takeovers + schemes review · takeovers + schemes review after a seven-year high in 2018, public...
TRANSCRIPT
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TAKEOVERS + SCHEMES REVIEW
G T L A W . C O M . A U
2020
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THE GILBERT + TOBIN 2020 TAKEOVERS + SCHEMES REVIEW
After a seven-year high in 2018, public M&A involving ASX-listed companies softened in 2019. Some key themes from 2019 were:
+ 41 transactions valued over $50 million were announced in 2019, down from 49 transactions in 2018. The aggregate transaction value decreased significantly from $48.7 billion in 2018 to approximately $24 billion in 2019.
+ The healthcare sector made the greatest contribution to announced public M&A by value, followed closely by retail & consumer services and industrial products.
+ Cashed up private equity firms sought out public M&A targets in a significant way, willing to deploy approximately $10.3 billion on a range of targets in 2019, equivalent to 44% of the aggregate transaction value.
+ While the number of transactions involving a foreign bidder was broadly the same as recent years, the aggregate deal value attributable to foreign bids fell by more than half from $42 billion in 2018 to $19 billion in 2019. Bidders from North America were the most active, while interest from China was more subdued.
+ 89% of the total number of announced M&A transactions over $50 million were successful in 2019, despite the slight drop in average final premium paid by bidders.
+ The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ignited increased scrutiny and action by corporate regulators. The number of ASIC enforcement actions increased by 20% and the Takeovers Panel heard 38 applications, the second highest in its 20-year history.
This Review, which was released on 12 March 2020, examines 2019’s public M&A transactions valued over $50 million and provides our perspective on the trends for Australian public M&A in 2019.
We trust you will find this Review to be an interesting read and a useful resource.
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CONTENTSKEY HIGHLIGHTS
1 MARKET ACTIVITY
2 SECTOR ANALYSIS
3 TRANSACTION STRUCTURES
4 FOREIGN BIDDERS
5 CONSIDERATION TYPES
6 SUCCESS FACTORS
7 TRANSACTION TIMING
8 IMPLEMENTATION AGREEMENTS AND BID CONDITIONS
9 THE REGULATORS
2019 PUBLIC M&A TRANSACTIONS
OUR APPROACH
ABOUT GILBERT + TOBIN
RECENT GILBERT + TOBIN TRANSACTIONS
ABOUT THE AUTHORS
AWARDS AND RECOGNITION
GILBERT+ TOBIN M&A PARTNERS
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6
10
14
16
24
27
31
34
39
47
49
50
51
56
62
63
KEY HIGHLIGHTSTRANSACTION ACTIVITY SOFTENS
PRIVATE EQUITY AND SUPERANNUATION FUNDS ACTIVE
RETAIL & CONSUMER SERVICES AND HEALTHCARE LED THE WAY
After a seven-year high for public M&A transaction activity in 2018, activity softened in 2019 with a decrease in both the value and number of transactions. 41 transactions valued over $50 million were announced, down from 49 transactions in 2018, representing a 16.3% reduction.
The aggregate transaction value decreased significantly in 2019, with approximately $24 billion in transactions announced, compared to $48.7 billion in 2018. This is the lowest aggregate transaction value since 2013 and a fall of more than 50% from 2018. This was primarily due to a fall in the number large transactions, with only 11 transactions valued at over $500 million announced in 2019, compared to 21 in 2018. Even if one excludes the ~$13 billion unsuccessful offer for APA Group in 2018, it is clear that there was a significantly lower aggregate value of public M&A transactions in 2019.
It is difficult to pinpoint the causes for the fall. Perhaps, the federal election in May 2019 had some part in it being a softer year. Other potential reasons include greater instability from geopolitical tensions and, on the local front, greater regulatory scrutiny.
While overall activity may have been down, private equity continued to be a significant source of activity in 2019, being the proponents in public transactions with a value of approximately $10.3 billion last year. This represented 44% of aggregate transaction value (up from 28% in 2018) and 24% of transaction volume (consistent with 2018). A range of PE houses were active in public deals in 2019 including BGH Capital, TPG, KKR, Brookfield, PEP, Quadrant and Adamantem to name a few.
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Healthcare and retail & consumer services emerged as the top performing sectors by transaction value, contributing 27% and 21% of total transaction value respectively. Retail & consumer services represented 20% of the total number of transactions, while the healthcare sector contributed 15% of the transaction volume.
The energy and resources sector represented 17% by number and 7% by value of public M&A transactions in 2019, demonstrating a reduction in the contribution from this sector from 2018.
In particular, AustralianSuper was a key part of the BGH Capital consortium’s proposals for Healthscope and Navitas and used its significant shareholding to drive the Navitas transaction. QIC Private Capital also made a successful public M&A bid for Pacific Energy. This evidences superannuation funds’ shift from being purely passive investors to active drivers of activity.
INTERESTINGLY, 2019 ALSO SAW SIGNIFICANT INVOLVEMENT OF AUSTRALIAN SUPERANNUATION FUNDS IN PUBLIC M&A FOR THE FIRST TIME
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VALUE OF FOREIGN INVESTMENT FALLS
SUCCESS RATES UP & SCHEMES INCREASINGLY THE TRANSACTION STRUCTURE OF CHOICE
REGULATORS UNLEASHED
The Financial Services Royal Commission seemed to galvanise public opinion and scrutiny of large corporates further in 2019.
Regulators, including ASIC and APRA, which were criticised for not taking stronger action sooner against misconduct, have stepped up regulatory action.
ASIC’s controversial ‘why not litigate?’ approach has seen the regulator increase its regulatory presence with a 20% increase in the number of enforcement actions over FY 2018-2019. It is also progressing criminal prosecutions in relation to three different M&A transactions, including most recently against Ms Jan Cameron for allegedly failing to disclose a substantial shareholding interest in Bellamy’s Australia, which was ultimately taken over by China Mengniu Dairy Company last year.
The ACCC continues to be activist in its approach to investigating mergers. However, the ACCC also extended its losing streak in merger decisions before the courts/tribunals to seven with the Federal Court recently allowing the Vodafone/TPG merger to proceed.
The Takeovers Panel was also very busy in 2019, hearing 38 applications. This was the second highest ever, as the Panel comes to celebrate its 20th birthday in March 2020.
Friendly / agreed acquisitions by scheme of arrangement are increasingly the preferred approach for bidders.
89% of the total number of announced M&A transactions over $50 million were successful in 2019, representing a significant increase over 2017 where only 70% of transactions reached a successful outcome and an increase over 2018 where 80% were successful.
The increased use of schemes of arrangement, particularly in high value transactions, is a continuing trend which is strengthening. 83% of transactions over $50 million proceeded by way of scheme in 2019. This represents an 18% increase over 2018, where 65% of transactions over $50 million proceeded by way of scheme.
Transactions which proceeded by way of scheme enjoyed greater success rates in 2019 with 90% of schemes succeeding in 2019, compared to 72% in 2018.
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Foreign investment activity in 2019 in terms of deal volume was broadly the same as recent years, with 56% of all public deals over $50 million involving foreign acquirers compared to 59% in 2018 and 63% in 2017.
However, more strikingly, the aggregate deal value attributable to foreign bids fell by more than half from $42 billion in 2018 to $19 billion in 2019.
Despite lower volumes and values, foreign bidders enjoyed higher success rates in 2019 with 95% of foreign bids succeeding compared to 76% in 2018.
Notably, European bidders who accounted for 12% of bidders by transaction number in 2018 only represented 7% of bidders in 2019. However, interest from North American acquirers increased in 2019, representing 29% of bidders by transaction number, up from 18% in 2018. Asian acquirers represented 17% of total bidders.
THE AGGREGATE DEAL VALUE ATTRIBUTED TO FOREIGN BIDS FELL BY MORE THAN 50% TO $19 BILLION
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MARKET ACTIVITY1
Public M&A activity down after bumper 2018In last year’s Review, we reported that Australian public M&A activity was the highest it had been for the past seven years.
At the time, it was noted that the federal election and expected tightening of regulatory oversight might dampen transaction activity in 2019.
It seems that cautionary note became reality in 2019. Although transaction activity was solid, transaction values failed to match the highs of 2018.
In total, there were 41 transactions valued at $50 million or more in 2019, representing a 16.3% decrease from the previous year but consistent with 2017 levels (which was a five-year high at the time).
$50m to $500m
0
10
20
2012 2013 2014 2015 2016 2017 2018 2019
30
40
50
60
$500m+ transactions
Num
ber o
f tra
nsac
tions
anno
unce
d
Transaction announcements per year by number
3218 23 24 20
30 3028
10
6
14 1210
11 1121
42
24
37 3630
41 4149
Total transaction value per year
0
10
20
30
40
60
Tota
l valu
e of t
ransa
ction
s ($ b
illion
)
Total value of transactions
22.116.1
23.7 24.0
46.0
24.6
41.448.7
2012 2013 2014 2015 2016 2017 2018 2019
However, and significantly, the number of transactions worth over $500 million almost halved from 21 to 11 (albeit, it is worth noting that 2018 was an eight-year high in this regard). The decrease in larger transactions overshadowed the slight increase in deals between $50 and $500 million from 28 in 2018 to 30 in 2019.
When measured by aggregate transaction value, the fall in public M&A activity in 2019 appears even more pronounced, decreasing by more than 50% from 2018 levels to approximately $24 billion. This was a direct result of the marked decrease in higher-value deals. Indeed, the number of $1 billion+ deals almost halved from 10 in 2018 to six in 2019, with no deals over $5 billion (unlike in recent years). Interestingly, while large deals were done, the ASX 200 increased some 15% in the 2019 calendar year. Perhaps pricing in 2019 was too expensive for the liking of bidders?
Distribution of transaction values
0 5 10 15 20 25
1000 - 5000
> 5000
500 - 1000
100 - 500
50 - 100
20182019Number of transactionsVa
lue o
f tra
nsac
tions
($ m
illion
)
2017
20
7
5
6
2323
11
8
2
10
20
6
3
5
This continues the trend from 2018 of foreign bidders being significant players in the highest value public M&A transactions.
Overall, however, the proportion of foreign bids was lower in 2019 compared to 2018. More on this in Chapter 4.
ALL SIX TRANSACTIONS EXCEEDING $1 BILLION INVOLVED A FOREIGN BIDDER
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Private equity prominent again Following a triumphant return by private equity in 2018, private equity firms were once again strongly acquisitive in 2019, as predicted in last year’s Review.
While the proportion of private equity transactions by volume remained similar to 2018 at 24% of all deals over $50 million (10 deals in 2019 compared to 12 in 2018), private equity bidders accounted for 44% of public M&A deals by value, up from 28% in 2018 and only 2% in 2017.
Notably, private equity again had a strong appetite for M&A in the healthcare sector in 2019, with 30% by number and 57% by value of overall private equity M&A activity being in that sector, up from 17% by number and 15% by value in 2018. Private equity interest in retail & consumer services also remained strong, albeit failing to match 2018 levels, accounting for 20% by number and 24% by value of private equity investment, down from 34% by number and 32% by value.
Percentage of PE investment across all PE deals, by value
HEALTHCARE
Healthscope ($4.4 billion)
Metlifecare ($1.4 billion)
Konekt ($74 million)
RETAIL & CONSUMER SERVICES
Navitas ($2.1 billion)
QMS Media ($421 million)
FINANCIALS
Pioneer Credit ($120 million – current)
UTILITIES
Pacific Energy ($467 million)
INDUSTRIAL PRODUCTS
Legend Corporation ($79 million)
PROFESSIONAL SERVICES
Dreamscape Networks ($105 million)
57% 24%
1% 1%1%
4%REAL ESTATE
Aveo Group ($1.3 billion)
12%
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Timing of announcementsThere was a strong start to 2019, with seven transactions announced in January and February, including the $4.4 billion acquisition of Healthscope by Brookfield.
As anticipated, public M&A activity slowed down in the second quarter with the federal election occuring in May. It is also likely that foreign bidder activity slowed due to FIRB entering “caretaker” mode during the election period and not making any significant decisions as per convention.
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Timing of announcements
01
1098765432
Num
ber o
f Tra
nsac
tions
7,000
6,600
6,200
6,800
6,400
6,0005,8005,6005,4005,2005,000
S&P/
ASX
200
2018
Jan MayFeb Jun SepMar Jul OctApr Aug Nov Dec
2019 S&P / ASX 200 (2018) S&P / ASX 200 (2019)
Deal activity picked up after the election, particularly in July and October, where six transactions were announced in each of those months, including:
Quadrant Private Equity’s $421 million acquisition of
QMS Media
QIC Private Capital’s $467 million acquisition of
Pacific Energy
Seven West Media’s unsuccessful acquisition of
Prime Media Group
PSP Investment’s $724 million acquisition of
Webster
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+ Brookfield’s $4.4 billion acquisition of Healthscope
+ Nippon Paint’s $3.8 billion acquisition of DuluxGroup
+ BGH Capital consortium’s $2.1 billion acquisition of Navitas
+ China Mengniu Dairy Company’s $1.5 billion acquisition of Bellamy’s Australia
+ EQT’s proposed $1.4 billion acquisition of Metlifecare
+ Brookfield’s $1.3 billion acquisition of Aveo Group
+ AP Eagers’ $836 million off-market takeover offer for Automotive Holdings
+ Wesfarmers Lithium’s $769 million acquisition of Kidman Resources
+ PSP Investments’ $724 million acquisition of Webster
+ Shell Energy Australia’s $617 million acquisition of ERM Power
+ Fox Corporation’s $585 million acquisition of Credible Labs Inc
TRANSACTION HIGHLIGHTS
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$1 BILLION+
$500 MILLION+
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SECTOR ANALYSIS
Key sectorsIn 2019, the healthcare sector led the way by value, contributing 27% of total transaction value, a significant increase from 10% in 2018. This was largely driven by the $4.4 billion acquisition of Healthscope by Brookfield and EQT’s $1.4 billion offer to acquire retirement village provider Metlifecare just prior to the end of the year.
Activity in the healthcare sector was diverse with hospitals, veterinary clinics, pharmaceuticals, aged care and OH&S all attracting investment. Deal activity in the healthcare sector increased slightly with six transactions in 2019 (up from five in 2018).
Retail & consumer services came in second by deal value (21%), with industrial products coming in third (17%), largely due to Nippon Paint’s $3.8 billion acquisition of DuluxGroup.
The healthcare, industrial products and retail & consumer services sectors were also the sectors with the three largest transactions by value.
By number of transactions, retail & consumer services led public M&A activity in 2019, accounting for 20% of transaction volume. Energy & resources was the second largest contributor to transaction volume (17%) followed by healthcare (15%).
Transactions per sector (number vs value)
Proportion by total value of transactionsProportion by number of transactions
0%
15%
5%
10%
20%
25%
30%
Transportation & Logistics
Utilities Real Estate FinancialsRetail & Consumer Services
TelecommunicationsProfessional Services
Energy & Resources
Food, Beverage & Tobacco
Industrial Products
Healthcare
2%
10%
3% 5% 5%
17%
7%
20% 21%
7% 7%
15%
27%
17%
10%9% 9%
2%1% 1%
5%
0%
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HEALTHCARE REMAINED THE KEY SECTOR WITH 15% OF TRANSACTIONS BY NUMBER AND 27% OF AGGREGATE TRANSACTION VALUE (UP FROM 10% BY NUMBER AND 10% BY VALUE IN 2018)
HEALTHCARE led the way in terms of aggregate deal value, largely due to Brookfield’s $4.4 billion acquisition of Healthscope (the largest transaction by value in 2019)
RETAIL & CONSUMER SERVICES strongly represented in both number of deals and aggregate transaction value
ENERGY & RESOURCES continues to attract significant public M&A activity by transaction volume
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Top transactions by sectorThe top five transactions by value came from four different sectors:
Brookfield Asset Management’s successful acquisition of Healthscope by scheme of arrangement
Nippon Paint’s successful acquisition of DuluxGroup by scheme of arrangement
BGH’s successful acquisition of Navitas by scheme of arrangement
China Mengniu Dairy Company’s successful acquisition of Bellamy’s Australia by scheme of arrangement
$4.35 billion $3.82 billion $2.09 billion $1.5 billion
Industrial Products (Construction Materials)
Healthcare (Hospitals)
Retail & Consumer Services
Food, Beverage and Tobacco (Consumer Staples)
EQT’s proposed acquisition of Metlifecare by scheme of arrangement
$1.44 billion
Healthcare (Aged care)
1 2 3 4 5
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The energy & resources sector performed well again in 2019 but saw a moderate decline in the proportionate value and number of transactions.
After contributing the greatest number of M&A transactions in 2018, the energy & resources sector contributed the second largest number of transactions (17%) in 2019. There were seven deals in the sector in 2019, down from 14 in 2018.
The sector contributed 7% to the aggregate value of transactions, slightly down from 9% in 2018.
Transactions in energy & resources and other key sectors
60%
70%
50%
40%
30%
20%
10%
0%2012
32%
13%
27%
10%
1%4%
9%7%
48%38%
46%
35%
10%
24% 29%
17%
2013 20162014 20172015 2018 2019
Energy & Resources (by number) Energy & Resources (by value)
Healthcare (27%), retail & consumer services (21%) and
industrial products (17%) by value
Utilities (34%) and real estate (21%) by value
Energy & resources
2019’S STANDOUT TRANSACTIONS IN THE SECTOR INCLUDED:
Wesfarmers Lithium’s $769 million acquisition of Kidman Resources by scheme of arrangement
Independent Group’s ultimately unsuccessful $320 million hostile bid for Panoramic Resources, one of the few old-fashioned hostile bids in the market last year
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Sectors of interest for foreign bidders 56% of the transaction volume in 2019 involved foreign bidders.
