped, by

environmental and land-access concerns,

particularly due to questions arising out of fracking.

As with other parts of the resources sector, oil and

gas projects are being constrained by the high cost

of labour, materials and operations. These forces

are expected to lead to consolidation in the junior-

to mid-cap sector of the market, particularly among

unconventional exploration and development

companies, as well as divestitures by larger

companies of some of their interests in existing

LNG projects.

Projects and infrastructure

The commodities boom has had very significant

impacts on the infrastructure sector in Australia.

Not only has there been a need to significantly

expand production infrastructure to support new

or extended projects, there has been very

considerable strain placed on distribution

infrastructure as a result of the growth in

production volumes.

In particular, port and rail infrastructure has had to

cope with greatly increased demand both from

existing producers that have expanded their volumes,

and new producers whose projects have become

viable as a result of the rise in commodity prices.

Over the last decade, Australia has seen significant

bottlenecks emerge at key export points as a result

of the steep rise in demand from producers. At the

Newcastle Port in New South Wales, these issues in

the coal supply chain resulted in dramatic vessel

queues for some years. Supply-chain bottlenecks

required government intervention in some cases,

including in Newcastle.

In other cases, lack of capacity required the

development of new ownership and operational

models to help solve overall capacity constraint issues,

and equitable capacity allocation among producers

competing for capacity at distribution points.

As a result of government and producer initiatives,

we have seen the emergence of sophisticated

multiple-user access regimes in port and rail

infrastructure. These regimes are designed to

create incentives to expand capacity where

demand exists, and to allocate that capacity

efficiently among users.

More still needs to be done to create efficient

multiple-user access regimes in some areas. For

example, access to rail and port capacity for

mid-cap iron ore producers in Western Australia

remains problematic and is a major barrier to the

development of a range of projects.

The Australian Government continues to be heavily

engaged in facilitating the development of access

regimes for new rail and port developments, which

we hope will address these ongoing concerns.

chris FlynnPartnert +61 2 9263 4321 E [email protected]

Ben macDonaldPartnert +61 3 8656 3351E [email protected]

David martinoPartnert +61 8 9413 8407E [email protected]



ALINTA ENERGY

On strategic issues relating to its Newman power

station facility

EXXARO RESOURCES

Advising on its A$388 million cash takeover bid

for African Iron

sundAncE rEsOurcEs

Negotiations with the governments of the Republic

of Cameroon and the Republic of the Congo, on the

development of a 35 million tonnes per annum iron

ore project (includes rail and port facilities to

support the mining of iron ore in both countries)

OAKAJEE PORT AND RAIL

Supply chain agreements with three iron ore

producers in the mid-west of Western Australia

PlutOn rEsOurcEs

Acquisition of the Cockatoo Island iron ore

project from Leighton and Cliffs, and subsequent

joint venture related to that project

While Australia has one of the most robust

economies in the developed world, competition is

already regarded as concentrated in key sectors of

the economy. As a result, negotiating the competition

and antitrust clearance process for mergers and

acquisitions can be more difficult than expected.

Added to this, the Australian Competition and

Consumer Commission (ACCC) under the leadership

of its new Chairman, Rod Sims, is more closely

scrutinising deals for potential competition

implications. The average time taken for informal

merger clearances has more than doubled since 2009.

When formulating the commercial deal timetable,

parties need to bear in mind that, although Australia

does not have a formal notice regime for mergers

and acquisitions, most deals are notified under an

informal clearance process. In complex cases

involving substantial information requests, the

ACCC will generally use its compulsory

information-gathering powers. The ACCC will use

these powers to look behind the public explanation

of a merger or acquisition to see if whether there

are rationales or predictions of outcomes, for

example in advisers’ reports – which give rise to

competition concerns. Where Statements of Issues

are published by the ACCC they appear to be

lengthier, cover more issues and are more focused.

The ACCC will likely need more time to consider

responses to the issues raised but the introduction

of pre-assessments also means that some

transactions that have a low risk of resulting in a

substantial lessening of competition may be cleared

without public review.

metcash judgment provides greater predictability

of merger decisions

The Full Court of the Federal Court of Australia

rejected the ACCC’s efforts to block Metcash’s

acquisition of another supermarket chain, Franklins.

Deal makers will welcome the implications of this

decision. The Metcash decision reinforces the

ACCC’s accountability in the merger review process.

