Baker & McKenzie advised global investment bank Babcock & Brown on its recent listing on the Australian Stock Exchange — the largest Australian IPO so far this year.
The IPO of 110 million shares listed at $5 a share to raise $550 million, implying a full market capitalisation for Babcock & Brown of $1.6 billion.
However, at the end of its first day of trading on 6 October, the bank’s shares finished at $7.98 each, more than 60 per cent above the offer price after reaching a high of $8.27. This was the biggest first-day premium from a major new listing since AMP and Optus delivered 43 per cent to investors in 1998.
Freehills acted for the underwriters and Mallesons Stephen Jaques for Bayerische Hypo- und Vereinsbank (HVB) AG, which held the largest stake, at 17 per cent, of the original company. HVB now owns just 6 per cent of the listed firm.
The Baker & McKenzie team was led by IPO specialists Steven Glanz and Guy Sanderson, with assistance from David Ryan on the group’s reorganisation, which involved more than 800 entities. In addition, Glanz coordinated a team of more than 250 lawyers from Bakers’ offices in 14 countries, including the US, UK and Germany.
Glanz said the IPO “pretty much dwarfs” all others on the ASX so far this year. There were also several unusual aspects to the deal.
The company had to be restructured from a US limited partnership in to a “top-down listed vehicle”. Babcock & Brown is now 70 per cent owned by public shareholders, Glanz said, and 30 per cent by the original executive owners under the name Babcock & Brown International (BBI).
“We went down that route because we had some very challenging tax issues,” Glanz explained. “To accommodate that spectrum of tax issues and make the float possible, we had to develop a structure that enabled us to reach a landing where everyone was happy.”
The arrangement includes a “mechanism where US executives who have shares in Babcock & Brown International can convert their shares in [BBI] to Babcock & Brown,” Glanz said. This meant Bakers had to ensure the value of each share in Babcock & Brown was equivalent to Babcock & Brown International shares.
“We were also successful in obtaining very unusual relief from the ASX to allow the IPO to proceed under the dual ‘Listco/Holdco’ structure and on the basis of the timetable required by Babcock & Brown,” he said. They were also allowed to submit accounts older than the ASX’s normally strict limit of eight months.
Babcock & Brown was established in 1977 and now operates from 19 offices across North America, Europe, Africa, Asia and Australia. It has five operating divisions including real estate, infrastructure, operating lease, structured finance and corporate principal investment/funds management.