In 2018, there was significant foreign interest in energy & resources, real estate and financials, while 2019 saw strong foreign interest in healthcare, retail & consumer services and industrial products.
In terms of value, the healthcare sector represented 33% of the total value of foreign bids, largely attributable to the $4.4 billion acquisition of Healthscope by Brookfield and EQT’s proposed $1.4 billion acquisition of Metlifecare. This was followed by industrial products (with 21.3% of foreign bids by value), which was mainly due to Nippon Paint’s $3.8 billion acquisition of DuluxGroup.
Key sectors for foreign bidders
Num
ber o
f bid
ders
10
0123456789
20192018
22 2
7
3
0
554 4
1 1 1 11 1 12
Energy & Resources
Retail & Consumer Services
Real Estate
FinancialsHealthcare Industrial Products
Food, Beverage & Tobacco
TelecommunicationsUtilitiesProfessional Services
6
3
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TRANSACTION STRUCTURES3
In 2019, 83% of all transactions valued over $50 million proceeded by way of scheme of arrangement as opposed to takeover bid. This is a significant increase from 2018 where 65% of transactions were undertaken by scheme. It continues and amplifies the long-term trend we have observed over recent years.
As the graph below reflects, the historical “50/50” nature of the takeover or scheme divide is well and truly behind us. Bidders and targets alike now prefer the transaction and timetable certainty offered by a scheme. This is particularly relevant for private equity firms which generally need to undertake due diligence and acquire 100% of a target to obtain financing.
The preference for schemes of arrangement over takeover bids continues to be more pronounced for transactions valued over $1 billion. As in 2018, all transactions exceeding $1 billion announced in 2019 were structured as schemes. As one would expect, the greater the amount of capital at risk, the more a bidder needs to do due diligence, is likely to have third party financing and will therefore prefer the certainty of outcome offered by a scheme.
Schemes continue to be the preferred transaction structure
Schemes v takeovers ($50m+) Schemes v takeovers ($1b+)
2018
2019
2018
2019
2017 2017
2016 2016
2015 2015
2014 2014
65%
63%
67%
46%
49%
35%
37%
33%
54%
51%
100%
20%
17%
17%
55%
80%
83%
83%
45%
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Schemes ($50m+) Schemes ($1b+)Takeovers ($50m+) Takeovers ($1b+)
Pre-bid stakesThe considerable majority of bidders using a takeover bid (rather than a scheme) in 2019 had a pre-bid shareholding in the target prior to announcement of the transaction. 71% of takeover bids involved a bidder who held (or acquired) a physical pre-bid holding in the target. The size of these stakes ranged from Independence Group’s 4% pre-bid shareholding in takeover target Panoramic Resources through to Grafton Health Holdings’ 93% pre-bid shareholding in Orion Health Group.
50% 17%83% 100%50%
Where the bidder has a large pre-bid holding, the choice of takeover bid over scheme of arrangement is generally understandable given that the acquirer is unable, in the context of a scheme, to vote its shares at the shareholder meeting to approve the transaction. That said, eight bidders with pre-bid stakes of 10% or more still opted to proceed by way of scheme rather than takeover bid in 2019 (potentially because an all-or-nothing outcome was required).
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Hostile v Friendly
No on-market bids in 2019On-market takeover bids remain very rare in the Australian market. In 2019, there were no on-market takeover bids valued over $50 million (down from two in 2018 and one in 2017).
Only 5% of all transactions in 2019 were commenced on a hostile or unsolicited basis, down from 12% in 2018 and 20% in 2017. This trend is perhaps unsurprising given:
+ The increasing preference of bidders for schemes of arrangement, which are necessarily friendly as they require the cooperation of the target’s board.
+ The general acceptance of confidential non-binding indicative offers and bear hugs (involving a scheme of arrangement) as a way of progressing unsolicited approaches. The lack of a put up or shut up rule in Australian takeover laws means an unwelcome unsolicited approach can pressure a target over many months without having to formally make a takeover bid.
Of the two hostile bids in 2019, the largest was the ultimately successful $836 million off-market takeover of Automotive Holdings Group by AP Eagers.
Independence Group’s withdrawn offer to acquire Panoramic Resources is the other notable hostile bid made during 2019.
Hostile bids a thing of the past?
Hostile Friendly
0%
20%
40%
60%
80%
100%
% of
Tran
sact
ions
2017 2018 2019201620152014
76%58%
80% 80%88% 95%
24% 42%20% 20% 12% 5%
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FOREIGN BIDDERS
A year of consolidation As far as Australia was concerned, 2019 was a year of consolidation when it came to foreign investment.
In 2019, the Foreign Investment Review Board (FIRB), and associated agencies like the Critical Infrastructure Centre and government departments concerned with national security (as well as tax), continued to deepen their oversight and review of foreign investment. That said, in 2019, unlike previous years, there were no high-profile foreign acquisitions in sensitive industries, no public rejections of applications for FIRB approval and no particular foreign investment controversies. Perhaps this was a result of fewer large foreign acquisitions, challenges in the banking industry (post Financial Services Royal Commission), no large cross border deals in the energy & resources sector and generally reduced Chinese state-owned investment. In any case, the lack of controversy was no doubt welcome to the Government in a federal election year.
ALL IN ALL, WE CONSIDER 2019 TO BE A YEAR OF CONSOLIDATIONThat said, there were a few areas of development which are worth noting.
DataLike various other countries, FIRB has been increasing its focus on the protection of sensitive data. This will only increase as data proliferates in, and between, businesses.
The type of data that may need to be protected includes personal data of Australian residents and citizens (eg acquisitions in the healthcare sector), government /national security data and data / information relating to critical infrastructure. FIRB has also had to consider an increased number of foreign investment proposals seeking to acquire data centres and other facilities that house, or have access to, sensitive private data.
Of course, the concern for malicious actors to access, and exploit, sensitive data is a general concern in these times.
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THE FIRB APPROACH HAS GENERALLY BEEN TO MITIGATE THE POTENTIAL PROBLEMS THROUGH THE DEVELOPMENT OF DATA SECURITY CONDITIONS RATHER THAN OUTRIGHT PROHIBITION
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Firstly, the drafting of the conditions could be improved by defining key terms.
Secondly, the conditions can significantly impact the way a business is operated if they are not thoroughly thought through. For example, there is often a condition preventing sensitive information being accessed from offshore. This can cut across the way a target business is currently run if they have an offshore call centre that provides customer service. In this respect, it is important for the target to be more involved in the FIRB approval process, and particularly in negotiating the terms of any conditions, than may otherwise be the case so they can ensure the business can continue to be run in an optimal manner post acquisition.
The increasing importance of data may mean that the government will before long need some more specific legislation about the protection of data. Stating the obvious, these threats and issues do not only apply to businesses in the process of acquisition by foreigners. In this respect, using the foreign investment rules for the protection of data is a suboptimal approach.
THE FIRB DATA SECURITY CONDITIONS HAVE GENERALLY FOCUSSED ON:
THE TYPES of data people can access
WHERE can they access the data from
WHO may access the data
WHERE the data is physically stored (for example, if it is stored in the cloud, there are some cloud service providers that are on a government “white list”)
Continued focus on taxation mattersFIRB consults with the Australian Taxation Office (ATO) during the approval process. The ATO has in recent years increased its focus on multinational tax avoidance.
While not in the context of foreign acquisitions, the ATO’s focus was evident in the recent $481.5 million settlement with Google in respect of its tax practices between 2008 and 2018. This brings tax settlements in the last two years between the ATO and a range of multi-nationals including Microsoft, Apple and Facebook to approximately $1.25 billion.
It has become the usual practice for large foreign acquisitions to face a range of standard tax conditions around their structuring, ongoing reporting and general compliance.
Consultation with the ATO can also prolong the approval process.
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Decreased Chinese interest Chinese state-owned investment (and private investment with close links to the Chinese state) has always been a vexed issue for FIRB.
FIRB has been at pains to say its approach to considering applications for approval is non-discriminatory as to jurisdiction of acquirers (as distinct from the nature of the acquirers). However, it is clear this is an issue. For example, in relation to the assessment of data protection, there is going to be much more attention when it is a Chinese foreign government investor compared to an American private equity fund.
Indeed, the FIRB chairman, David Irvine, has sought to improve the public relations on FIRB’s approach to Chinese investment by giving two public presentations in the second half of 2019 to Chinese investment orientated organisations. He sought to highlight that Australia seeks to encourage Chinese investment, pointing to various approvals over time. This is despite tension around Sino-Australian investment relations caused by the prohibition on Huawei equipment in Australia’s 5G rollout and rejections of acquisitions in the energy & resources sector in recent years. China Mengniu Dairy Company’s $1.5 billion acquisition of Bellamy’s, Australia’s leading organic infant formula business, is a recent example of a Chinese acquisition that was approved in 2019.
Clearly it is important that relations do improve as China is Australia's largest two-way trading partner, by quite some margin. Chinese companies are also the fifth largest holder of foreign direct investments in Australia. The Australian Government’s approach to the coronavirus outbreak may also test relations and will be critical for many businesses, including the education sector.
In recent years, China has been Australia’s largest source of proposed foreign investment year-on-year, except for 2018, when the US was the largest source country for that year. While official statistics have not been released for 2019 as yet, it is clear that the incidence of acquisitions of Australian public companies by Chinese investors is much lower. That said, this is also attributable, in some part, to global conditions and the impact of Chinese capital controls.
Indeed, large foreign acquisitions in 2019 seem to have been dominated by US and Canadian companies (including Brookfield for Healthscope and Aveo). Interestingly, there was a renaissance in Japanese acquisitions in 2019, including Asahi’s $16 billion acquisition of Carlton & United Breweries, Nippon Paint’s $3.8 billion takeover of DuluxGroup and Nippon Paper’s $1.7 billion purchase of Orora’s Australasian cardboard box manufacturing business.
18
THE FIRB CHAIRMAN, DAVID IRVINE, HAS SOUGHT TO IMPROVE PUBLIC RELATIONS ON FIRB’S APPROACH TO CHINESE INVESTMENT BY HIGHLIGHTING APPROVALS OVER TIME
19
TimingAnecdotally, the speed of the FIRB approval process for large or sensitive matters slowed in 2019. This is generally considered to be a function of the increased scrutiny from government agencies arising out of the wider consultation FIRB now undertakes.
In addition, in 2019, the government entered caretaker mode ahead of the federal election in May, which may have slowed the overall approval process during that time. On a related matter it should be noted that the re-election of the Liberal government has resulted in a largely unchanged approach to foreign policy. Nevertheless, the increased scrutiny, especially on tax and data matters, is likely to mean approvals will not happen any quicker in 2020.
That all said, in FIRB’s view, despite numerous complaints about timetables, 80-90% of FIRB decisions are reached and communicated within the initial 30-day review period.
FIRB does accept that more complex cases take longer, particularly for acquisitions that raise novel issues (eg with data) or where the government itself is in the process of finding solutions. David Irvine has stated “that a great majority of decisions are made within that statutory period is a good indication that, if there is a delay, there is usually a good reason for that delay. We have to balance the need for quick decision making with the need for correct decision making” and that “FIRB’s role is to facilitate, not to obstruct foreign investment. If it is taking longer, it is often because we are searching for a method to facilitate”.
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Worldwide trendAustralia is not alone in recognising and responding to national security challenges. It is definitely part of a worldwide trend to more closely scrutinise foreign investment and to protect one’s borders. For example:
+ In the US, the Trump administration has broadened and strengthened the remit of the Committee on Foreign Investment in the United States (CFIUS) with respect to national security matters in response to growing concerns over the trade and industrial policies of certain foreign countries (especially China). This is aimed at increasing CFIUS’s existing authority to review and potentially block or unwind investments in US businesses and critical US technology, infrastructure, personal data and real estate that may give rise to US national security concerns.
+ In October 2019, the UK Government announced plans to introduce new legislation to strengthen the government’s existing powers to scrutinise and intervene in transactions on national security grounds. The government has indicated that the proposed legislation will create a UK-wide notification system for transactions which may have security concerns and give the government powers to apply conditions to a transaction, or to block it altogether. Interestingly, the UK recently and controversially agreed to allow Huawei to have a restricted role in building Britain’s 5G network notwithstanding intense lobbying from the US Government to ban Huawei involvement.
+ Japan has expanded the scope of sensitive sectors for which notification is required – covering an additional 20 new industries including software relating to information processing. The government has also approved further restrictions on foreign investment on national security grounds, including lowering the threshold in sensitive companies from the current 10% to 1% (which will take effect from April 2020).
+ China has also introduced a unified foreign investment screening regime (replacing three existing regimes), which includes the establishment of a national security review regime.
20
21
Public M&A transactions in 2019Foreign bidder activity in 2019 was broadly in line with the long-term average in terms of deal volume, slightly decreasing to around 56% of public M&A transactions over $50 million being made by foreign bidders from 59% in 2018. One could say this was the second annual decrease in a row in terms of volume, but then this just takes us back to where we were in 2015 (which was also above 2016). So, we think it is another year which is consistent with the long term average of between 50% and 70%.
However, the same cannot be said in terms of aggregate transaction value. The value of foreign investment decreased significantly in 2019 compared to 2018, with a reduction of more than $23.3 billion in foreign investment to a total of $19 billion. In fact, the value of foreign investment in 2019 was lower than in 2016.
That said, when one considers the largest public M&A transactions last year, the importance of foreign investment remains clear. All public M&A transactions in 2019 with a value of $1 billion or more involved foreign bidders. The largest foreign bidder transactions in 2019 were:
+ Brookfield’s $4.4 billion acquisition of Healthscope;
+ Nippon Paint’s $3.8 billion acquisition of DuluxGroup;
+ BGH Capital consortium’s $2.1 billion acquisition of Navitas;
+ China Mengniu Dairy Company’s $1.5 billion acquisition of Bellamy’s Australia;
+ EQT’s proposed $1.4 billion acquisition of Metlifecare; and
+ Brookfield’s $1.3 billion acquisition of Aveo Group.
It was a busy year for Brookfield in that it was responsible for two of the top foreign bids. BGH Capital was also involved in two of these transactions, with BGH Capital and AustralianSuper making the initial approach for Healthscope. While the principals of BGH Capital are Australian based, we have categorised the BGH Capital consortium acquisition of Navitas as foreign due to its foreign consortium members and investors and the need for FIRB approval, which is not uncommon with private equity backed bids.
Foreign bidders by number of transactions
Foreign bidders by value
2015 2018
2018
2019
2019
2016
2016
2017
2017
80%
54%59% 56%
49%
63%70%
60%
50%
40%
30%
20%
10%
0%
5 15 25 3510 20 30 40 45$ billions
21
23.8
36.7
42.3
19.0
22
+ North America, that is the US and Canada, with six deals each, continues to dominate foreign investment. The increase in transactions involving North American bidders was largely due to active Canadian pension funds seeking to invest in Australia, particularly in infrastructure, real estate and adjacencies;
+ Asian bidders came from a variety of countries including Japan, South Korea and China;
AP Eagers’ $836 million takeover of Automotive Holdings
Wesfarmers Lithium’s $769 million acquisition of Kidman Resources
BGH Capital consortium’s $2.1 billion acquisition of Navitas
Grafton Health’s $107 million acquisition of Orion Health
UK: FNZ’s $268 million contested acquisition of GBST Holdings
Shell’s $617 million acquisition of ERM Power
Japan: Nippon Paint’s $3.8 billion acquisition of DuluxGroup
China: Hong Kong listed China Mengniu Dairy Company’s $1.5 billion acquisition of Bellamy’s Australia
Shanghai listed Chengtun Mining Group’s $109 million acquisition of Nzuri Copper
US: The acquisitions of Credible Labs Inc ($585 million) and Gazal Corporation ($268 million)
Canada: Brookfield’s $4.4 billion acquisition of Healthscope and $1.3 billion acquisition of Aveo Group
7%
15%
44%
5%
29%
AFRICA SOUTH AMERICA
NORTH AMERICA
ASIA
AUSTRALIA
OTHER
EUROPE
Sweden: EQT’s proposed $1.4 billion acquisition of Metlifecare
+ Japan has had a resurgence in acquisitions of Australian companies, perhaps driven by low cost debt and also low growth in Japan;
+ While China has had a reduced interest in Australia in recent times, Chinese companies still had two successful acquisitions in 2019; and
+ European investors were behind three transactions.
Where did the bidders come from?As illustrated in the world map (below), in 2019 foreign bidders came from a range of continents and jurisdictions including Asia, North America, the UK, Sweden and New Zealand. However, when you break it down some more, there are some interesting themes in this:
22
23
The largest number of foreign bidders from individual countries were:
As was the case in 2018, foreign bidders made up a larger share of the public M&A transactions from a transaction value perspective (compared to transaction number). While North American bidders accounted for 29% of transactions by number, they accounted for 36% of aggregate transaction value. Similarly, while Asian bidders accounted for 15% of transactions by number, they accounted for 25% of aggregate transaction value.