The court also required the ACCC’s analysis to be

grounded in commercial realities and not abstract

hypothesis of what might happen as a result of the

merger. The downside is that this may mean that in

more contentious cases, the ACCC will take longer

to gather the relevant facts and evidence.

accc enforcement priorities

In mid-2012, ACCC Chairman Rod Sims identified

and indicated that the ACCC will focus on the

following sectors: telecommunications, energy, retail

petrol, supermarkets and liquor, digital and online

economy, banking and small retail acquisitions.

The ACCC also highlighted its increased

cooperation with competition agencies in other

jurisdictions (particularly within the Asia Pacific

region). This can be expected in closer alignment of

enforcement priorities, particularly in relation to

cartel activities.

COMPETITION + REGULATION

Air cArGO cArtEl

Defending Thai Airways and Malaysian

Airlines in the ACCC’s air cargo cartel

proceedings

virGin AustrAliA

All strategic joint venture alliances,

Virgin’s restructure, and airport

regulatory matters

tElstrA

As a 50% owner of FOXTEL on the

FOXTEL bid for AUSTAR

SYNTHES

On its merger with Johnson & Johnson

uS$21.3 billion

Elizabeth averyPartnert +61 2 9263 4362 E [email protected]

gina cass-gottliebPartnert +61 2 9263 4006 E [email protected]

catherine DermodyPartnert +61 3 8656 3320 E [email protected]

moya DoddPartnert +61 2 9263 4432E [email protected]

Paula gilardoniPartnert +61 2 9263 4187 E [email protected]

Rani JohnPartnert +61 2 9263 4348 E [email protected]

Simon SnowPartnert +61 2 9263 4246 E [email protected]

Peter watersPartnert +61 2 9263 4233 E [email protected]

luke woodwardPartnert +61 2 9263 4014 E [email protected]

Closer scrutiny of mergers is lengthening deal timetables.


Focus on efficient case management

There is an increased emphasis by Australian courts

on running cases more efficiently in order to avoid

the costly mega-litigation seen in the past and

reduce court time. Proposed changes to Federal

Court proceedings include a ‘fast-track’ system and

compulsory pre-litigation requirements for parties

to take reasonable steps to try to resolve their

disputes before commencing court action.

Regulatory action

Consistent with many other juristictions, we are

seeing a heightened propensity for the key

regulators of the corporate sector to launch

investigations and court proceedings. It is a strategy

that has had mixed success recently, but the

approach is certainly clear.

Increase in shareholder class actions

The emergence of litigation funders is a relatively

new phenomenon in Australia. An increase in

funders and plaintiff law firms has given rise to more

aggressive class actions in the wake of several

high-profile corporate collapses in Australia.

Securities class action filings have increased steadily,

with a record number of cases filed. This trend is

likely to continue as a result of changes which make

class actions more attractive, both to plaintiff firms

and litigation funders.

greater powers being given to australia’s

securities regulator

The Australian Securities and Investments

Commission (ASIC) has been given greater powers

beyond its initial scope of regulating securities, in light

of 11 insider trading convictions since January 2009.

ASIC also takes on the enormous role of regulating

all forms of consumer credit nationally.

International large-scale arbitration opportunities

Law reform at the state and federal level has seen an

increase in the number of international arbitrations

being heard in Australia. Reforms include increased

powers to arbitrators, and coordination between

the courts and arbitrators to make the arbitration

process more attractive to litigators. This has given

businesses a cost-effective and efficient alternative

to litigation that reflects international best practices.

litiGAtiOn


Rani John Partnert +61 2 9263 4348 E [email protected]

tim o’learyPartnert +61 8 9413 8408E to’[email protected]

colleen PlatfordPartnert +61 2 9263 4026 E [email protected]

michael williams Partnert +61 2 9263 4271 E [email protected]

Dianne BanksPartnert +61 2 9263 4041 E [email protected]

tim castlePartnert +61 2 9263 4062 E [email protected]

Emanuel confosPartnert +61 2 9263 4059 E [email protected]

andrew FloroPartnert +61 2 9263 4436 E [email protected]

mark gerusPartnert +61 8 9413 8405E [email protected]

Steven glassPartnert +61 2 9263 4010 E [email protected]

GOOGlE

Defence of legal action by the ACCC regarding the

AdWords sponsored links system

RIVERCITY MOTORWAY GROUP

Class action by investors in relation to forecast volumes

of traffic in respect of the major infrastructure project,

the CLEM7 tunnel project in Brisbane

bluEscOPE stEEl

Coal contracting disputes with Xstrata

bEtFAir

Successful constitutional challenge to Western

Australian legislation prohibiting use of

betting exchanges

The Australian litigation landscape is changing to embrace more efficient and globally accepted practices.

