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A year for some private time

A year for some private time

A BUYING spree of Australian iconic brands by private equity funds this year ensured mergers and acquisitions remained one of the busiest arenas for law firms in 2006.Energy and resources,…

A BUYING spree of Australian iconic brands by private equity funds this year ensured mergers and acquisitions remained one of the busiest arenas for law firms in 2006.

Energy and resources, public private partnerships — including the NSW Rolling Stock PPP, the biggest so far — and a chipper health sector, made an impression, but many of these deals were also M&A transactions.

Private equity has been involved in major investments in Australia for decades, but not to the same extent and not involving such iconic Australian companies.

Damian Hazard, a private equity partner at Freehills said it had “been a good year to be a private equity lawyer” with 2006 marking the year when private equity involvement in the Australian M&A market reached levels equivalent to major foreign markets.

“If you look at the value of deals that are either announced or completed in the private equity space for this year, it’s now getting up to a similar share of activity [to the US or UK]. So up towards 15 to 20 per cent rather than down below 5 per cent,” he said.

Some of these included CVC Asia Pacific and Kolberg Kravis Roberts (KKR) taking joint venture stakes in new media companies set up by Publishing and Broadcasting Ltd and Seven Network Ltd respectively.

David Stammers, a private equity specialist at Clayton Utz, said 2006 “was the first time that private equity had affected people’s thinking in terms of M&A. I don’t think people thought of it as a seriously big driver of M&A activity until this year.”

But, as yet, private equity hasn’t featured in the very biggest deals of the year, although it was likely to this week with plans to take a controlling stake in Qantas set to go ahead.

According to figures from Thomson Financial, the biggest so far included Mexican building materials supplier Cemex’s offer for Rinker Group, which, at $12.7 billion is by far the biggest off market takeover bid in Australia’s history.

Allens Arthur Robinson is acting for Cemex in its bid, as it did for the Coles Myer group when private equity fund Newbridge Capital bought Myer and its Bourke Street, Melbourne property for $1.4 billion in March. Freehills acted for Newbridge.

But there are still questions over whether that bid will succeed. The second ranked deal is Suncorp-Metway’s bid for Promina Group, worth $6.23 billion and announced in October. This is far closer to completion, although it still awaits shareholder approval due early next year. Corrs Chambers Westgarth is acting for Suncorp, with Freehills acting for Promina.

Others included the merger of the ASX and the Sydney Futures Exchange (SFE) announced in April, with Mallesons Stephen Jaques acting for the ASX and Blake Dawson Waldron the SFE, with a value of $6 billion placed on the merged entity.

Private investors began to show their hand early in the year in the form of the leveraged management buyout (LMBO) from CCMP Capital Asia (formerly JP Morgan Partners Asia) bought out Waco International Limited for 5.4 billion South African rand ($1.2 billion). Baker & McKenzie acted for the buyer and Freehills for the seller on the first LMBO to pass a billion dollars in Australia.

But these two deals didn’t hold onto the superlatives for long. By June KKR, advised by Gilbert + Tobin, topped these with its $1.875 billion purchase of Cleanaway and Brambles Industrial Services from the ASX-listed Brambles Industries.

Robert Bazzani, head of M&A at KPMG, said M&A transactions were larger in number and value at both ends of the value spectrum.

For him, the biggest deal of the year was Toll Group’s protracted hostile takeover bid for Patrick Corp, which took almost a year to complete by July. “Just in terms of sheers size, complexity, public market audience and stamina, that would have to be it,” he said. “It had everything.”

Law firms advising on the bid included Clayton Utz representing Toll, and Allens, Arnold Bloch Leibler and Johnson Winter & Slattery working on Patrick’s defence.

Other top deals included the takeover of Myer by private equity player Newbridge Capital and Colorado by Affinity.

By October, a proposed buyout of DCA Group by CVC for $1.9 billion via scheme of arrangement was announced, with Freehills acting for DCA.

When changes to the foreign and cross-media ownership laws were finally passed in the same month, the weight of the money private equity had to spend really became evident.

The first big move where private law firms got a look in was Publishing and Broadcasting Ltd’s $4.5 billion spin-off in October of its main media assets into a joint venture between itself and CVC. This time Gilbert + Tobin acted for PBL and Mallesons for CVC.

The Seven Network followed a month later with a very similar deal with KKR, setting up the Seven Media Group, with Freehills brought in to complete the deal in just three weeks by Seven and Baker & McKenzie advising KKR.

Last week, in an effort to stave off takeover suitors when the media ownership laws commence, Fairfax Media and Rural Press announced their $2.9 billion merger (see p14).

Still on the horizon when Lawyers Weekly went to press is the bid by a consortium including private equity house Texas Pacific Group and Macquarie Bank to take as much as regulations allow in Qantas.

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A year for some private time
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