However, it is also interesting to see that Australian bidders accounted for 21% of the aggregate transaction value in 2019, increasing from just 14% in 2018.
Given the ongoing subdued Chinese outbound direct investment and the continued (Australian government and media) sensitivity towards Chinese foreign investment, and the increase in private equity bids (with readily available pension/superannuation and debt funding), it will be interesting to see if there is a continued shift away from Asian to North American bidders.
95% OF ALL ANNOUNCED PUBLIC DEALS OVER $50 MILLION INVOLVING FOREIGN BIDDERS SUCCESSFULLY COMPLETED. THIS WAS ABOVE 2018’S SUCCESS RATE OF 76% AND OUTDID THE PREVIOUS HIGH OF 92% IN 2016.
2018
2019
2014
2015
2016
2017
Foreign bidder success rates
76%
95%
80%
67%
92%
74%
Proportion of bidders by region over time60%
50%
40%
30%
20%10%
0%2014 2015 2016 2017 2018 2019
Europe
Australia
North America
Asia
Africa
Other
China 2 deals Japan
3 deals
THE KEY FOREIGN PLAYERS IN 2019 WERE NORTH AMERICAN BIDDERS, WITH THE DECREASE IN ACTIVITY OF CHINESE BIDDERS OVER THE LAST TWO YEARS CONTINUING IN 2019
Canada 6 deals
United States6 deals
UK 2 deals
Foreign bidders’ success rates reach new highForeign bidder success rates in public M&A transactions reached their highest in the time we have been publishing our Review (almost 10 years).
That said, this higher success rate may in part be reflective of the way deals are done today. That is, there is a general trend away from hostile/unsolicited bids to friendly/agreed transactions and also a general increase in confidential non-binding indicative offers which may not become public if rejected.
24
5CONSIDERATION TYPES
Cash reigns supreme!The preference for cash consideration amplified in 2019, with the percentage of transactions comprising all-cash consideration
Combination considerationThere were no transactions which had a consideration structure which offered target shareholders a fixed combination of both cash and scrip with no all cash alternative. This was down from 8% of transactions announced in 2018 which offered a combination of cash and scrip.
HOWEVER, THERE WERE FIVE TRANSACTIONS WHICH GAVE SHAREHOLDERS THE OPTION TO ELECT EITHER SCRIP OR CASH CONSIDERATION This included the successful acquisition by Sandfire Resources of MOD Resources via scheme of arrangement, which offered the option to elect either scrip consideration of 0.0664 Sandfire share for every 1 MOD share or cash consideration of A$0.45 per MOD share, subject to an aggregate cash cap of $41.6 million.
Use of cash consideration at an all-time high83% of transactions in 2019 gave target shareholders the option to receive all cash consideration, up from 71% of transactions in 2018. This is the highest percentage we have identified in the past ten years. It may, in part, be attributable to the increased activity of private equity bidders, and the relatively cheap debt funding available to bidders.
Schemes remained the preferred structure for cash transactions, making up 88% of transactions offering all-cash consideration.
Interestingly, only 57% of takeover bids offered solely cash, down from 82% in 2018 (marking a continued decline in all-cash bids from 2017).
Once again, consistent with 2018, there was a preference for the certainty of cash among the larger transactions: the largest five successful transactions announced in 2019 offered all-cash consideration as a possible election.
AP Eagers’ $836 million acquisition of Automotive Holdings Group was the largest transaction using a scrip consideration structure.
Types of consideration by number of transactions100%
80%
60%
40%
20%
0%20192014 2015 2016 2017 2018
Cash Scrip Combination
8% 21% 13% 15% 8%22%
18%13% 15% 21%
17%
70%61%
74% 70% 71%
83%
STUB EQUITY CREATIVITY REMAINED UNDER THE SPOTLIGHT.
THERE WERE NO TRANSACTIONS WHICH OFFERED TARGET SHAREHOLDERS A FIXED COMBINATION OF BOTH CASH AND SCRIP.
INCREASING TO
83%
25
A further two transactions sought to provide scrip consideration to select shareholders (management/consortium members), who formed a separate class of shareholder when voting on the scheme of arrangement.
$2.50 cash per target share. Healthscope shareholders could elect to receive shares in the Bidco parent if more than 10% of Healthscope shareholders elected the scrip option. There was a cap on these elections representing 45% of the total issued share capital of Bidco, with a pro rata scale back mechanism to apply if the cap was reached. Ultimately, less than 0.01% of shareholders elected the scrip option, and so no scrip was issued.
$6.00 cash per target share, however certain members of management were required to rollover their shares in Gazal into shares in the BidCo parent.
$2.195 cash per target share inclusive of a $0.045 dividend. Aveo shareholders could elect to receive units in a Bermudan limited partnership which would hold class B shares in the TopCo if more than 10% of Aveo shareholders elected the scrip option. There was cap on these elections representing 30% of the total issued share capital of TopCo, with a pro rata scale back mechanism to apply if the cap was reached. Ultimately, 16.9% of shareholders elected scrip and none were scaled back.
Cash of $5.825 per target share, however consortium members who held target shares rolled over their shareholdings into HoldCo shares.
Anecdotally, there were many conversations with potential bidders in the first half of 2019 about stub equity transactions. Brookfield’s acquisition of Aveo Group was an example where all shareholders had a chance to exchange their Aveo shares for shares in the private equity bidding vehicle. The Navitas transaction offered scrip in the bidder’s HoldCo, although only to consortium members who held target shares.
In June 2019, ASIC proposed in Consultation Paper 312 significant restrictions to address its concerns that certain stub equity structures run counter to the underlying policy provisions governing proprietary companies (ie their shares are generally required to be closely held and they are subject to lower disclosure and governance requirements than public companies) and deny retail investors important protections.
Submissions were made by G+T and others that existing disclosure exemptions are appropriate and that requiring a public company structure would result in bidders using a foreign entity as the acquisition vehicle taking it outside the application of the Corporations Act where fewer protections for retail shareholders may be available. As at the date of this publication, ASIC has not released anything further on its proposals in this regard.
Stub equity creativity under the spotlightTwo transactions in 2019 involving Brookfield sought to provide flexibility for all target shareholders by incorporating a stub equity option into the consideration structure as follows
25
BROOKFIELD'S ACQUISITION OF
PVH’S ACQUISITION OF BGH’S ACQUISITION OF
BY SCHEME OF ARRANGEMENT BY SCHEME OF ARRANGEMENT
BY SCHEME OF ARRANGEMENTBY SCHEME OF ARRANGEMENT
Healthscope
Gazal Corporation
Aveo Group
Navitas
26
Cash Scrip Equity to select shareholders Stub equity
$4.4 billion Healthscope /
Brookfield
$769 million Kidman
Resources / Wesfarmers
Lithium
$228 million Echo Resources / Northern Star
Resources
$2.1 billion Navitas / BGH
$421 million QMS Media /
Quadrant
$167 million MOD Resources
/ Sandfire Resources
$3.8 billion Dulux / Nippon
Paint
$617 million ERM Power / Shell Energy
$192 million Xenith IP
Group / IPH
$1.3 billion Aveo Group /
Brookfield
$320 million Panoramic Resources /
Independence Group
$109 million Nzuri Copper / Chengtun
Mining
$836 million Automotive
Holdings / AP Eagers
$268 million Gazal / PVH
$86 million URB
Investments / 360 Capital
$200M $400M $600M $800M $1B$5B+
Sources of fundingThe chart (right) shows that the cash consideration for public M&A came from a variety of sources. While the majority of bidders continue to fund their acquisitions using at least a portion of existing capital, the number of transactions establishing new acquisition facilities (predominantly, secured debt facilities) increased from 41% in 2018 to 62% in 2019. It seems that bidders are much more prepared to borrow to undertake acquisitions and is likely to also reflect the increased number of private equity transactions.
Larger deals continue to use a mix of funding sources.
Interestingly, there has been a continued decline in the proportion of bidders undertaking equity capital raisings to fund their acquisitions.
+ Healthscope / Brookfield $4.4 billion funded from existing cash reserves and senior secured syndicated facilities as well as bridging finance
+ DuluxGroup / Nippon Paint $3.8 billion funded by a new unsecured debt facility
+ Navitas / BGH Capital consortium $2.1 billion funded by existing cash reserves and new secured debt facilities
+ Bellamy's Australia / China Mengniu Dairy Company $1.5 billion funded by term loan facility
For example:
Consideration structures
Sources of funds82% 79%77%
9% 8% 6%
40% 41%62%
New acquisition facilities Equity capital raising Existing reserves /
corporate facilities201920182017
26
27
6SUCCESS FACTORS
Significant increase in success rates 89% of all concluded public M&A transactions over $50 million were successful in 2019. This represents an increase over the success rate in 2018 of 80%.
High value transactions (ie those valued above $500 million) enjoyed a 100% success rate, significantly up from 76% in 2018 (and the highest we have observed since 2014). Transactions ranging from $50 million to $500 million were less successful in 2019, falling from 82% in 2018 to 77% in 2019.
The success rate for 2019 does not include four transactions which were current at 1 March 2020. The success rates for 2016 to 2018 have been updated to reflect the ultimate outcome of all transactions which were analysed in those past Reviews.
Takeovers and schemes equally successful Success rates were broadly similar for schemes and takeovers in 2019, with 90% of schemes and 86% of takeover bids (with a transaction value exceeding $50 million) delivering a successful outcome. In comparison to 2018, this reflects a higher success rate for schemes (72% in 2018) but a lower success rate for takeovers (94% in 2018).
Success rates for takeovers v schemes
TakeoverScheme0% 20% 40% 60% 80% 100%
2018
2019
94%
86%
72%
90%
It is interesting to consider the circumstances in which transactions were not successful in 2019:
Transactions not approved by requisite majorities of shareholders
+ Charter Hall / Abacus’ proposed acquisition of Australian Unity Office Fund
+ Seven West Media’s proposed acquisition of Prime Media GroupAdverse independent expert’s report following a board recommendation
+ PharmaCielo’s proposed acquisition of Creso Pharma by scheme
Breach of defeating conditions, lack of major shareholder support and adverse board recommendation (notwithstanding favourable independent expert’s report)
+ Independence Group’s proposed acquisition of Panoramic Resources by takeover
Particularly noteworthy is that three of the four unsuccessful transactions in 2018 were board-recommended schemes, two of which were voted down by shareholders. This is a timely reminder of the importance of ensuring key shareholders are supportive of the transaction.
Success rates
$50m to $500m $500m+ All $50m+
100%
40%
70%
10%
90%
30%
60%
0%2016 2017 2018 2019
80%
20%
50%
85%80%
62%70%
82%77%
100%
89%76% 80%
91%83%
28
Friendly transactions enjoy significantly higher success rate In 2018, we were somewhat surprised to see hostile takeovers enjoy higher success rates than friendly transactions (83% vs 79%).
In 2019, we saw a return to normal – significantly higher success rates for friendly transactions (91%) as compared to hostile takeovers (50%). That said, it is relevant to note that there were only two hostile bids in 2019, with one being successful (AP Eagers’ bid for Automotive Holdings Group) and the other one unsuccessful (Independence Group’s bid for Panoramic Resources). So, in respect of hostile takeovers, the data is a product of a very small sample size.
Decrease in premiums The average final premium paid by bidders has decreased to 39% in 2019 after a five-year high of 50% in 2018. This makes the 2019 result more consistent with the size of premiums in years prior to 2018. That being said, the data for 2018 was significantly skewed by five transactions featuring premiums of more than 100%, two of which were more than 200%. When we exclude those outliers, average premiums in 2018 would have been 36%, which is slightly below 2019 levels.
Perhaps counter-intuitively, despite the drop in premiums in 2019 as compared to 2018, success rates were up on the prior year. More conventionally, it makes sense that the premiums in three of the four unsuccessful transactions in 2019 were 15% or below, making them among the lowest of all transactions in the data set.
Success rates for friendly and hostile transactions
Friendly Hostile
100%
40%
70%
10%
90%
30%
60%
0%
1086420
2015 2016 2017 2018 2019
80%
20%
50%
100%91%
50% 50%
88%
67%76%
43%
79% 83%
Average premiums paid
41%
33%
40%
51%
50%
39%
30%
35%
40%
45%
50%
55%
Aver
age p
rem
ium
s paid
%
Dea
l cou
nt
60%
All $50m+ transactions $500m+ transactions
2017 2018 2019
Transactions by final premium grouping
0% to 10% 10% to 20% 20% to 30% 30% to 40% 40% to 50% 50% to 60% 60% to 80% 80% to 100% 100% to 130% 130% & above
1 1 1
10
3
0
4 44
8
29
Top five premiums offered in 2019Top 10 transactions by premium offered in past five years
275% PT Bayan Resources TBK’s successful $515 million acquisition of Kangaroo Resources by scheme of arrangement233%Zijin Mining Group’s proposed $90 million takeover bid for Nkwe Platinum
213% TIO’s successful $73 million takeover bid for Flinders Mines
177% Merck & Co’s successful $502 million acquisition of Viralytics by scheme of arrangement142% Hancock Prospecting’s successful $426 million takeover bid for Atlas Iron141% Advanced Personnel Management’s successful $74 million acquisition of Konekt by scheme of arrangement 130% Tetra Tech’s successful $109 million takeover bid for Coffey International129% Coal of Africa’s unsuccessful $126 million takeover bid for Universal Coal120% Oz Minerals’ successful $418 million takeover bid for Avanco Resources100% Auctus’ successful $56 million takeover bid for Atherton Resources
1
2
3
4
5
6
7
8
9
10
2018 20172019 2016 2015
Only one deal from 2019 featured in the list of the highest 10 premiums offered over the past five years, being the 141% paid by Advanced Personnel Management for Konekt.
The top 5 five premiums for 2019 were paid in the following successful transactions (all structured as schemes of arrangement):
29
141% Advanced Personnel Management’s $74 million acquisition of Konekt
95%FNZ Group’s $268 million acquisition of GBST Holdings
73% IPH’s $192 million acquisition of Xenith IP Group
59% China Mengniu Dairy Company’s $1.5 billion acquisition of Bellamy’s Australia
57% PSP Investment’s $724 million acquisition of Webster
30
Types of pre-bid arrangementsAs in the past few years, holdings of actual shares remained the most common form of pre-bid stake, followed by pre-bid agreements with shareholders. The move away from cash settled equity swaps observed in 2018 has continued, with no bidder in 2019 using this type of instrument (or at least insofar as one can tell from public disclosures).
It is worth noting, however, that NorthWest Healthcare Properties REIT, which was a key stakeholder in the Healthscope transaction, acquired a significant holding in Healthscope via a swap. Ultimately, this allowed NorthWest to leverage into the overall transaction, enabling it to buy Healthscope properties from the successful acquirer in conjunction with the scheme.
Note that in some transactions, the bidder had more than one type of pre-bid stake.
Types of pre-bid arrangements (2019)
Equity derivative
0%
Pre-bid shareholding
Pre-bid agreement with shareholders
% of transactions in 2019 with a pre-bid stake
68% 32%
Pre-bid stakes on the declineThe proportion of transactions featuring a pre-bid stake fell to 46% in 2019 (down from 49% in 2018), the equal lowest result since we have been publishing this Review.
These transactions included both takeovers and schemes and deals ranging in value from $50 million to $2 billion. 71% of takeover bids involved a bidder who held (or acquired) a physical pre-bid holding in the target, while only 24% of schemes involved the acquirer holding a physical pre-bid stake. Interestingly, pre-bid stakes also featured in two unsuccessful transactions – Charter Hall / Abacus’ proposed acquisition of Australian Unity Office Fund by scheme, and Independence Group’s proposed acquisition of Panoramic Resources by takeover.
Taken together, is the data telling us that pre-bid stakes are becoming less important to delivering a successful outcome? We expect not given the clear benefits of acquiring a pre-bid stake in most transactions, but it is one we will continue to monitor closely.
Transactions featuring pre-bid stakes
2017 2018 2019
59%49% 46%
2016
56%
2015
46%
2014
51%
0%10%20%30%40%50%60%70%80%
30
31
TRANSACTION TIMING7
Takeovers still provide a faster route...usually While it is always possible for takeovers to complete more quickly than a scheme of arrangement if shareholders accept quickly, until recent years, there had in actual fact been no strong advantage timing-wise between takeovers and schemes.
However, in 2017, takeovers on average became significantly quicker to implement than schemes. This differential between takeovers and schemes has since remained. During the last three years, takeovers were on average around 42 days quicker to complete than schemes.
We consider that this difference has arisen due to an evolution of the strategy as to when a bidder might consider using the takeover procedure. That is, this emergence of takeovers as a materially shorter process has coincided with the emergence of schemes as being the much-preferred method of implementing a control transaction. Essentially, friendly Australian public company control transactions are now implemented by a scheme, unless there is a particular reason why a takeover should be preferred. And one of those reasons is that the circumstances of the company – whether that be the bidder starting from a control position, or the composition of the register suggesting a number of significant shareholders being open to accept quickly – creates the possibility of the deal being concluded in shorter time. Therefore, use of the takeover procedure has been subject to an almost “self-selection” of deals able to be implemented more speedily. In the years where transaction structures were more equally balanced between takeovers and schemes, there was no material difference between the two from a timing perspective.