Australia continues to be an important market for intellectual property (IP) law. Increasing globalisation has seen a rise in foreign IP owners entering the Australian market, which has resulted in an increase in international companies enforcing their IP rights in Australia. We are seeing the following emerging IP developments.

online Peer-to-Peer (P2P) infringement This law is set to be reviewed following the decision of the High Court of Australia in Roadshow v iiNet. The government is considering whether to amend the copyright legislation in order to address the issue of P2P infringement and to plug the gaps that the decision has left in the copyright regime.

australian law Reform commission

(alRc) inquiry The ALRC has initiated an inquiry into copyright exceptions for certain online activities in the first such inquiry into digital copyright issues for a number of years, and is likely to prove to be the most critical investigation of the appropriate limits of copyright in the internet age.

Raising the Bar act the Raising the Bar Act will take effect in April 2013, to bring Australia’s patent laws more into line with those of other jurisdictions in one of the most important reforms of Australian patent laws for a decade, including the limits of patentability assessed by reference to international disclosures.

The IP jurisdiction of the Federal Magistrate’s Court will expand from April 2013, to include civil trade mark infringements and design right infringements, together with the added remedy of awarding additional damages for trade mark infringement (previously only available in copyright cases).

National Business Name Registration System The National Business Names Registration System commenced on 28 May 2012. Business names will be registered through ASIC and will cover the whole of Australia under a single registration, avoiding the very cumbersome state-by-state regimes that previously had to be navigated.

top-level domain names Businesses can now register for generic top-level domain names covering brands, places or generic words or characters (for example .coke, .sydney, .shop). There have been a number of applications by Australian companies and we are monitoring the registration process.

INTELLECTUAL PROPERTY


lisa lennonPartnert +61 2 9263 4190 E [email protected]

Siabon SeetPartnert +61 2 9263 4232 E [email protected]

michael williams Partnert +61 2 9263 4271 E [email protected]

chris williams Special Counselt +61 2 9263 4013 E [email protected]

SAMSuNg v Lg

On its challenge to the marketing campaign by LG,

relating to LG’s 3D TVs in Australia

RoAdShow v IINeT

Advising the major international film studios in their

claim against iiNet over copyright infringement

on its network

eNeRgIzeR v gILLeTTe

Advising Energizer in defence of its marketing campaign

for the Schick razor brand, in false advertising

proceedings in the Federal Court initiated by Gillette

GOOGlE

In connection with the misuse of Google’s brands by

online traders and businesses

Australia remains a key battle ground in the global protection of intellectual property.


REAL ESTATE, PROJECTS + ENVIRONMENT

Foreign funds target australia Australia is currently an attractive destination for foreign institutional and private investors in the property sector, particularly those from America, Europe and Asia. Despite the high Australian dollar, Australian real estate is appealing to offshore investors for various reasons including its commodity-orientated export economy, high level of transparency and long-term lease structures. From an occupier-demand point of view, the market is pointing to a likely upward movement in rents. Indeed, with local investment constrained by cautious banks and high Australian base rates, local buyers have found it difficult to compete with deep-pocketed foreign investors.

Most investors are interested in prime office assets rather than retail properties, which have performed poorly in an environment of slowing consumer demand. Foreign demand for rural property has caused the Australian Government to keep foreign ownership restrictions under review.

commercial, industrial and retail property industry The past year has seen a structural shift in commercial, industrial and retail property, brought on by changes within the economy, particularly in the retail sector. Global shopping chains are competing for the chance to enter the Australian market, with up to 10 international retailers opening new stores in the past 18 months. They have been aided by new retail developments such as Westfield Sydney, which have provided the necessary flagship

spaces. There has also been strong interest in prime regional shopping centre assets from institutional investors in Australia and overseas, with demand continuing to exceed supply.

Renewable energy projects environmental regulatory changes are increasing There is an increasing appetite for both State and Federal Government to introduce complex legislation, mechanisms and policies to regulate industry sectors that have the potential to impact the environment. As a result, the environmental risks (as well as opportunities) for businesses looking to operate in Australia is on the rise.

We also see a renewed vigour by regulators to investigate and enforce compliance with environmental laws. This has typically been the result of increased public interest, media awareness and political sensitivity associated with environmental issues such as contaminated land, mining impacts and pollution incidents.

Greater numbers of clean energy projects are coming to market as a result of regulatory changes and the introduction of the carbon tax and offset schemes in Australia and require debt finance.

