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Corrs, Freehills, Clayton Utz in mega financial merger

Corrs, Freehills, Clayton Utz in mega financial merger

ONE OF the biggest finance sector M&A deals in Australia, Suncorp-Metway’s $7.9 billion bid for Promina Group, was completed last week after gaining a raft of regulatory approvals from state…

ONE OF the biggest finance sector M&A deals in Australia, Suncorp-Metway’s $7.9 billion bid for Promina Group, was completed last week after gaining a raft of regulatory approvals from state and federal agencies.

Corrs Chambers Westgarth acted for Suncorp, Freehills for Promina and Clayton Utz for the underwriter, Citigroup.

Corrs lead partner on the deal, Teresa Handicott, said it was the second biggest financial services merger in Australia so far and involved a unique underwriting by Citigroup of the bid in Australia.

“I don’t think anything in Australia has been done like this before. It was more a US-style underwriting, which allowed Suncorp to arrange $1.17 billion in cash prior to the second court hearing of the merger,” she said.

The second court approval was held on 12 March. Court approval of a scheme of arrangement is unlikely to be given unless the court can ascertain that the buyer has the necessary funds available.

Handicott said most acquirers will use bridging finance then a capital raising to pay for the loan. “That wasn’t open to Suncorp because it’s a bank and it has really strict prudential requirements from [the Australian Prudential Regulation Authority],” she said.

“They didn’t want to raise the money if they weren’t going to do the acquisition — that would be capital management insanity to have raised that money.

“So we had this awful chicken and egg [situation] in which we didn’t want the money unless we got the court approval, but we couldn’t get the court approval unless we got the money, and we had to do it by an equity raising.”

The merger was first announced in October last year, but Handicott said her team had spent some time beforehand meticulously organising the offer.

“By the time we approached Promina in October, we had done as a team everything that could have been done from the public domain,” Handicott said. “We were as prepared as we could be, we had analysed all their securities, we had analysed all their public information, we knew even down to … their employee share plans and how the acquisition would affect those.”

Freehills’ lead partner Philippa Stone said that while managing the interaction between the scheme and the Suncorp capital raising was the most interesting aspect of the deal, timing was another challenge.

“We wanted the scheme implemented as quickly as possible. Promina shareholders wanted their money and Suncorp wanted control of the business as quickly as possible,” she said.

For the bid to be finalised, a large number of approvals had to be gained. These included consent from the Australian Competition and Consumer Commission, under the New Zealand Overseas Investment Act 2005 to the acquisition of Promina Shares by Suncorp, and approval from the federal Treasurer.

There were also written confirmations needed from authorities in both the ACT and Tasmania that neither authority will revoke the current licence or approval of Vero Insurance Limited to act as a licensed or approved insurer under the state workers’ compensation.

The Motor Accident Authority of NSW and the Motor Accident Insurance Commission of Queensland also had to guarantee that it would not suspend or cancel the licence of Australian Associated Motor Insurers Limited under the respective state motor accidents legislation as a result of the scheme.

As the deal has seen Promina directors move onto the Suncorp board, Handicott said legislation also had to be passed in the Queensland Parliament to remove the present rule that a majority of Suncorp board members must be from Queensland.

Promina shareholder approval was almost unanimous when the vote was taken on the merger on 5 March.

Handicott’s team included special counsel Andrew Mackenzie, senior associate Jonathan Cheyne, and solicitor Juanita Rayson. Others included partner Andrew Lumsden and senior associate Iain Laughland who advised on the underwriting arrangements and acquisition due diligence. Partner Eddie Scuderi acted on ACCC approval, and partner Stan Lewis on the court approvals.

As well as partner Philippa Stone, Freehills’ team included partner Braddon Jolley, senior associate Sandy Mak. Partner Stuart Byrne at Clayton Utz acted for Citigroup.

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