Average days to end of takeover offer vs scheme implementation date
2019
2018
2017
DAYS115DAYS
69
DAYS129DAYS
78
DAYS96
DAYS126
Takeover Scheme
Between 2018 and 2019:
+ the average time to complete a scheme increased slightly by three days;
+ the average time to complete a takeover reduced by 18 days; and
+ takeovers retained a material time advantage, closing on average 51 days earlier than schemes during the year.
However, it should be noted that the data for takeovers is a little skewed by the inclusion of a takeover of an ASX listed, but New Zealand incorporated entity, Orion Health Group. This takeover was completed in 12 days (which would not actually be possible under Australian law). Stripping that transaction out of the data, the average days to the end of the takeover offer in 2019 would be 90, which would be a six-day reduction in the average time taken since 2018, and a widening of the average time differential between a takeover and a scheme from 30 days in 2018 to 39 days in 2019.
Regardless, the position from the previous couple of years has been maintained – takeovers still took materially less time to implement on average than schemes.
32
Takeovers with a pre-bid stake Takeovers without a pre-bid stake
Num
ber o
f day
s
0
70
125
75 78
110
0
90
158
71
44
92
126
2014 2015 2016 2017 2018 2019
20406080
100120140160180
Takeovers As stated above, last year there was a shortening in the time taken for a takeover from announcement to close of the offer - from 96 days in 2018 to 78 days in 2019. As also discussed, when the Orion Health Group transaction is removed from the data set, the period for 2019 actually becomes 90 days, which is a reduction, but not a significant one, from the previous year.
Other statistics worth noting are:
+ a slight increase (of three days) in the average initial offer period to 61 days; and
+ a significant reduction in the average time by which the offer period was extended from 38 days to 17 days.
The marginal increase in the initial offer period has no significance in our view. It is just reflective of expected variances in the data set.
The marked reduction in the average period for extensions to the offer period reinforces our view that the reductions in time periods for takeovers is a function of the reduced use of takeovers to implement control transactions. The deals that are being implemented by takeover are, in their nature, more able to be consummated quickly.
Timing in takeovers Days to close of takeover bid: impact of pre-bid stake
02014 2015 2016 2018 20192017
20
40
60
80
100
120
Initial offer period Extended offer period
Num
ber o
f day
s
92
20
72
8918
71
99
36
63
69
9678
18
51
3817
58 61
It is worth noting, however, that not all takeovers in 2019 were completed in a short time. The takeover of Automotive Holdings Group took 164 days because of ACCC concerns, and the takeover of Egan Street Resources took 136 days due to the existence of competing bids.
While the average time for a takeover was 78 days, the median was actually 63 days.
In previous years, we have assessed the impact of having a pre-bid stake on the time taken to complete a takeover. Generally, other than in 2017 (where the outcome was skewed by there being only being one deal that proceeded to completion without a pre-bid stake), deals where the bidder held a pre-bid stake had a distinct advantage in closing more quickly.
However, what is interesting about this year’s data is that we are unable to do that comparison.
IN 2019, THERE WERE NO TAKEOVER BIDDERS WHICH STARTED THEIR BID WITHOUT A PRE-BID STAKE
33
Schemes of arrangement As shown below, the time period between announcement of a scheme and its implementation date has been relatively stable over the last six years. This is obviously to be expected in the context of such a regulated process.
More than three quarters (76%) of all successful schemes announced during 2019 took between 80 – 130 days from announcement to the scheme implementation date when excluding the two outlier deals which faced significant regulatory delays (discussed below).
This reinforces the general “rule of thumb” of between three to four months to implement a scheme.
Unsurprisingly, delays in obtaining necessary regulatory approvals were involved in the two schemes that took the longest period of time to implement. The acquisition of Ruralco by Canada’s Nutrien required both FIRB and ACCC approvals and the acquisition of Nzuri Copper by Chengtun Mining Group required Chinese government approvals.
Timing in schemes
Days to scheme meeting Days to implementation
Num
ber o
f day
s
0
108116 114 115
126 129
2014 2015 2016 2017 2018 2019
20
40
60
80
100
120
140
93
15
95
21
86
28
96
19105
21
97
32
33
34
IMPLEMENTATION AGREEMENTS AND BID CONDITIONS
8
Implementation agreements Implementation agreements continued to be a standard feature of agreed transactions in 2019.
Only two of the 38 recommended transactions in 2019 did not involve an implementation agreement. Each of these transactions was structured as a takeover bid, with the bidder having a significant pre-existing shareholding or pre-bid stake. Arguably, these circumstances reduced the likelihood of interlopers and therefore made it less important to obtain the benefit of the protections and rights included in an implementation agreement.
Deal protection measuresIn addition to standard obligations on the target board to recommend the transaction to shareholders (in the absence of a superior proposal and, where applicable, subject to a favourable independent expert’s report), implementation agreements in 2019 continued to include the usual suite of exclusivity provisions in the vast majority of agreed transactions, namely:
+ restrictions on the target soliciting competing proposals (ie no-shop) and talking to potential competing bidders unless approached with a potentially superior proposal (ie no-talk);
+ obligations on the target to notify the bidder if it receives a competing proposal (ie notification obligation); and
+ matching rights in favour of the bidder if a superior proposal emerges, giving the bidder an opportunity to match the superior proposal before the target board can change its recommendation.
Frequent deal protection mechanisms
2017 2018 2019
80%
90%
100%
No Shop No Talk Break Fee Matching Right
93% 93%95%
86%
92% 93%
97% 97% 97% 97%
Break feesAgain in 2019, target boards routinely agreed to pay break fees in agreed transactions on the occurrence of certain trigger events, including a change in recommendation by the target board or material breach of the implementation agreement by the target.
For the most part, the quantum of break fees stayed within the Takeovers Panel’s 1% guidance (based on the target’s equity value). One notable exception was the scheme transaction in respect of the acquisition of Pioneer Credit, where Pioneer agreed to a break fee of 1% of its enterprise value ($287 million), which represented 2.4% of equity value ($120 million).
This shows that, where a target company is highly geared, it may be permissible to base the 1% threshold on enterprise value rather than equity value (as contemplated in the Takeovers Panel’s guidance). However, where this approach is adopted, it will be particularly important to be able to demonstrate that the break fee is a reasonable pre-estimate of the bidder’s actual costs. The first Court hearing in respect of the Pioneer Credit scheme is due to be held in mid-March 2020, and it will be interesting to see whether ASIC or the Court have a view on the quantum of the break fee.
Continuing the trend of recent years, 49% of transactions valued over $50 million featured a reverse break fee in 2019. This figure was slightly down on the previous three years, where the outcome was 54%, 52% and 58%, respectively. Reverse break fee triggers included:
+ failure to satisfy conditions relating to regulatory or shareholder approvals required by the bidder; and
+ material breach of the implementation agreement by the bidder. In nearly all cases, the quantum of the reverse break fee was the same as the break fee payable by the target. A notable exception was Brookfield’s acquisition of Healthscope. In that transaction, Brookfield agreed to pay a reverse break fee of $129 million if Healthscope terminated the transaction for material, unremedied breach of the implementation agreement by Brookfield. This represented three times the break fee payable by Healthscope in equivalent circumstances (and on other customary trigger events).
90%
95%
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Material adverse change (MAC)
100% of all schemes had MAC conditions, as did 86% of off-market takeovers (up compared to 91% for schemes and 80% for off-market takeovers in 2018). In agreed/recommended transactions, it is becoming less a question of whether there will be a MAC, but rather what the MAC will look like, with the triggers and exceptions generally the subject of much negotiation. While the triggers are more often than not based on falls in EBITDA and net assets, there are a range of other triggers that are sometimes used including falls in revenue and increases in net indebtedness.
Minimum acceptance conditions
71% of all off-market takeover bids had a minimum acceptance condition, which was broadly consistent with 2018. Notably, AP Eagers’ $836 million scrip bid for Automotive Holdings Group did not contain a minimum acceptance condition despite being conditional on various other matters (including regulatory and third party approvals). This, however, can be explained by the fact that AP Eagers was already the largest shareholder in AHG.
Bid conditionsA range of bid conditions were included in the off-market takeovers and schemes announced in 2019.
Frequency of conditions
All transactions Takeovers Schemes
98%86%
100%
46%56%
17% 18%5%
14%
39% 43%
98%86%
100%
38%
3%14%
0%No legal restraint
/ prohibitionFIRB
conditionACCC
approvalStock market
fluctuation3rd party consent
No material adverse change
Unconditional bids
There was only one unconditional takeover in 2019 – Grafton Health’s bid for Orion Health. However, the bidder had a pre-existing shareholding of above 90%, so in a substantive sense, bidders were less willing to proceed on an unconditional basis in 2019 as compared to previous years (where there have generally been a handful of unconditional bids).
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HIGHLIGHT: BATTLE OF THE NON-BINDING BIDS
One of the more interesting transactions during 2019 was the “battle” for GBST, an ASX listed company offering specialist administration and transaction processing software predominantly for retail wealth management organisations and global and regional investment banks.
“Bidding war” between Bravura, FNZ and SS&C 12 APRIL
Bravura $2.50
3 JULY SS&C $3.60
8 JULY GBST rejects
FNZ
29 JULY FNZ and GBST
agree $3.85
OCTOBER Scheme implemented
and GBST delisted
1 JULY FNZ
$3.50
5 JULY FNZ
$3.65
8 JULY FNZ commences Panel proceedings
24JUNE FNZ shows
interest
27 JUNE Bravura $3.00
30 JUNE GBST and SS&C enter
exclusivity deed at $3.25
19 JUNE Bravura $2.72
26 JUNE GBST opens limited
sale process
28 JUNE FNZ $3.15;
SS&C $3.25
In April 2019, GBST received an unsolicited non-binding indicative proposal from Bravura to acquire GBST at a price of $2.50 per share, which was rejected by GBST. Bravura followed that up on 19 June 2019 with a revised indicative proposal of $2.72. This followed a limited engagement between the two parties, which involved a management presentation by GBST.
GBST was then approached by the FNZ Group to engage in discussions in respect of acquiring GBST. Following such approach, GBST decided to undertake a limited sale process where interested parties were given an opportunity to secure access to due diligence on an exclusive basis by being invited to submit indicative proposals by 3 July 2019.
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Before that date however, Bravura further increased its indicative proposal to $3.00 per share, conditional on GBST entering an exclusivity deed with it by 4.00pm on 28 June 2019. Importantly, this was prior to the time set for indicative proposals in the GBST sale process. In doing so, Bravura had sought to force GBST’s hand by accepting the bird that was in the hand, rather than those potentially in the bush.
GBST responded by bringing the deadline on the limited competitive process forward, on several occasions, and ultimately to 2.00pm on 28 June 2019 (the date set by Bravura on which its indicative proposal would be withdrawn).
Non-binding indicative proposals were submitted by FNZ (at $3.15 per share) and a US-listed company, SS&C, at $3.25 per share. On 30 June 2019, GBST and SS&C entered into an exclusivity deed containing customary exclusivity provisions (eg no shop, no talk and no due diligence restrictions), subject to a fiduciary duty carve-out. Interestingly, the deed also provided for SS&C to pay to GBST a form of break fee if it did not proceed to a binding agreement with GBST on the terms of its successful indicative proposal (other than for certain specified reasons). This was announced on 1 July 2019.
GBST regarded certain information it would need to provide to a bidder during due diligence would be commercially sensitive, more so to certain prospective bidders who it regarded as having a greater competitive overlap in their operations. As a result, it only wanted to allow one party to proceed to diligence. However, the dilemma it had was how to secure a bid that was actually binding while the various parties kept increasing their non-binding indicative proposals. It needed to try and rule a line under the
“indicative” bidding war to progress at least one of the indicative proposals to a binding offer and to secure the attractive premiums being offered for GBST shareholders. The formal process, and entry into the exclusivity deed with the successful participant in that process, SS&C, was intended to rule that line.
However, FNZ had other ideas, and on the same day that GBST announced the exclusivity deed with SS&C, FNZ submitted a further non-binding indicative proposal at $3.50 per share, on the basis that SS&C would not have yet been given diligence access and allowing GBST to rely on its fiduciary carve-outs to its exclusivity obligations.
Two days later, on 3 July 2019, SS&C further increased its indicative proposal to $3.60 and SS&C commenced its diligence.
On 5 July 2019, FNZ announced a further increase in its indicative proposal to $3.65. So, despite its best efforts, the formal process run by GBST had failed to end the indicative bidding.
On 8 July 2019, GBST announced that despite FNZ indicating a price $0.05 higher the SS&C’s, GBST had determined that it was in the best interests of GBST shareholders to continue to facilitate the progress of a binding offer from SS&C reflecting the terms of its last proposal and which is capable of being put to shareholders. Essentially, GBST had determined - for reasons relating to the scope of the diligence required by the parties, the impact on GBST’s commercial position of providing diligence access to FNZ which did not result in a binding offer from FNZ, SS&C’s exclusivity break fee and other provisions of FNZ’s proposed exclusivity deed − that the proper discharge of its fiduciary duties did not require it to breach its obligations under the exclusivity deed with SS&C. GBST stated that:
GBST had tried once again to rule a line under the “indicative” bidding war.
“IT SEES LITTLE BENEFIT FOR SHAREHOLDERS IN RECEIVING FURTHER NON-BINDING, INDICATIVE AND INCOMPLETE PROPOSALS, OR IN ENGAGING IN AN INDEFINITE BACK AND FORTH PROCESS OF REVISED NON-BINDING INDICATIVE PROPOSALS THAT PROVIDE NO GREATER LEVEL OF CERTAINTY FOR GBST SHAREHOLDERS”
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Takeovers Panel ProceedingBut again, FNZ had had other ideas.
On GBST’s announcement, FNZ made an application to the Takeovers Panel that the conduct of GBST had constituted unacceptable circumstances. In essence, it contended that the process and actions of GBST meant that the potential acquisition of control of GBST was not taking place in an efficient, competitive and informed market.
As a preliminary matter, the sitting President of the Panel determined not to grant FNZ’s interim application for an order requiring GBST to cease providing diligence access to SS&C.
On FNZ’s substantive application, the Panel also decided to not conduct proceedings. However, in reaching this determination, the Panel provided certain useful guidance:
+ The impact on the commercial position of the target of the provision of due diligence to a certain party (as compared to the provision to other parties) is a valid consideration that may support different treatment of potential bidders.
+ It is reasonable for a board to receive valuable undertakings from prospective bidders in exchange for giving access to company information, and that the undertakings required may vary between alternative bidders.
+ The Panel will not readily second-guess a target board’s decisions taken after receiving independent legal and financial advice (including in respect of decisions to enter into exclusivity arrangements with a prospective bidder). While the Panel found that the process adopted by GBST was not conventional, it also was not unacceptable, and indeed, had been successful in achieving significantly improved outcomes for GBST shareholders.
+ The Panel adopted a principles-based approach to deal protection mechanisms (including countenancing that an absence of a fiduciary out may not necessarily be unacceptable in all circumstances) rather than the form of prohibition adopted in the UK.
+ Target directors were encouraged to negotiate deal protection mechanisms and not necessarily accept measures as “market practice”.
The issue as to whether an exclusivity deed should be disclosed in full, or whether a summary would be sufficient, was also considered but the issue was not determined. The Panel acknowledged that its policy provides that the “existence and nature of any lock-up device should normally be disclosed”. ASIC, however, submitted its strong view that the exclusivity deed should be disclosed in full. The Panel did not need to determine the issue as GBST and SS&C agreed to release the deed in full, but the Panel did say it was minded to conduct proceedings to consider the issue (in the absence of GBST’s voluntary disclosure), although it “remains an open question in what circumstances it may be sufficient to disclose a summary of a process deed instead of the deed itself”. If in the future parties to a transaction just disclose a summary rather than an exclusivity deed itself, they should probably expect a call from ASIC, and potentially end up being taken to the Panel.
FNZ ultimately wins the day... as do GBST shareholders!
And how did this all end up for GBST?
Well, FNZ returned several weeks later, submitted a higher binding bid (albeit subject to limited due diligence) at $3.85 per share, which SS&C did not match. FNZ used a relatively unusual technique of “exploding” offers where the price they offered reduced incrementally if it had not been accepted by certain deadlines. SS&C chose not to match the higher price, and the scheme under which FNZ acquired GBST was successfully implemented in late October 2019.
And the big winners were clearly GBST shareholders, receiving a valuation on their shares almost double the value prior to the original approach by Bravura.
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39
THE REGULATORS 9
ASICIt is undeniable that ASIC had an extremely busy 2019 and it promises to be the same for 2020.
However, it is fair to say that its main areas of focus have not included M&A. Other matters have attracted greater attention from the corporate regulator, including:
+ the ongoing fall-out from the Financial Services Royal Commission (including dealing with criticism of ASIC);
+ an increasingly litigious approach by ASIC to resolving matters against various financial services industry participants;
+ analysis by ASIC’s corporate governance taskforce on matters like executive remuneration, approaches to non-financial risk and corporate culture; and
+ a review of audit quality.That said, the generally more aggressive and interventionist approach of ASIC in other areas has also carried over into public M&A when it comes to formal review of transactions, particularly schemes of arrangement and some enforcement action as well.
