Gilbert & Tobin and Mallesons Stephen Jaques are the chief external legal advisers in Publishing and Broadcasting Ltd’s (PBL) move to transfer a large chunk of its media assets into new company, PBL Media, to be part owned by a US investor CVC.
Andrew Bullock, M&A partner at Gilbert & Tobin, which advised PBL, said it was a particularly “legally intensive” transaction.
“The deal is only possible if you can construct a method of investment by the foreign private equity firm that complies with the Broadcasting Services Act 1992 restrictions, which obviously preclude foreigners from controlling regulated media businesses.”
The law firms said work on the deal had to be completed very quickly. Although they had been working on the deal for up to six weeks before it was announced, Bullock said “in terms of interface with bidders, the deal was actually done in about three-and-a-half weeks”.
Peter Cook, one of Mallesons’ partners advising international private equity house CVC, said the deal was not dependant on changes to the cross-media ownership laws, but he said it gave all parties to the deal “more comfort” now they had passed the Senate.
Mallesons advised CVC on all aspects of the transaction, including M&A arrangements and financing and regulatory issues.
Cook agreed the deal was “made more tricky given that we had CVC as a foreign company, with both the Foreign Acquisitions and Takeovers Act 1975, and the Broadcasting Services Act 1992 [to consider], so it was essential the documents were structured so that CVC had no control over the assets”.
Cook explained that CVC took a 50 per cent “economic interest” with no control of the board to satisfy the existing media ownership laws. “Really they are not on an equal footing with PBL.”
Bullock said this was achieved through CVC investing in a convertible note facilitating the 50 per cent economic investment, “but doesn’t give rise to them holding company interests in Channel Nine, or control of Channel Nine”, which is the entity covered by the Broadcasting Services Act.
However, once the new laws come into effect (slated for early next year), Cook said, subject to further regulatory approval, CVC would be seeking to have 50 per cent of the directors on the board of PBL Media, and “effectively 50 per cent of the equity”.
At present, he said the economic interest they have means they could only benefit from selling their stake in PBL Media, but “the business is controlled by PBL, and will continue to be controlled by PBL”.
The deal will make PBL Media Australia’s largest diversified media group. The existing management of the media companies remaining largely in place, and will include the Nine Network, ACP Magazines, the 50 per cent joint venture with Microsoft, ninemsn, and Sky News.
PBL retains its shares in Foxtel, FoxSports, Hoyts, Ticketek, New Regency and Seek.
PBL will receive $4.542 billion from the deal, and retain an equity investment of $982 million in PBL Media. About $3.75 billion was raised through debt.
James Packer, executive chairman of PBL, said the transaction mean the company could maximise domestic and international growth, while allowing PBL Media to expand and capitalise on emerging media opportunities.
He said the restructure would provide the additional capital needed for the “international expansion of our gaming interests”, including potential investments in Macau, Europe and Singapore.
John Alexander, CEO of PBL, said PBL Media would be able to “take advantage of opportunities in the media sector both in Australia and overseas”.
Along with Bullock, other partners at Gilbert & Tobin who worked on the deal included: David Wilkie, who dealt with the separation of PBL’s media assets, Gina Cass-Gottlieb, who advised on the regulatory issues, and James Lewis on debt financing. Deborah Johns advised on due diligence.
As well as Cook, Mallesons’ partners on the deal were Greg Golding, Jason Watts and Luke Waterson. Senior associates included Evie Bruce and Rachael Bassil.