Other policies such as the carbon farming initiative, together with significant investment by the Australian Government in clean technology programs, provide flexibility for liable entities and clean energy developers to facilitate Australia’s transition to a low-carbon future.

amanda HempelPartnert +61 2 9263 4017 E [email protected]

Diane SkapinkerPartnert +61 2 9263 4297 E [email protected]

Ben FullerSpecial Counselt +61 2 9263 4171 E [email protected]

TOP RYDE CITY SYDNEY

Advising receivers and managers on the due diligence

and proposed sale of the Top Ryde City

DIGITAL REALTY DATAFIRM

On the construction and leasing of data centres

dFO cAnbErrA

Advising receivers and managers on the due

diligence and proposed sale of DFO Canberra and

Homemaker Hub

tElstrA

On its exit from a national joint venture with Vodafone

Hutchison involving over 2,000 sites


On property and environmental issues in connection

with the acquisition of Spotless Group

NEW SOUTH WALES GOVERNMENT

On the property and environmental aspects to the

privatisation of WSN Environmental Solutions

rEMOndis

Environmental aspects of the acquisition of the waste

management division of Thiess Services

Opportunities return and emerge.

With effect from 1 July 2012, the Government has

introduced its Minerals Resource Rent Tax (MRRT)

and extended the scope of the Petroleum Resource

Rent Tax (PRRT). However, the expected windfall

from these taxes is very much dependent on

commodity prices and the actions of state

governments in increasing the level of state-based

royalties (thereby reducing the Australian

Government’s share of the MRRT).

A source of uncertainty for tax advisers and

taxpayers alike has also been the increasing trend

towards retrospective legislation. Examples include:

• recent changes to the PRRT legislation effective

from 1 July 1990

• changes to transfer pricing legislation backdated

to 1 July 2004

• announced changes to the general anti-

avoidance rules effective from March 2012, even

though the specific amendments have not yet

been tabled for broad public comment.

The increase in the MIT taxation rate from 7.5% to

15% has also been met with concern and frustration

by foreign property fund investors, and represents

another challenge for property fund managers in an

already difficult market.

Restructuring issues

As noted in earlier sections, ‘loan-to-own’ and debt

for equity swaps are becoming more prevalent in

the Australian market. Paradoxically, in these

transactions we are seeing the risk of capital gains or

other tax liability arising in the absence of economic

gain where the restructure involves material debt

forgiveness. Care required!

Stamp duty

Another tax which should be considered in the

structuring phase of a transaction is stamp duty.

Each Australian jurisdiction has its own stamp duty

legislation and administration despite attempts to

harmonise the legislation and administration across

the jurisdictions over many years. Since the amount

of stamp duty payable on a transaction can be

significant, it is important to factor the duty into the

cost of the transaction.

Over the last few years, the stamp duty revenue

authorities have sought to increase their duty

revenue by expanding the duty base – for example,

in some cases wholesale replacement of the ‘land

rich’ duty provisions to increase its attractiveness in

respect of share dealings, and an increase of the top

marginal transfer duty rates.

TRANSACTIONAL TAX

Hanh chauPartnert +61 2 9263 4027 E [email protected]

Peter FerosPartnert +61 2 9263 4163 E [email protected]


On the income tax consequences of aspects of its bid for

Spotless Group

crEdit suissE

On tax aspects of the restructor of secured

debt facilities

a$5 billion

With tax collections in Australia being affected by continuing global economic instability, the Australian Government is seeking to protect and grow its existing revenue base in a number of ways.


Pro bono We believe that as lawyers, we are in every sense the housekeepers of our legal system. It is our responsibility to ensure that the system is just and equitable, and that everyone in our society has access to justice.

Pro bono work is a vital part of what we do and who we are. We were the first Australian law firm to appoint a full-time in-house pro bono lawyer. We now have one partner and three lawyers dedicated entirely to pro bono work and management of our Pro Bono practice. Lawyers and partners across the firm also undertake pro bono work.

In 2011 Gilbert + Tobin:• advised on 343 pro bono matters for 102

individuals and 241 community organisations• had 80% of our lawyers and partners provide

pro bono advice• provided almost A$6.5 million worth of pro

bono services.We are committed to assisting marginalised and disadvantaged people, either individually or through organisations that work to empower or assist them. We have a particular focus on

Indigenous clients, people with disabilities, refugees and human rights issues.