However, it could be said that ASIC has been slow to follow through on real policy development or updates relating to M&A, for example, to its “Truth in Takeovers” regulatory guide. To be fair, perhaps “careful” and “more considered” might be alternative terms for ASIC’s approach here. We discuss some of these matters on pages 39 to 42.
Schemes of arrangementDirector benefits and recommendations
A key area of focus for ASIC in 2019 was director recommendations where the directors will receive payments or other benefits if a scheme is approved by shareholders and the Court. This has also been the subject of some scrutiny by the Courts.
ASIC and the Courts have, at a minimum, required extensive and more prominent disclosure of the benefits directors may receive if a scheme is approved. These benefits may include early vesting or acceleration of employee options or performance rights issued to managing directors under employee incentive schemes, retention payments, transaction bonuses or additional payments to directors for considering takeover bids.
However, in some cases where a director receives a material benefit in connection with the scheme’s implementation, the regulators have also called into question whether it is appropriate for a director to make a recommendation on the transaction to shareholders. While the appropriateness of interested directors was considered in various decisions in 2019, the more recent decisions (Kidman Resources Ltd [2019] FCA 1226 and Villa World Limited [2019] NSWSC 1207) suggest the preferable approach is that directors who will receive a benefit may still make recommendations to shareholders as to how they should vote. That said, in each decision, the importance of fulsome and prominent disclosure in these circumstances was reiterated. With respect, this is clearly the most sensible approach.
Given the ongoing focus on these matters by ASIC and the Courts, there is greater attention being given during deal negotiations to the benefits that may be received by directors if the scheme is approved.
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Benefits and classes
As transactions increase in complexity, ASIC is also giving some focus to additional benefits particular shareholders (and their affiliates) may receive if a scheme is approved. The question is, of course: do the additional interests or benefits result in the relevant shareholder being in a separate class for the vote on the scheme? Over many years, a practice developed in the Courts to pragmatically deal with tricky judgement calls on these matters involving the target company agreeing to separately account for, or tag, the votes of the relevant shareholders and, if those votes are determinative, the matter can be considered in greater detail at the second Court hearing. More often than not the vote is clear cut, such votes are not determinative, and the matter only gets a passing mention at the second court hearing.
However, in the Brookfield acquisition of Healthscope by scheme of arrangement in 2019, ASIC considered that this approach was not sufficient and was not supportive of the scheme proceeding without a different class being established. In this transaction, NorthWest had previously acquired a strategic stake in Healthscope via an equity derivative, with the intention of pursuing the acquisition of certain real estate assets of Healthscope. Subsequently, in conjunction with Healthscope agreeing the terms of the scheme of arrangement with Brookfield, various arrangements were entered into in connection with the proposed scheme (with the agreement of Brookfield, Healthscope and NorthWest) which included the sale and leaseback of properties by Healthscope to NorthWest; assistance by NorthWest in the financing of the scheme; and agreement by NorthWest that it would vote in favour of the scheme.
Given the magnitude and nature of the arrangements, ASIC considered that NorthWest was in effect a joint proponent of the deal and therefore NorthWest should form a separate class. Although the Court acknowledged ASIC’s concerns, it ultimately took the view that a separate class was not required in these particular circumstances. However, it noted that it retained the discretion to discount or discard the NorthWest votes at the final Court hearing if it thought necessary. In the end, the votes cast by NorthWest were not determinative in approving the scheme.
Disclosure matters
ASIC’s focus on disclosure was not just limited to scheme booklets, with disclosures made outside the scheme booklet also coming under scrutiny. ASIC has emphasised that all communications with shareholders need to meet the standard expected in the scheme booklet and, where appropriate, need to be made in a formal supplementary statement. In this regard, ASIC has been giving close attention to statements:
+ by the acquirer that it would not increase price; and + attributed to shareholders and proxy advisers as to how they
intend to vote (or how they have recommended shareholders vote).
Substantial shareholder notices
There are a range of practices when it comes to completing substantial holder notices. The prescribed nature of the forms is not always helpful, and disclosure is sometimes incomplete, relevant documents not lodged and notices lodged late.
In this respect, ASIC may scrutinise the adequacy of required disclosures. Some might say ASIC should do this more often albeit the resources required to cover the field on this matter would be enormous.
An example of ASIC pursuing this matter was the substantial holder notice filed in connection with the equity derivative that NorthWest had entered into in connection with its interest in Healthscope. As part of that transaction, NorthWest entered into various agreements including sale and leaseback arrangements, financing assistance and voting commitments. ASIC raised concerns that a number of related agreements (that had been entered into with NorthWest entities at the same times as the agreement attached to the substantial holder notice) were not attached to the substantial holder notice. In response to ASIC’s concerns, a revised notice was filed attaching the relevant agreements.
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41
Stub equity
ASIC is still considering its approach to stub equity in control transactions.
An offer of ‘stub equity’ occurs where scrip consideration is offered to target shareholders as an alternative to cash under a transaction typically involving a private equity bidder. These offers provide an opportunity for target shareholders to retain an economic exposure to the underlying business of the target company through holding scrip in the bidding, or holding, vehicle (HoldCo).
ASIC considered that a series of control transactions including the Capilano Honey scheme of arrangement in 2018 involving a proprietary HoldCo were structured to avoid the two main restrictions placed on proprietary companies under the Corporations Act, namely:
+ having 50 shareholders or less; and + the prohibition on proprietary
companies undertaking fundraising activities.
The terms of these transactions have required certain shareholders to direct their scrip consideration be issued to a nominee or custodian to be held on the shareholder’s behalf. The aim is to ensure that HoldCo has 50 members or less and can therefore remain a proprietary company and not be subject to the takeovers provisions in the Corporations Act.
ASIC considers it important that investors in widely held companies are
afforded the safeguards that the law explicitly provides for shareholders of public companies, and from which proprietary companies are exempt, including restrictions on related party transactions, restrictions on conflicted directors voting, the rules for the appointment and removal of directors and the requirement to hold annual general meetings.
The issue was first raised in 2018 where ASIC had concerns on some schemes. A formal consultation paper was issued in June 2019, where ASIC sought feedback on proposals to limit offers of stub equity in the form of shares in Australian proprietary companies to retail investors. ASIC has received submissions, many critical of the proposals, and is currently considering its response.
We do not think that there is any need for further regulation here. The offer of stub equity gives the potential for upside to those investors that value it. For those that don’t, they can just accept the cash consideration (as most usually do). The offer of stub equity can help get deals across the line, delivering bid premiums to shareholders where some shareholders would not accept a cash only offer.
Any additional regulation for Australian proprietary companies issuing stub equity will not mean the death of stub equity offers but instead likely result in bidders using an offshore vehicle rather than an Australian proprietary company (as we have already seen in the Brookfield/Aveo transaction). This does not seem a good regulatory outcome for Australian shareholders.
In any case, we await formal guidance on ASIC’s considered position on the matter.
Truth in Takeovers
For some time now, ASIC has said it is reviewing its ‘Truth in Takeovers’ Regulatory Guide 25 on false and misleading statements in takeovers. This regulatory guide is generally considered good policy. It has been a key linchpin of the regulation of public statements during control transactions over the last two decades. As our markets have become more sophisticated and practices developed, ASIC signaled it would review and update its policy here.
At this stage, ASIC is continuing work on the proposed update. We understand ASIC may be considering taking a hard-line approach to some matters. In any case, we hope the revised regulatory guide will be released before long and the approach is considered and in line with market practice.
Policy developments and updates…..or rather ongoing consideration of developments and updates
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THESE CASES SHOW AN INCREASED WILLINGNESS OF ASIC TO PROSECUTE WRONGDOING IN CORPORATE TRANSACTIONS
Jan Cameron, a former director of Bellamy’s Australia, for allegedly failing to disclose a substantial shareholding interest in Bellamy’s which was ultimately taken over by China Mengniu Dairy Company last year. The matter relates to a 14.74% shareholding in Bellamy’s held by her alleged associate, the mysteriously named Black Prince Foundation, incorporated in Curacao.
Jennifer Hutson, the former chair of the childcare provider G8 Education, in relation to a takeover bid made in 2015 by G8 Education for Affinity Education Group. Charges include dishonestly failing to exercise her powers and discharge her duties as a director, dishonest use of her position as a director, 15 counts of giving false or misleading information, and two counts of attempting to pervert the course of justice. In 2019, the general counsel of G8 Education pleaded guilty to giving false information to ASIC in connection with the investigation.
Clive Palmer and his company Palmer Leisure Coolum Pty Ltd for breaching the takeovers law in relation to a proposed takeover of the President’s Club Ltd. ASIC alleges that Palmer’s company publicly proposed to make a takeover bid of The President’s Club but did not make an offer for those securities within two months which was required under section 631 of the Corporations Act.
Criminal prosecutions
In 2019, ASIC continued to pursue criminal prosecutions against directors in relation to two separate takeover bids from prior years. In early 2020, it commenced a third criminal prosecution in respect of another company recently taken over.
These prosecutions were against:
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Facilitating higher bids
Pacific Energy was another Takeover Panel matter involving multiple bids.
This transaction involved a second bidder seeking to upset an agreed deal by offering a higher price. To obtain some downside protection, the second bidder required the target to agree to a break fee before it would make its non-binding indicative offer. In essence the break fee would be triggered if the first bidder or any other bidder, outbid the second bidder.
The first bidder did raise its bid, exercising its matching rights after the second bidder had made its offer and the target triggered the matching right process before seeking to change its recommendation to the second bid.
The first bidder argued that the target had breached its contractual commitments to it which resulted in unacceptable circumstances such that the target should not be required to pay a break fee to the second bidder. The Panel disagreed. Leaving to one side the contractual arguments, the Panel was reluctant to find the circumstances unacceptable where the target board had been well advised and their approach had resulted in a higher bid for shareholders.
In both the GBST and Pacific Energy matters, the Takeovers Panel showed a reluctance to second guess the actions of a target board whose conduct had resulted in higher offers for the shareholders.
Exclusive due diligence
GBST Holdings, a case concerning multiple bids for the target company.
In this matter, the target company was seeking to run an auction amongst potential bidders seeking non-binding indicative offers to undertake due diligence and negotiate binding transaction documentation on an exclusive basis. The potential bidder who had initially succeeded in being granted exclusivity by offering the best overall terms was subsequently outbid by another bidder. At this point, the target decided to continue on with the bidder it had granted exclusivity to even though the subsequent bidder had offered a higher price (on a non-binding indicative basis).
The subsequent bidder made an application to the Panel criticising the approach of GBST. The application was generally unsuccessful albeit it did succeed in gaining fuller disclosure of the exclusivity terms which facilitated its ability to make a higher offer which was ultimately accepted by the target.
In dismissing the application, the Takeovers Panel noted that the process undertaken by the target board achieved a successful outcome for the shareholders and the Panel would generally be reluctant to second guess target company directors who had been well advised.
See more on this case on pages 36 to 38.
Takeovers PanelApplication activity at the Takeovers Panel increased significantly in 2019 with 38 applications being made (up from 27 the previous year). This was the second highest in any year in the Panel’s history.
It is interesting that while there has a distinct trend away from takeover bids to schemes of arrangement over the last 20 years as the preferred mode of public company acquisition (see section 3), the Takeovers Panel has been as busy as ever this year. The Panel continues to be the key regulatory body in developing policy in relation to control transactions and disputes.
Some landmarks for the Takeovers Panel include, in 2019, the Panel welcoming a new President, Mr Alex Cartel, a very experienced investment banker who prior to that practised as an M&A lawyer. This year the Takeovers Panel will mark its 20th year anniversary in March 2020. By any standard, the Panel has been a tremendous success over this time with its efficient and cost effective decision making. It has also developed policy in a number of areas including frustrating action, 1% break fee, disclosure of derivatives over 5% and enhancing the Truth in Takeovers policy in many respects. These developments have been generally well accepted.
Some key Takeovers Panel cases and developments in 2019 included:
Backing well-advised target boards in competing bid scenarios
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ACCCMerger action in the Federal Court
In the 2019 edition of this Review we noted that the Pacific National – Aurizon Holdings merger litigation was the first ACCC merger action in Court in a number of years. In 2019, the ongoing PN–Aurizon litigation (which the ACCC lost at first instance, but is appealing) and the decision by TPG to successfully challenge the ACCC over its decision to oppose its proposed merger with Vodafone (VHA) in the Federal Court meant that 2019 was the first time ever that two merger cases were being heard by Federal Court in a single calendar year. The clearance processes in each of these cases have now been going for more than 18 months, pointing to the significant uncertainty and delays associated with Federal Court action.
2019 was also notable because the ACCC’s new merger authorisation process was used and has been identified as an efficient and cost-effective procedure. AP Eagers sought and obtained authorisation for its acquisition of Automotive Group Holdings. AP Eagers took advantage of the strict statutory timeframes in this process and obtained conditional clearance just 12 weeks after notification. The eBay subsidiary Gumtree has also lodged an application in early 2020 seeking authorisation for its proposed acquisition of the company which operates the carsguide.com.au and autotrader.com.au platforms.
Undisclosed associations
2019 saw several Takeovers Panel applications alleging illegal and undisclosed associations between shareholders holding more than 20% in aggregate in the context of voting for the election or removal of directors. These applications were generally made by the boards of companies trying to rebuff unhappy shareholders who were seeking to oust the existing directors.
IN ALMOST ALL CASES, THE APPLICANT COMPANY WAS UNSUCCESSFULEach case will of course depend on its owns facts. However, the Panel has rightly been sceptical of allegations of undisclosed associations in cases where shareholders are ultimately exercising their voting rights in connection with corporate governance concerns.
Cash settled swaps/derivatives disclosure
The Takeovers Panel proposed a revised guidance note on disclosure of equity derivatives, issuing a public consultation paper on the matter in 2019. The policy is in essence similar to the current position for disclosure of substantial shareholdings above 5%. That is, holdings of physical shares and derivative holdings of more than 5% in aggregate need to be disclosed (as do changes of 1% or more).
However, a key change in proposed revisions to the guidance note is to require such disclosure even where there is no control purpose and no control transaction on foot. This would bring the approach in Australia in line with that of many other jurisdictions. The Panel is currently considering submissions received in response to the public consultation paper.
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TPG–VHA
The proposed merger between TPG Telecom and Vodafone captured headlines throughout 2019. The ACCC commenced its review in September 2018 and ultimately announced its decision to oppose in May 2019, more than seven months later.
The ACCC’s decision to oppose the merger came as a surprise to many in the industry; TPG had no substantial position in mobiles, and Vodafone had no material position in fixed line broadband. TPG and Vodafone argued that the proposed merger was a move to strengthen competition by creating a viable competitor to Telstra and Optus. However, the ACCC viewed the proposed merger as being likely to substantially lessen competition by precluding TPG from taking its ‘proven track record’ of disruption to the mobile sector by independently entering the market, thereby acting as a fourth mobile competitor.
The trial lasted three weeks over September–October 2019, and Justice Middleton delivered judgment on 13 February 2020, close to 18 months after the ACCC’s initial merger commenced.
The merger was cleared and, although the full reasons remain confidential, Justice Middleton made clear in his public comments that he was not swayed by the ACCC’s argument that no merger would result in TPG building a fourth mobile network.
The ACCC was admonished by Justice Middleton for proposing speculative counterfactuals and attempting to engineer market outcomes.
Justice Middleton noted that “it is not for the ACCC or this Court to engineer a competitive outcome.” In a media release issued immediately after the decision, the Chair of the ACCC, Rod Sims, doubled down on the ACCC’s approach to mergers and described the decision as the loss of a “once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services”.
Including the PN–Aurizon case (which is subject to appeal), the ACCC has now lost its past seven contested merger trials in the Federal Court and Tribunal.
Pacific National–Aurizon
The 2019 edition of this Review highlighted PN’s proposed acquisition of intermodal assets from Aurizon Holdings. The ACCC commenced its review of this transaction all the way back in October 2017 and opposed it in July 2018, based on its view that the transaction would lessen competition and enable PN to discriminate against competitors. In May 2019, the Federal Court rejected the ACCC’s argument. The Court accepted that open access undertakings offered by PN on the final day of the hearing would prevent it from engaging in the ACCC’s hypothesised discriminatory conduct.
Rod Sims has publicly claimed that competition regulators globally were in disbelief when they found out a court treated a behavioural undertaking as a solution to the otherwise real threat to competition.
29 MONTHSAFTER THE PROCESS BEGAN
On a broader perspective, the ACCC’s reaction to its loss in the PN–Aurizon trial foreshadowed the possibility of future law reform. Following that loss, Rod Sims rejected any suggestion that the ACCC’s own litigation strategy was to blame, instead claiming that there were deficiencies with the merger law:
There is nothing wrong with our legal strategy. About 85 to 90 per cent of cases we take to court are successful in cartels, competition and consumer law. But on mergers our record is lousy.
When you are winning the cases all of the time in all other areas of the law but not in mergers, it is clear there is a problem with the merger regime in Australia.
In the immediate aftermath of the ACCC’s loss in TPG–VHA, Rod Sims reiterated that the Commission will “continue to oppose mergers that [they] believe will substantially lessen competition”. The calls for law reform are sure to gain momentum, driven by the will of the ACCC.
THE ACCC APPEALED THIS RULING AND THE MATTER IS CURRENTLY BEFORE THE FULL COURT OF THE FEDERAL COURT, WITH THE HEARING COMMENCING IN FEBRUARY 2020 –
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New merger authorisation process – first two applications
The 2017 Harper amendments to the Competition and Consumer Act re-established the ACCC as the first instance decision-maker for merger authorisation; parties had previously been able to apply directly to the Australian Competition Tribunal following prior changes to the law in 2006. AP Eagers was the first party to use this new process – in 2019 it sought authorisation for its acquisition of AHG, arguing that the acquisition would not lessen competition. AHG and AP Eagers are the largest and second-largest car dealership groups in Australia, respectively. AP Eagers proceeded with an off-market takeover bid for the ASX-listed AHG, and the takeover was conditional on ACCC clearance.
The ACCC considered that the proposed acquisition would substantially lessen competition in Newcastle and the Hunter Valley region. AP Eagers disagreed, however in order to expediate the clearance process, it agreed to offer an undertaking to divest its assets in the area. On receipt of this undertaking, the ACCC granted conditional authorisation to AP Eagers.
Merger authorisation process vs merger action in Federal Court
An important feature of the merger authorisation process is that there are binding timeframes: the ACCC has 90 days to make a determination, and the Tribunal has up to 120 days more if the parties seek review of an unfavourable ACCC decision. Needless to say, this is much shorter than the processes in the ongoing PN–Aurizon and recently concluded TPG–VHA matters.
In January 2020, Gumtree became the second party to take advantage of this new process, arguing that Gumtree’s proposed acquisition of the owner of two other automotive listing platforms would lead to a range of pro-competitive benefits and not substantially lessen competition. The ACCC is expected to make a decision on this acquisition in April 2020.
We very much expect that this authorisation process will continue to be considered by parties to merger transactions which are likely to come under close scrutiny by the ACCC, due to the defined timeframes, including when the ACCC decision is appealed.
2716 1983 2312 2615 1872 2211 2514 1761 21105 2413 2094Months
Mat
ter
08/05/19ACCC opposes
24/09/18ACCC commences
19/07/18ACCC opposes and files
27/10/17ACCC commences
11/18Court hearing
15/05/19Court judgement
26/06/19Appeal lodged
17/02/20Full Court hearing
02/19Court hearing
10/09/19Court hearing
12/02/20Judgement in favour of TPG/VHA
24/05/19Court filing
01/10/19Court hearing ends
29/04/19Application
24/06/19Market feedback letter
24/07/19Determination
AP Eagers authorisationKEY
TPG/VHA litigationPN/ Aurizon litigation
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2019 PUBLIC M&A TRANSACTIONSTarget Bidder Transaction
Type Status Bidder Origin
Consideration Type (Cash / Scrip /Combination)
Final Transaction Value A$
Healthscope Ltd VIG Bidco Pty Ltd Scheme Successful Canada Cash $4.352 billion
DuluxGroup Ltd Nippon Paint Holdings Co Ltd Scheme Successful Japan Cash $3.815 billion
Navitas Ltd BGH BidCo A Pty Ltd Scheme Successful Australia Cash $2.086 billion
Bellamy's Australia Ltd China Mengniu Dairy Company Ltd Scheme Successful China Cash $1.502 billion
Metlifecare Ltd Asia Pacific Village Group Ltd Scheme Current Sweden Cash $1.436 billion
Aveo Group Ltd Hydra RL BidCo Pty Ltd Scheme Successful Canada Cash $1.275 billionAutomotive Holdings Group Ltd AP Eagers Ltd Takeover
(off-market) Successful Australia Scrip $836 million
Kidman Resources Ltd Wesfarmers Lithium Pty Ltd Scheme Successful Australia Cash $769 million
Webster Ltd PSP BidCo and Sooke Investments Inc Scheme Successful Canada Cash $724 million
ERM Power Ltd Shell Energy Australia Pty Ltd Scheme Successful Australia Cash $617 million
Credible Labs Inc Project Six Merger Sub, Inc US Merger Successful United
States Cash $585 million
Australian Unity Office Fund
CHAB Office Pty Ltd as trustee for the CHAB Office Trust
Scheme Unsuccessful Australia Cash $495 million
Ruralco Holdings Ltd Agrium Australia Pty Ltd Scheme Successful Canada Cash $469 million
Pacific Energy Ltd QGIF Swan BidCo Pty Ltd Scheme Successful Australia Cash $467 million
QMS Media Ltd Shelley Bidco Pty Ltd Scheme Successful Australia Cash $421 million
Panoramic Resources Ltd Independence Group NL
Takeover (off-market) Unsuccessful Australia Scrip $320 million
Villa World Limited AVID Property Group Australia Pty Limited Scheme Successful Australia Cash $294 million
GBST Holdings Ltd Kiwi Holdco CayCo Ltd Scheme Successful Australia Cash $268 million
Gazal Corporation Ltd Sunshine B Pty Ltd (PVH BidCo) Scheme Successful United
States Cash $268 million
Wellcom Group Ltd Innocean Worldwide Inc Scheme Successful South Korea Cash $263 million
National Veterinary Care Ltd
Australian Veterinary Owners League Pty Ltd Scheme Current
Australia, NZ and Singapore
Cash $252 million
48
Target Bidder Transaction Type Status Bidder
Origin
Consideration Type (Cash / Scrip /Combination)
Final Transaction Value A$
Macquarie Media Ltd Nine Entertainment Co Holdings Ltd
Takeover (off-market) Successful Australia Cash $250 million
Echo Resources Ltd Northern Star Resources Ltd
Takeover (off-market) Successful Australia Cash $228 million
Xenith IP Group Ltd IPH Ltd Scheme Successful Australia Cash $192 million MOD Resources Ltd Sandfire Resources NL Scheme Successful Australia Cash $167 million
NetComm Wireless Ltd Casa Systems Inc Scheme Successful United States Cash $161 million
CSG Ltd Fuji Xerox Asia Pacific Pte Ltd Scheme Successful
Japan and United States
Cash $139 million
Creso Pharma Ltd PharmaCielo Ltd Scheme Withdrawn Canada Scrip $122 million
Pioneer Credit Ltd Robin BidCo Pty Ltd Scheme Current United States Cash $120 million
Highlands Pacific Ltd Cobalt 27 Capital Corp Scheme Successful Canada Cash $115 million
CML Group Ltd Consolidated Operations Group Ltd Scheme Current Australia Scrip $111 million
Nzuri Copper Ltd Xuchen International Ltd (Bidco) Scheme Successful China Cash $109 million
Orion Health Group Ltd Grafton Health Holdings Ltd
Takeover (off-market) Successful New
Zealand Cash $107 million
Dreamscape Networks Ltd Web.com Group Inc Scheme Successful United
States Cash $105 million
Spicers Ltd Kokusai Pulp & Paper Co Ltd Scheme Successful Japan Cash $90 million
URB Investments Ltd 360 Capital Total Return Fund Scheme Successful Australia Scrip $86 million
Legend Corporation Ltd Greenland Bidco Pty Ltd Scheme Successful Australia Cash $79 million
Konekt LtdAdvanced Personnel Management International Pty Ltd
Scheme Successful Australia Cash $74 million
EganStreet Resources Ltd
Silver Lake Resources Ltd
Takeover (off-market) Successful Australia Scrip $65 million
Prime Media Group Ltd Seven West Media Ltd Scheme Unsuccessful Australia Scrip $65 million
Chalmers Ltd Qube Logistics (Aust) Pty Ltd
Takeover (off-market) Successful Australia Cash $53 million
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OUR APPROACH
We have only analysed transactions which have a market value of over $50 million because they are the transactions of most relevance to our clients and friends in the M&A advisory community. Also, smaller transactions can involve unusual aspects which can skew the analysis.
We have included all transactions where the parties had entered into an agreement or where the bidder had announced an offer or an intention to proceed with a firm offer in 2019. We have traced the progress of these transactions until 1 March 2020.
A full list of transactions analysed is set out on pages 47 to 48.
The primary sources of data used in compiling the Review were bid documents and ASX announcements prepared by the bidder and target and lodged with ASX, which were supplemented by information from websites of regulatory bodies.
We have classified a scheme as “successful” if it has become effective, and a takeover bid as “successful” if it is (or has become) unconditional and the bidder has substantially increased its shareholding in the target having regard to their existing shareholding and objectives.
We have classified a transaction as “hostile” where a firm offer was announced and was not initially recommended by the target board and as “friendly” where the transaction was
recommended on its announcement. If the target board says “do nothing” while it considers the offer, we have classified the transaction as “friendly” or “hostile” based on their subsequent recommendation to “accept” or “reject”.
Where this Review refers to a transaction’s value, the reference is to the value of 100% of the target’s equity based on the offer price per share (and where the primary consideration was scrip, the offer price per share was based on the bidder’s share trading price on the date of the announcement of the offer).
Transactions referred to as providing cash consideration refer to transactions with all-cash consideration or the ability for shareholders to elect to receive all-cash consideration.
Unless otherwise specified, where this Review refers to the premium offered in a transaction, it refers to the final premium measured against the closing price of the target shares on the day prior to any announcement of the transaction or a potential transaction.
Unless otherwise specified, all dollar references in this Review are to the Australian dollar. Transactions announced in a foreign currency have been converted to Australian dollars based on the WM/Reuters historical exchange rate data on the day of announcement.
In this Review, we have summarised our key observations of an analysis of the 41 public takeovers and scheme transactions announced during the 2019 calendar year in respect of ASX-listed companies.
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50
ABOUT GILBERT + TOBIN
We provide commercial and innovative legal advice to major corporate and government clients across Australia and internationally. We are a trusted legal adviser for many industry leaders who value our entrepreneurial culture and determination to succeed.
Gilbert + Tobin has a strong emphasis on corporate transactional work. Chambers (the most respected of all legal directories) has given us a Band 1 ranking in each of Corporate/M&A, Equity Capital Markets, Private Equity, Competition & Antitrust and Banking & Finance (Acquisition Finance). We were named ‘Law Firm of the Year’ for Mergers & Acquisitions in the 2019 edition of Best Lawyers and “Law Firm of the Year” for Corporate Law and for Private Equity Law in the 2020 edition.
Our M&A team comprises highly experienced partners and lawyers who achieve commercial results through creative solutions and perseverance. We advise on M&A transactions of the highest commercial significance, but are equally able to deliver significant value on smaller deals.
We are regularly retained to assist boards of public and private companies to navigate challenging issues that arise in complex and contested M&A transactions.
We also have a demonstrated track record of assisting listed entities with robust takeover defence strategies. By providing the best available strategic legal advice, we can assist in ensuring unwelcome approaches at inadequate prices do not succeed and, if control is to pass, it does so at the best price possible in the circumstances.
Alternatively, if a friendly and agreed deal is sought, we are well placed with our knowledge of transaction structures and market precedents to ensure a transaction can be agreed in a timely and cost efficient manner.
Gilbert + Tobin’s reputation for expert advice extends beyond our M&A team to a broad range of areas including corporate advisory, equity capital markets, competition and regulation, banking and infrastructure, technology and digital, energy and resources, disputes and investigations, real estate and projects and employment.
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Gilbert + Tobin is the law firm businesses trust to effect positive outcomes in defining moments. Our people combine exceptional talent and energy across transactions, regulatory issues and disputes. We strive to deliver outstanding results and are proud of the difference we make in our role as a leading employer and corporate citizen.
Ranked tier 1 across
multiple areas of law.
We are one of Australia’s leading transactions, regulatory and disputes firms, committed
to outstanding citizenship.
“Best firm I have ever worked with - practical, commercial, innovative
and cost conscious.”
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RECENT GILBERT + TOBIN TRANSACTIONS
Gilbert + Tobin has advised our clients on the following significant transactions in recent times:
+ Adamantem Capital on its $79.1 million acquisition of Legend Corporation by scheme of arrangement
+ Afterpay founders on a partial sell-down (by way of block trade) of $100 million of shares in Afterpay
+ Anhauser-Busch InBev on the proposed $16 billion sale of Carlton & United Breweries to Asahi Group, the largest M&A transaction in Australia in 2019
+ Anheuser-Busch InBev on the Australian aspects (CUB/Fosters) of its US$107 billion takeover of SAB Miller, the largest takeover in the world in 2016
+ Ansell on the US$600 million sale of its Sexual Wellness business to Humanwell Healthcare and CITIC Capital Chine Partners
+ APN Property Group on various successful capital raisings amounting to over $100 million
+ APN Funds Management (as responsible entity of Generation Healthcare REIT) in respect of the $500 million takeover bid for Generation Healthcare REIT by NorthWest Australia
+ Ata Resources on its $183 million acquisition of Universal Coal by scheme of arrangement
+ Balter Brewing on its acquisition by Carlton & United Breweries
+ BCI Minerals on the $100 million sale process for divestment of up to 100% of its iron ore portfolio
+ Beach Energy on all aspects of its successful $1.585 billion competitive bid to acquire Lattice Energy from Origin Energy and related debt and equity capital raisings
+ BGH Capital led consortium on its $4 billion + takeover proposal for Healthscope
+ BGH Capital led consortium (including BGH Capital, AustralianSuper and Rod Jones) on its $2.1 billion acquisition of Navitas by scheme of arrangement – the largest take private led by an Australian PE fund
+ Blackstone (as part of a consortium including Canada Pension Plan Investment Board and GIC) on the acquisition of a controlling interest in a new entity housing the Financial and Risk business in joint venture with the previous owner Thomson Reuters, at an overall valuation of US$20 billion
+ Blackstone Group on its acquisition of a stake in PAG, an Asia-focused alternative investment management firm
+ Boardriders, Inc on its $380 million acquisition of Billabong by scheme of arrangement
+ Canberra Data Centres on its $152 million acquisition of the Data Centre
+ Carlton & United Breweries (ABInBev) on its acquisitions of 4 Pines Brewing Holdings and Pirate Life Brewing
+ Carlyle Private Equity on the $517 million sale of its 50% interest in Coates Hire to its joint venture partner, National Hire (a subsidiary of Seven Group Holdings)
+ Citi as lead manager of Appen’s $285 million institutional placement
+ Citi as lead manager of NextDC’s $281 million institutional placement
+ Citi as sole underwriter of NAB's dividend reinvestment plan in respect of its May 2019 dividend, underwriting up to a value of $1 billion
+ Citi as the underwriter of SCA Property Group's $259 million share placement
+ Cleanaway Waste Management in relation to the $671 million acquisition of Tox Free Solutions by scheme of arrangement and associated equity capital raising
+ Coca-Cola Amatil on its sale of the SPC fruit and vegetable processing business to Shepparton Partners Collective Pty Ltd and its group of companies
+ Coca-Cola Amatil on the joint acquisition by Amatil and its major shareholder, US-based The Coca-Cola Company (TCCC), of a 45% equity stake in Made Group, an independent Australian beverage manufacturer
+ Convenience Retail REIT in relation to its $237 million IPO and listing on ASX
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+ Cover-More on the $739 million recommended scheme proposal from Zurich Insurance Company
+ CPE Capital on the acquisition of Marand Precision Engineering
+ CPE Capital on the $1 billion sale of Accolade Wines to The Carlyle Group
+ Credit Suisse (Australia) as the underwriter of AUB Group’s $116.3 million accelerated non-renounceable rights entitlement offer
+ Credit Suisse and UBS as the underwriters of Netwealth Group’s $264 million IPO and listing on ASX
+ Credit Suisse, Goldman Sachs and J.P. Morgan as joint lead managers of Home Consortium’s $325 million IPO and listing on ASX
+ Credit Suisse, Jarden and Deutsche Bank Craigs as joint lead managers and underwriters of Kathmandu’s NZ$145 million accelerated renounceable entitlement offer to part fund its A$350 million acquisition of Rip Curl Group
+ Crescent Capital Partners on its $153.5 million acquisition of the Viridian Glass group from CSR
+ Crescent Capital Partners on its $195 million acquisition of Healthcare Australia
+ Crescent Capital Partners on its acquisition of Nucleus Network, a clinical research subsidiary of Baker Heart and Diabetes
+ Crescent Capital Partners on the $205 million sale of its GroundProbe business to Orica
+ Crescent Capital Partners on the sale of its Steel-Line business to Japanese company Bunka Shutter
+ Crescent Capital Partners on the successful fund raise of its sixth fund, securing a firm record $800 million from its investors
+ Damstra Holdings on its IPO and listing on ASX + Destinations of the World on its US$173 million sale to
Webjet and associated capital raising + DuluxGroup on its successful $3.8 billion acquisition by
Nippon Paint by scheme of arrangement, the largest trade/strategic takeover in Australia in 2019
+ Emeco on its $686 million three-way merger with Orionstone and Andy's Earthmovers
+ Exablaze on its acquisition by Cisco Systems + Five V Capital’s portfolio company, The Probe Group, on its
joint acquisition with Quadrant Private Equity of MicroSourcing International from Salmat for an enterprise value of $300 million
+ FMR, Bremerton & Bartlett on the $271 million sale of their 30% stake in Barminco to Ausdrill