We undertake a broad variety of pro bono work, including test case and public interest litigation, corporate and commercial advice and assistance, submissions, policy work and community legal education. We treat the interests of our pro bono clients in the same innovative, industrious and diligent fashion as our commercial clients.

corporate social responsibility

In addition to our lawyers using their specialist skills to serve our pro bono clients, they are encouraged to branch into other areas of law in order to service our clients’ other needs. This includes refugee law, human rights and discrimination law, victims’ compensation and assisting victims of predatory lending schemes.

As a firm with sustainable business practices embedded in its DNA, we will remain a firm which empowers employees to make a difference and values contributions at all levels.

Over the years our staff have engaged in numerous projects supporting disadvantaged groups. We are currently working on projects with teenagers from refugee backgrounds and people who are homeless or at risk of homelessness.

Reconciliation action Plan Our commitment to corporate social responsibility (CSR) is reflected through our Reconciliation Action Plan (RAP), our community projects and our sustainability programs.

Through our RAP, we have consolidated our commitment to not only working with and supporting Aboriginal and Torres Strait Islander people as clients but as suppliers to our business, and

COMMUNITY

michelle HannonPartnert +61 2 9263 4110 E [email protected]

In 2011, Gilbert + Tobin provided over 14,000 hours of pro bono work, an average of around 54 hours per lawyer.

This is well in excess of the aspirational target of 35 hours set by the National Pro Bono Resource Centre, the leading consulting body to the Australian legal profession on pro bono services.

The value of this work is conservatively estimated at A$6.46 million.

increasing the number of Aboriginal and Torres Strait Islander staff in our firm through targeted programs.

Sustainability Finally, we have sustainability policies and programs, which set targets to reduce our environmental footprint each year and provide sustainable business and employment practices.

third Sector advisory Gilbert + Tobin’s commitment to the disadvantaged and the vulnerable is demonstrated through our long history of supporting the community sector through our corporate social responsibility initiatives and through the provision of pro bono legal services.

We have recently launched our Third Sector Advisory Group to provide legal services to charities, not-for-profit and philanthropic organisations. We provide specialist legal advice on charitable fundraising regulation, tax concessions, raffles, charitable trusts and structures, and community gaming.

We also serve and advise corporates and their foundations, families and individuals and a cross section of the diverse third sector including organisations committed to community welfare, health, Indigenous Australians, arts and culture, sport, overseas aid, environment, industry, education and religion.

DoINg BuSINESS IN auStRalIa Doing business in Australia answers some of the most common questions an overseas investor may ask when establishing a business presence in Australia

http://www.gtlaw.com.au/publications/doing-business-in-australia/

aNtItRuSt aSIa

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http://antitrustasia.com/

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GILBERT + TOBINDOING BUSINESS IN AUSTRALIA

2012

about gilbert + tobin

+ Independent, top-tier Australian law firm

+ Established in 1988

+ Employs 500+ people

+ Offices in Sydney, Melbourne and Perth

+ Highest proportion of female partners (38%) of any major Australian law firm

+ Pioneer in the provision of pro bono services

Practice areas

+ Banking + Finance

+ Corporate Advisory (Funds, Mergers + Acquisitions, Private Equity, Capital Markets, Tax and Stamp Duty)

+ Communications + Technology

+ Competition + Regulation

+ Energy + Resources

+ Intellectual Property

+ Media

+ Litigation + Dispute Resolution

+ Real Estate + Projects

+ Restructuring + Insolvency

Industry recognition 2012 Best Lawyers Australia Eighteen Gilbert + Tobin partners were recognised as leaders in their field across 18 areas of law.

Chambers Global, 2012 Twenty-eight of our partners were recognised as industry leaders across 20 areas of law including corporate advisory, banking and finance and projects.

2012 ALB Australasian Law Awards Gilbert + Tobin won two awards, including the Innovative Use of Technology Award for the second consecutive year.

2012 Euromoney Legal Media Group Australasia Women in Business Law Awards Gilbert + Tobin won four awards including Best Australasian Firm for Women in Business Law and Most Innovative Law Firm.

2011 International Law Office Client Choice Awards Gilbert + Tobin won Best Australian Law Firm for the second consecutive year.

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GILBERT + TOBIN FACTS

SYDNEYLevel 37

2 Park Street

Sydney NSW 2000

Australia

T +61 2 9263 4000

F +61 2 9263 4111

MElbOurnElevel 22

101 Collins Street

Melbourne VIC 3000

Australia

T +61 3 8656 3300

F +61 3 8656 3400

PERTH1202 Hay Street

West Perth WA 6005

Australia

T +61 8 9413 8400

F +61 8 9413 8444

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