+ Goldman Sachs as the sole lead manager and underwriter of Orica's $500 million placement to fund the acquisition of Exsa, Peru's leading manufacturer and distributor of industrial explosives
+ Goldman Sachs as sale agent for the share sale facility established in connection with the $16 billion demerger of Coles Group from Wesfarmers
+ Goldman Sachs as underwriter of Bank of Queensland's $250 million placement
+ Goldman Sachs, UBS and Macquarie Capital as joint lead managers of Latitude Financial Services Group’s proposed IPO and listing on ASX
+ Goldman Sachs, UBS, Credit Suisse and Bell Potter as joint lead managers of Coronado Global Resources Inc.'s $774 million IPO and listing on ASX
+ GrainCorp on its defence of the $3.3 billion takeover bid by Long-Term Asset Partners
+ GrainCorp on the sale of its Australian Bulk Liquid Terminals business to ANZ Terminals for an enterprise value of approximately $350 million
+ Great Panther Silver on its $144 million acquisition of Beadell Resources by scheme of arrangement
+ Harbour Energy/EIG Partners consortium on its proposed $14.4 billion bid for Santos
+ Infratil on the sale of Perth Energy Holdings to AGL Energy + Investa Commercial Property Fund on the sale of a 50%
interest in the Investa Office Management platform to Macquarie Capital
+ Investa Property Group on its $276 million acquisition of a strategic stake in Investa Office Fund and on the $3.4 billion contested acquisition (by trust scheme) of Investa Office Fund
+ IOOF on its $539 million placement and share purchase plan to fund the acquisition of ANZ’s One Path Pensions and investments business
+ IOOF on its $975 million acquisition of Australia and New Zealand Banking Group’s (ANZ) OnePath Pensions and Investments and aligned dealer groups businesses
+ Jacobs Engineering on the successful $4.6 billion sale of its energy, chemicals and resources group to WorleyParsons
+ J.P. Morgan and Macquarie as joint lead managers of Reliance Worldwide Corporation's $1.1 billion accelerated non-renounceable entitlement offer for the transformational acquisition of John Guest Holdings
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+ J.P. Morgan and Macquarie Capital, the joint lead managers and bookrunners of Investec Australia Property Fund’s dual listing on ASX and IPO, which also featured a block trade sale by the fund’s major securityholder, Investec Property Fund of approximately $65 million worth of securities
+ J.P. Morgan and Morgan Stanley as joint lead managers of Tyro Payments’ $287 million IPO and listing on ASX
+ J.P. Morgan as lead manager in relation to Growthpoint's $150 million share placement
+ J.P. Morgan as underwriter of Charter Hall Education Trust’s $120 million institutional placement of fully paid units
+ J.P. Morgan, Morgan Stanley and China International Capital Corporation Hong Kong Securities as joint lead managers in relation to the US$2.5 billion entitlement offer and placement by Yancoal Australia, to partly fund its acquisition of Coal & Allied from Rio Tinto
+ Jacobs Engineering Group Inc. on Australian legal aspects of its $4.6 billion sale of its energy, chemicals and resources division to WorleyParsons
+ Jadestone Energy on its acquisition of the Montara Oil Field from PTTEP including senior debt facility and equity capital raising
+ JP Morgan and Macquarie Capital as the joint lead managers on Investec Australia Property Fund’s placement and capital raising
+ Kin Group on its unsolicited on-market takeover of The Reject Shop
+ KKR on its acquisition of Laser Clinics Australia + KKR on its $2 billion acquisition of MYOB Group by scheme
of arrangement + Konekt on its sale to Advanced Personnel Management by
scheme of arrangement + KordaMentha (as administrators of Arrium) on the dual-track
IPO and trade sale process of Moly-Cop which resulted in the sale of Moly-Cop to American Industrial Partners for an enterprise value of US$1.23 billion
+ Lifehealthcare on its $211 million sale to Pacific Equity Partners by scheme of arrangement
+ Liverpool Partners (together with Adamantem Capital) on its $108 million acquisition of Zenitas Healthcare
+ Macquarie Capital and Shaw and Partners as joint lead managers and underwriters of Abacus' $250 million placement and SPP
+ Macquarie Capital as sole lead manager of Magellan Financial Group's $275 million placement
+ Majority shareholders of Bras N Things on the $500 million sale to Hanes Brands
+ Mineral Resources in relation its proposed $523 million acquisition of AWE by scheme of arrangement
+ Mineral Resources on the US$820 million sale of 60% of the Wodgina Lithium Project to Albemarle Corporation
+ Mineral Resources on the US$480 million acquisition of 40% (in two modules) of Albemarle's Kemerton hydroxide facility
+ Mineral Resources on its proposed $280 million acquisition of Atlas Iron
+ Mineral Resources on the sale process for the $2 billion divestment of up to a 49% interest in its Wodgina lithium mine assets
+ MoneyMe Limited on its IPO and listing on ASX + Morgan Stanley and Goldman Sachs as joint lead managers of Elmo
Software's institutional placement and secondary sell down + Morgan Stanley and UBS as joint lead managers of Primary
Health Care's $250 million accelerated non-renounceable entitlement offer
+ Morgan Stanley and UBS as joint lead managers of Atlas Arteria’s $1.35 billion entitlement offer and placement
+ Morgan Stanley as lead manager and sole bookrunner of New Energy Solar’s $205 million IPO and listing on ASX
+ MYOB on the sale of its majority interest in Kounta to Lightspeed
+ Neptune Energy Group (which is backed by funds advised by Carlyle, CVC and a group of co-investors) on the Australian aspects of its €4.7 billion acquisition of a 70% shareholding in ENGIE E&P International S.A. from France's ENGIE Group
+ Nitro Software on its $110 million IPO and listing on ASX + Northern Star Resources on its $193 million acquisition of
the remaining shares in Echo Resources that it did not already own
+ NSW Government in relation to the $2.6 billion concession of Land and Property Information NSW
+ Opthea on its share placement + Pacific Equity Partners and management shareholders on the
$950 million sale of Allied Pinnacle to Nisshin Seifun Group + Pacific Equity Partners and The Carlyle Group on their $1.23
billion acquisition of iNova Pharmaceuticals from the Valeant Group
+ Pacific Equity Partners on its $455 million acquisition of Allied Mills Pty Ltd from its joint shareholders, GrainCorp and Cargill Australia
54
+ Palisade Investment Partners on its $605 million acquisition of a stake in Sunshine Coast Airport from Sunshine Coast Council
+ Panoramic Resources on its successful defence of the $312 million hostile takeover bid by Independence Group NL
+ PayPal on its US$400 million acquisition of HyperWallet Inc., and the integration of the Australian Hyperwallet business
+ Pemba Capital Partners (and other shareholders) on the $701 million sale of Device Technology Australia (an Australian medical device manufacturer and distributor) to Navis Capital
+ Pemba Capital Partners on the $170 million acquisition of a majority stake in ONCALL Group Australia
+ Pemba VCLP (a newly established PE fund) on its $650 million acquisition of the assets of RMB Australia
+ Platinum Equity LLC on the Australian law aspects of its US$2.5 billion acquisition of Multi-Color Corporation (a leader in global label solutions)
+ Presence of IT on its sale to Deloitte to create the largest human capital consultancy in APAC
+ Property Guru on its proposed IPO and listing on ASX + Quadrant Private Equity and the minority owners of the Real Pet
Food Co on the $1 billion sale of the Real Pet Food Co to a consortium of investors including New Hope, Hosen and Temasek
+ Quadrant Private Equity in relation to its $540 million sale of Zip Industries to Culligan, a US portfolio company of Advent International Global Private Equity
+ Quadrant Private Equity on its $150 million sale of CQMS Razer to American Industrial Partners
+ Quadrant Private Equity on its $200 million acquisition of iconic confectionery manufacturer Darrell Lea
+ Quadrant Private Equity on its $421 million acquisition of QMS Media by scheme of arrangement
+ Quadrant Private Equity on its acquisition of GraysOnline + Quadrant Private Equity on its acquisition of a majority stake
in Adore Beauty + Quadrant Private Equity on the acquisition of a majority stake
in Modibodi + Quadrant Private Equity on the acquisition of a majority stake
in Love to Dream + Quadrant Private Equity’s portfolio company, Fitness and
Lifestyle Group, on the $200 million acquisition of CMG Asia + Quadrant Private Equity on the acquisition of Total Tools + Qube led consortium on the $9 billion acquisition of Asciano
(the largest public M&A deal in Australia in 2016)
+ Qube on its $800 million equity capital raising to fund its acquisition of the Patricks Container Terminal business
+ Reliance Rail on its $2 billion refinancing including an injection of additional equity from 2 of its 3 existing shareholders
+ Resource Capital Fund VII L.P. on its investment in Cuprous Capital
+ Risk Capital Advisors on its sale to Willis Towers Watson + RBC Capital Markets and Euroz Securities as joint lead
managers of Carnarvon Petroleum's share placement + Ruralco Holdings on its $469 million acquisition by Nutrien
by scheme of arrangement + SAI Global on its $1.24 billion acquisition by Casmar
(Australia) Pty Ltd (a wholly owned subsidiary of the Baring Private Equity Asia Fund IV) by scheme of arrangement
+ Sandfire Resources on its $167 million acquisition of MOD Resources by scheme of arrangement
+ SG Fleet on its $800 million proposal to acquire Eclipx Group by scheme of arrangement
+ Shaw and Partners on the sale of 51% of its shares to SIX Swiss Exchange-listed EFG International and associated shareholder arrangements
+ Sime Darby Berhad on its $US136 million acquisition of the Gough Group
+ SiteMinder on its $130 million acquisition by BlackRock, Pendal, AustralianSuper, Goldman Sachs and Ellerston Capital
+ Sonic Healthcare on its $750 million acquisition of Aurora Diagnostics and its $600 million placement and related share purchase plan to part fund that acquisition
+ Spotless on the defence of the unsolicited $1.3 billion takeover bid by Downer EDI
+ SS&C Technologies on its $244 million proposal to acquire GBST Holdings by scheme of arrangement
+ Stantec on its acquisition of Wood & Grieve Engineers + State of NSW as a seller in the $1.6 billion sale of Property
Exchange Australia to a consortium comprised of Link, CBA and Morgan Stanley
+ Sun Capital in relation to Australian law aspects of its acquisition of Regal Drives Technologies from Regal Beloit Corporation
+ Superloop on its proposed $494 million acquisition by QIC by scheme of arrangement
+ Syrah Resources on its $112 million convertible note issue to AustralianSuper and non-renounceable entitlement offer
55
+ TDM Growth Partners on its investment in the ROKT software business, a leading e-commerce marketing tech company
+ Telstra in relation to the merger of Fox Sports Australia (owned by News Limited) and Foxtel (owned 50/50 by News Limited and Telstra)
+ Telstra in connection with a new US$500 million venture capital fund launched by Telstra Ventures, the venture capital arm of Telstra
+ Telstra on its $1.25 billion off-market share buy-back (2016) + Terex Corporation (NYSE: TEX) on the sale of Demag
Mobile Cranes business to Tadano for an enterprise value of approximately $215 million
+ The Carlyle Group (through its Carlyle International Energy Partners platform) on the Australian aspects of its acquisition of EnerMech Group from Lime Rock Partners
+ The owners of Alpenglow Australia on the sale of its radiology and medical imaging business to the Qscan Group
+ The shareholders of Outback Spirit Tours on its sale to Experience Australia Group
+ The Stars Group on its acquisition of 80% of CrownBet, and then CrownBet on its acquisition of William Hill (aggregate deal value of $650 million)
+ The Stars Group on its $151 million acquisition of the remaining 20% stake in BetEasy
+ Tilt Renewables on the $1.07 billion sale of the 270MW Snowtown 2 wind farm to Palisade Investment Partners and First State Super
+ TPG Capital on its $1 billion (enterprise value) acquisition of Greencross
+ TPG Capital on the acquisition of Novotech Holdings Pty Ltd + TPG Capital’s portfolio company, Greencross, on its
acquisition of Animal Referral Hospital + TPG consortium (comprising TPG Capital and the Ontario
Teachers’ Pension Plan) on the proposed $2.76 billion acquisition of Fairfax
+ Tyson Foods, Inc. on the Australian aspects of its US$2.16 billion acquisition of the Keystone Foods business from Marfrig Global Foods
+ UBS AG and RBC Capital Markets as joint lead managers and underwriters of EML Payments' $250 million accelerated non-renounceable entitlement offer and institutional placement to partially fund the $423 million acquisition of Prepaid Financial Services
+ UBS and Goldman Sachs (as joint lead managers) on Bingo Industries' $425 million accelerated non-renounceable entitlement offer, to fund its acquisition of Dial A Dump Industries
+ UBS as lead manager of Costa Group's $176 million capital raising (PAITREO)
+ UBS as underwriter of EML Payments’ $120 million placement + Velocity Frequent Flyer on its proposed IPO and listing on ASX + Viva Energy Australia on its $2.65 billion IPO and listing on
ASX, the largest ever non-government IPO in Australian corporate history
+ Viva Energy on the $734.3 million sale of its 35% stake in Viva Energy REIT to Charter Hall Group and the Charter Hall Long WALE REIT by way of block trade
+ Viva Energy REIT on its $1.5 billion IPO and listing on ASX + Web.com and Siris Capital on their $105.2 million acquisition
of Dreamscape Networks by scheme of arrangement + Wesfarmers on the sale of its 13.23% stake in Quadrant
Energy alongside co-sellers Brookfield, Macquarie and AMB Holdings, valued at US$2.15 billion cash plus contingent payments related to the Bedout Basin
+ Whitehaven Coal on its US$200 million acquisition of Winchester South from Rio Tinto
+ Wilsons Corporate Finance and Ord Minnett as joint lead managers in relation to Whispir’s IPO and listing on ASX
+ Xero in respect of its US$300 million convertible note offering and associated call option transactions
+ Xuchen International, a subsidiary of Chengtun Mining Group Co, in relation to the $109 million acquisition of Nzuri Copper by scheme of arrangement
+ Yancoal Australia on the US$230 million acquisition of Mitsubishi Development’s 28.9% interest in the Warkworth joint venture
+ Yancoal Australia’s Independent Board Committee on the US$3.4 billion acquisition of Coal & Allied Industries from Rio Tinto and the associated US$2.5 billion entitlement offer and placement to fund that acquisition
+ Yancoal on the Australian legal aspects of its dual primary listing on the Hong Kong Stock Exchange and the associated HK$1.61 billion IPO. The transaction included a pro-rata accelerated renounceable entitlement offer in Australia to existing Yancoal shareholders
+ Zomojo on its acquisition by Cisco Systems Inc
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Neil is co-head of the Corporate/M&A group and is also a member of G+T’s board of partners. Neil’s practice centres on M&A (with particular expertise in listed company takeovers and cross-border acquisitions), Takeovers Panel matters, private sales and disposals, private equity transactions, equity capital raisings and other capital management transactions and corporate governance matters.
Neil is a member of the Australian Government's Takeovers Panel (the Panel is a peer review body that regulates public M&A and is the primary forum for resolving takeover disputes). He is also a Senior Fellow of the University of Melbourne Law School.
Neil is recognised as a leading Australian Corporate and M&A lawyer by leading directories including Best Lawyers, Chambers Global, Chambers Asia-Pacific, The Legal 500, Doyles and International Who’s Who of M&A Lawyers. Best Lawyers named him Melbourne’s M&A, Corporate or Private Equity Lawyer of the Year in six of the last eight years.
NEIL PATHAK Partner
T + 61 3 8656 3344 M + 61 410 452 466 E [email protected]
ABOUT THE AUTHORS
In 2019, Neil advised on the following significant transactions (among other matters):
+ Anheuser-Busch InBev on the proposed $16 billion sale of Carlton & United Breweries to Asahi Group, the largest M&A transaction in Australia in 2019;
+ DuluxGroup on its successful $3.8 billion acquisition by Nippon Paint by scheme of arrangement, the largest trade/strategic takeover in Australia in 2019;
+ BGH consortium (including BGH Capital, AustralianSuper and Rod Jones) on its successful $2.1 billion acquisition of Navitas by scheme of arrangement – the largest take private by an Australian PE fund;
+ Tilt Renewables on its successful $1.07 billion sale of Snowtown 2 wind farm (Australia’s 2nd largest windfarm) to Palisade Investment Partners and First State Super;
+ Jacobs Engineering on the successful $4.6 billion sale of its energy, chemicals and resources group to WorleyParsons;
+ TPG Capital’s successful $910 million acquisition of Greencross;
+ Balter Brewing on its successful acquisition by Carlton & United Breweries;
+ Syrah Resources on its innovative $112 million capital raising involving a convertible note issue to AustralianSuper;
+ Damstra Technology on its successful initial public offering and listing on ASX; and
+ APN Property Group on various successful capital raisings amounting to over $100 million.
"HE WOULD ALMOST WITHOUT HESITATION BE OUR FIRST CALLOUT OF MELBOURNE.”
Chambers Asia-Pacific 2020
NEIL IS “A VERY SEASONED CAMPAIGNER AND ONE OF THE BEST M&A LAWYERS IN MELBOURNE” AND “A FANTASTIC PERSON TO WORK WITH ON A LARGE PUBLIC M&A TRANSACTION.”
Chambers Asia-Pacific 2019
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In 2019, Costas advised on the following significant transactions:
+ GrainCorp on its $3.3 billion approach from Long-Term Asset Partners;
+ Ruralco on the $1.1 billion (enterprise value) take private by Nutrien;
+ The Stars Group on its $6 billion merger with Flutter Entertainment, to create the world’s biggest online gaming group;
+ Adamantem Capital on its take private of ASX-listed Legend Corporation;
+ Shaw and Partners on the sale of 51% of the company to SIX Swiss Exchange-listed EFG International;
+ Superloop on its proposed $494 million acquisition by QIC by way of scheme of arrangement; and
+ MoneyMe on its IPO and listing on ASX.
COSTAS IS HIGHLY REGARDED IN THE MARKET FOR COMPLEX CORPORATE MATTERS INCLUDING TAKEOVERS, SECURITIES LAW AND CORPORATE GOVERNANCE.
A CLIENT OBSERVES: "HE'S NO-NONSENSE AND KNOWS HIS STUFF, AND HE'S VERY EFFICIENT AND GIVES GOOD, SENSIBLE ADVICE; HE WON'T JUST SAY WHAT YOU CAN'T DO. I HAVE ALWAYS FOUND HIM TO BE ROUNDED AND COMMERCIAL IN THE ADVICE HE GIVES."
Chambers Asia-Pacific 2020
Costas is co-head of the Corporate/M&A group and is also a member of G+T’s board of partners. Costas specialises in mergers and acquisitions, takeovers, corporate and securities law, capital markets and corporate governance matters.
Costas is widely recognised as one of Australia’s leading strategic M&A and securities lawyers. He is consistently recognised by leading directories for his expertise, including being listed in Chambers Global, Chambers Asia Pacific, Best Lawyers and The Legal 500 in a variety of practice areas including Corporate and Mergers & Acquisitions. He was also named by Best Lawyers as Lawyer of the Year in various corporate law categories in 5 of the last 7 years.
COSTAS CONDOLEON Partner
T + 61 2 9263 4821 M +61 413 610 969 E [email protected]
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Craig specialises in general corporate law with an emphasis on mergers and acquisitions, takeovers and schemes of arrangements and equity capital market transactions.
Craig is regarded as one of Australia’s leading M&A lawyers (most recently acknowledged by Chambers Asia Pacific 2020). Best Lawyers has recognised Craig since 2010 in the 7 practice areas, including Mergers & Acquisitions, Equity Capital Markets, Corporate Law, Corporate Governance and Practice and Private Equity. Craig has also been named as a Melbourne Lawyer of the Year in either Corporate Law, Private Equity or Corporate Governance over the last 7 years, most recently in 2020 for Corporate and Governance law.
In 2019, Craig advised on the following significant transactions:
+ IOOF on its $975 million acquisition of ANZ’s One Path Pensions and Investments and aligned dealer groups businesses;
+ BGH consortium (including BGH Capital, AustralianSuper and Rod Jones) on its successful $2.1 billion acquisition of Navitas by scheme of arrangement – the largest take private by an Australian PE fund;
+ IFM in respect of its acquisition of My Plan Manager; + Arq Group Limited in relation to its sale of its TPP Wholesale
reseller business to CentralNic Group; + SS&C Technologies on its $244 million proposal to acquire GBST
Holdings by scheme of arrangement; + the sale of Zomojo and Exablaze to Cisco Systems Inc; + Syrah Resources on its underwritten accelerated entitlement
offer and its associated issue of a convertible note to AustralianSuper, of a combined value of $112 million;
+ Opthea, APN Convenience Retail REIT and APN Industria REIT on their capital raisings; and
+ Goldman Sachs as underwriter of Bank of Queensland's $250 million placement.
CRAIG SEMPLE Partner
T + 61 3 8656 3349 M +61 400 446 028 E [email protected]
ALEX WON THE ‘NEW PARTNER OF THE YEAR - 3 YEARS OR LESS’ CATEGORY AT THE 2019 PARTNER OF THE YEAR AWARDS AND WAS A FINALIST IN THE ‘DEALMAKER OF THE YEAR’ CATEGORY AT THE 2019 AUSTRALIAN LAW AWARDS.
CRAIG IS AN "INCREDIBLY COMMERCIAL, INCREDIBLY DILIGENT" PRACTITIONER WITH AN IMPRESSIVELY BROAD REMIT, EMBRACING M&A, EQUITY CAPITAL MARKETS AND PRIVATE EQUITY TRANSACTIONS, PLUS CORPORATE GOVERNANCE MANDATES.Chambers Asia-Pacific 2019
Alex specialises in mergers & acquisitions, equity capital markets transactions and private equity, as well as general corporate and securities transactions.
In 2019, Alex advised on the following significant transactions:
+ DuluxGroup on its successful $3.8 billion acquisition by Nippon Paint by scheme of arrangement, the largest trade/strategic takeover in Australia in 2019;
+ KKR on corporate aspects of its $3.2 billion acquisition of Arnott’s Biscuits and certain international operations of Campbell Soup;
+ KKR on its $2 billion acquisition of MYOB by scheme of arrangement;
+ The Tang family office on their substantial holding in Cromwell Property Group (including the related Takeovers Panel proceedings);
+ MYOB on the sale of Kounta to Lightspeed; + MYOB on the sale of Acumatica to EQT; + Damstra on its successful initial public offering and listing on
ASX; and + Citi on its $2 billion underwrite of NAB’s dividend
reinvestment plan.
ALEX KAUYE Partner
T + 61 3 8656 3386 M +61 431 027 729 E [email protected]
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"HE'S EXTREMELY DETAILED, COMMERCIAL, TRUSTWORTHY, TAKES RESPONSIBILITY FOR THE FIRM'S WORK PRODUCT AND ITS DELIVERY." IFLR1000 2019
David is a corporate lawyer with considerable experience in large-scale public and private mergers and acquisitions, equity capital markets and corporate restructuring transactions. David’s transactional experience spans a broad range of key industry sectors, including media, banking and financial services, energy, mining, retail and general industrial. He also regularly assists financial advisory firms and offshore investment funds to structure their most complex corporate transactions.
David has acted on some of Australia’s largest and most complex corporate transactions, including advising:
+ Boardriders, Inc. on its $380 million acquisition of ASX-listed Billabong International by scheme of arrangement;
+ GrainCorp in relation to a takeover offer from Archer Daniels Midland Company, which valued GrainCorp at $3.4 billion;
+ Pacific Equity Partners on its $1.1 billion acquisition of Spotless Group by scheme of arrangement;
+ Coal & Allied in relation to a scheme of arrangement under which Coal & Allied was privatised by Rio Tinto and Mitsubishi Development (the transaction valued Coal & Allied at $10.8 billion);
+ Telstra Corporation, in its capacity as a partner in the FOXTEL partnership, in relation to FOXTEL’s $2 billion acquisition of AUSTAR;
+ Vitol on its $2.9 billion acquisition of Shell’s Australian downstream assets, including the Geelong Refinery and 870 retail sites across the country; and
+ The establishment and IPO of Viva Energy REIT, a multi-billion-dollar ASX-listed stapled entity with a portfolio of service station sites.
DAVID CLEE Partner
T + 61 2 9263 4368 M +61 424 181 692 E [email protected]
Sarah specialises in mergers and acquisitions (particularly takeovers and schemes of arrangement), capital raisings, advising on securities law and Listing Rule matters and corporate advisory and governance work.
Sarah was listed as a Best Lawyer for Mergers and Acquisitions Law, Equity Capital Markets Law, Corporate Governance Practice and Corporate Law by Best Lawyers 2020.
In 2019, Sarah advised on the following significant transactions:
+ Panoramic Resources, Euroz, Australis Oil & Gas, Sipa Resources, Alta Zinc, Venus Metals, Botanix and others on capital raisings;
+ Sandfire Resources on stakes in several public companies; + Triton Minerals on its change of control transaction; and + Panoramic on the successful defence of the hostile takeover
bid by Independence Group.
SARAH TURNER Partner
T +61 8 9413 8433 M +61 400 011 978 E [email protected]
GILBERT + TOBIN’S M&A GROUP IS PRAISED FOR "EXCELLENT PROJECT MANAGEMENT SKILLS WITH A HIGH DEGREE OF TECHNICAL EXCELLENCE ACROSS ALL COMPLEX ISSUES."
THE TEAM HAS A "BROAD SPREAD OF SUBJECT MATTER EXPERTS, WITH ALL ADVICE WELL PACKAGED AND COMMUNICATED THROUGH A CENTRAL CONDUIT."
IFLR1000 2020 – M&A
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Kevin is a partner in Gilbert + Tobin’s Corporate Advisory group. He advises on strategic mergers and acquisitions and corporate transactions, specialising in private M&A deals, public takeovers (friendly and hostile), schemes of arrangement, equity capital markets transactions and general corporate and securities law matters.
In 2019, Kevin advised on the following significant transactions:
+ Ruralco Holdings Ltd on its $469 million acquisition by Agrium Australia, a subsidiary of Nutrien, by way of scheme of arrangement;
+ Web.com on its $105 million acquisition of Dreamscape Networks by way of scheme of arrangement;
+ Xuchen International, a subsidiary of Chengtun Mining Group Co, on its $109 million acquisition of Nzuri Copper Limited by way of scheme of arrangement;
+ SiteMinder on its $130 million capital raising from multiple international and Australian investors;
+ The Stars Group on its $151 million acquisition of the remaining 20% stake in BetEasy; and
+ Shaw and Partners on the sale of 51% of its shares to SIX Swiss Exchange-listed EFG International, and associated shareholder arrangements.
Ebony has experience in advising both public and private company clients in relation to mergers and acquisitions, corporate fundraising, private equity transactions and general corporate and commercial issues. She has particularly strong experience in listed company takeovers and schemes of arrangement, and has acted on more than twenty-five control transactions and a significant number of primary and secondary capital raisings for her clients.
Prior to joining Gilbert + Tobin, Ebony was special counsel with a large global firm where she gained experience in Australia, London and Dubai.
In 2019, Ebony advised on a number of significant transactions including:
+ KKR on corporate aspects of its $3.2 billion acquisition of Arnott’s Biscuits and certain international operations of Campbell Soup;
+ BGH consortium (including BGH Capital, AustralianSuper and Rod Jones) on its successful $2.1 billion acquisition of Navitas by scheme of arrangement;
+ KKR on its $2 billion acquisition of MYOB Group by scheme of arrangement; and
+ MYOB on the sale of its interest in Acumatica and rollover into the acquiring entity.
KEVIN KO Partner
T +61 2 9263 4040 M +61 422 448 138 E [email protected]
GILBERT + TOBIN’S M&A GROUP IS "HIGHLY RATED, COMMERCIALLY FOCUSED WITH EXCELLENT LEGAL SKILLS."
IFLR1000 2020
EBONY KEENAN-DUNN Special Counsel
T +61 3 8656 3305 M +61 499 700 495 E [email protected]
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GILBERT + TOBIN’S M&A GROUP IS COMMENDED FOR ITS "HIGH QUALITY ADVICE, WITH COMMERCIAL ACUMEN PROVIDED BY A HIGHLY ENGAGED AND RESPONSIVE TEAM."
IFLR1000 2020 – M&A
LISA d’OLIVEYRA Executive Counsel
T +61 3 8656 3409 M +61 407 330 072 E [email protected]
SIMON MUYS Partner
T +61 3 8656 3312 M +61 459 100 211 E [email protected]
Lisa is a senior lawyer with significant experience in mergers and acquisitions, equity capital markets transactions, company law and corporate governance.
Lisa is responsible for a range of strategic initiatives designed to foster key client relationships and originate new business. She spearheads a number of programs designed to add value to a range of current and prospective clients, including board room events, thought leadership (including publications on developments in M&A and corporate governance) and continuing professional development for in-house counsel clients. Lisa also manages the firm’s relationship with key industry organisations including ACC Australia.
Prior to joining Gilbert + Tobin, Lisa was a senior lawyer at a top tier global law firm. Lisa has also worked at Davis Polk & Wardwell in New York.
Simon leads Gilbert + Tobin’s Melbourne Competition and Regulation practice. He specialises in competition law and regulated industries, with particular expertise across the energy, telecommunications, resources and transport sectors.
He has extensive experience advising clients on merger clearances, ACCC investigations and enforcement matters. He also specialises in the design and, where necessary, authorisation of a range of collaborative arrangements as well as engagement with sectoral regulators.
Simon also advises extensively on infrastructure and access issues, including on access issues and disputes, pricing design, technical and economic regulation.
Simon’s leading practice is recognised by the major legal directories. He has been listed for a number of years in Best Lawyers for his work across Competition Law, Regulatory Practice and Telecommunications. Who’s Who Legal: Competition Future Leaders 2019 recognised Simon as “excellent” and “a very intelligent, creative thinker” who “quickly understands clients’ risk appetite and targets advice at the right level.” Chambers Asia-Pacific 2020 refers to clients singling him out as an “exceptionally bright guy” in this space who is “extremely proficient in this area and I would happily use him in the future.” Who’s Who Legal (2018) described Simon as "an excellent competition lawyer" who boasts "unparalleled experience in matters involving access to essential pieces of infrastructure".
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AWARDS + RECOGNITION
2020 BEST LAWYERS AUSTRALIA
Gilbert + Tobin was named Law Firm of the Year for Corporate Law and for Private Equity Law in the 2020 edition of Best Lawyers. This follows on from G+T being named Law Firm of the Year for Mergers & Acquisitions in the 2019 edition of Best Lawyers.
72 Gilbert + Tobin partners are recognised by Best Lawyers, representing over 85% of the partnership acknowledged as leading in their areas of expertise.
Among these, 10 partners are named as Best Lawyers 2020 Lawyer of the Year, including six Corporate Advisory partners (Rachael Bassil, Costas Condoleon, Peter Cook, Justin Mannolini, Neil Pathak and Craig Semple).
2020 CHAMBERS ASIA PACIFIC AWARDS
38 Gilbert + Tobin partners are recognised in 21 areas of law. We are one of only two Australian law firms to be ranked Band 1 in Corporate/M&A, Equity Capital Markets, Private Equity and Competition & Antitrust. We are also ranked Band 1 in Acquisition Finance, TMT, Fintech and Charities.
2020 LEGAL 500
Gilbert + Tobin has been ranked Tier 1 across eight different practice areas: Corporate and M&A; Competition and Trade; Dispute Resolution; Intellectual Property; Capital Markets (Equity); Restructuring and Insolvency; Banking and Finance; & IT and Telecommunications.
2019 MERGERMARKET AUSTRALIA M&A AWARDS
Gilbert + Tobin won: + Private Equity Legal
Adviser of the Year
+ M&A Legal Adviser of the Year (Business Services)
+ M&A Legal Adviser of the Year (Consumer)
2019 AUSTRALASIAN LAW AWARDS
Gilbert + Tobin was named Law Firm of the Year (101-500 lawyers).
2019 AFR CLIENT CHOICE AWARDS
Gilbert + Tobin was named Most Innovative Firm for the second consecutive year.
2019 LAWYERS WEEKLY PARTNER OF THE YEAR AWARDS
Corporate Advisory partners, Rachael Bassil and Alex Kauye were recognised among Australia’s top legal professionals.
2019 FINANCIAL TIMES ASIA-PACIFIC INNOVATIVE LAWYER AWARDS
Gilbert + Tobin won: + Most Innovative Law Firm
in Asia-Pacific
+ Legal Innovator of the Year
+ Innovation in the Business of Law: Technology
2019 ASIALAW PROFILES
Gilbert + Tobin was ranked 'Outstanding' in M&A, private equity, capital markets.
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GILBERT + TOBIN M&A PARTNERS
Julie Athanasoff Partner +61 8 9413 8406 [email protected]
David Clee Partner +61 2 9263 4368 [email protected]
Tim Gordon Partner +61 2 9263 4251 [email protected]
Kevin Ko Partner +61 2 9263 4040 [email protected]
Tim Kennedy Partner +61 2 9263 4652 [email protected]
Alex Kauye Partner +61 3 8656 3386 [email protected]
Ben Macdonald Partner+61 3 8656 3351 [email protected]
Bill Spain Partner +61 2 9263 4009 [email protected]
Sophie Chen Partner +61 2 9263 4623 [email protected]
Chris Flynn Partner +61 2 9263 4321 [email protected]
Elizabeth Hill Partner +61 2 9263 4470 [email protected]
Justin Little Partner+61 8 9413 8464 [email protected]
Craig Semple Partner+61 3 8656 3349 [email protected]
Peter Reeves Partner+61 2 9263 4290 [email protected]
Rachael Bassil Partner +61 2 9263 4733 [email protected]
Adam D’Andreti Partner +61 2 9263 4375 [email protected]
Alastair Corrigall Partner+61 2 9263 4170 [email protected]
Adam Laura Partner +61 2 9263 4144 [email protected]
Neil Pathak Partner+61 3 8656 3344 [email protected]
John Williamson-Noble Partner +61 2 9263 4030 [email protected]
Ebony Keenan-Dunn Special Counsel +61 3 8656 3305 [email protected]
Lloyd Chater Special Counsel +61 2 9263 4284 [email protected]
Deborah Johns Partner +61 2 9263 4120 [email protected]
Hiroshi Narushima Partner +61 2 9263 4188 [email protected]
Sarah Turner Partner +61 8 9413 8433 [email protected]
Peter Cook Partner +61 2 9263 4774 [email protected]
Justin Mannolini Partner+61 8 9413 8491 [email protected]
David Josselsohn Partner +61 2 9263 4127 [email protected]
Costas Condoleon Partner +61 2 9263 4821 [email protected]
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