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Golden Goose China needs nurturing: firm

Golden Goose China needs nurturing: firm

The law firm that worked on BaoSteel Group's recent $285.6m investment in ASX-listed Aquila has justified its self-proclaimed position as a leading adviser to Chinese SOEs on inbound investment

THE firm that worked on BaoSteel Group's recent $285.6 million investment in ASX-listed Aquila has justified its self-proclaimed position as a leading adviser to Chinese SOEs on inbound investment. 

Corrs Chambers Westgarth told The New Lawyer last month that its position on the BaoSteel acquisition of a 15 per cent stake in Australian iron ore explorer Aquilla Resources secured its position as a leading legal adviser in this area. 

With clients including BaoSteel, China Iron and Steel Association, China Metallurgical Group Corporation, China National Chemical Corporation, China Minmetals Corporation, SinoSteel Mining, Southern China Air and Yanzhou Coal Mining Company, the firm has worked on some major deals in recent years. 

John Denton, managing partner of Corrs, said the firm can compete with the top-tier firms here with people in China because "in Beijing we are top tier". He said the firm operates "at a level over and above any of our competitors". 

It advised Yanzhou Coal Mining Company on its proposed A$3.3 billion acquisition of Felix Resources by way of scheme of arrangement. If completed, this will be the largest ever Chinese deal in the Australian coal sector. 

Corrs also advised China Metallurgical Group Corporation on its proposed A$2 billion iron ore joint venture with Evraz SA regarding the Cape Lambert Project.

It acted as Australian counsel on the Shanghai bourse component of its recent dual IPO in Hong Kong and Shanghai, the world’s second largest initial public offering of 2009. 

The firm also advised Sichuan Hanlong (Group) Co. Ltd on a Subscription Agreement with Moly Mines Limited, under which Hanlong would provide Moly Mines with US$200 million in equity and debt funding and committed to provide or arrange US$500 million debt funding for the Spinifex Ridge Molybdenum/Cooper project. 

The firm advised SinoSteel Mining on its interest in several uranium opportunities in Australia and overseas, as well as China National Minerals Co Ltd (Minmetals) on its acquisition of two chrome resources in South Africa. 

And in the first major acquisition by a Chinese enterprise in Australia outside the resource sector, the firm advised China National Chemical Corporation on its acquisition of all the shares of Qenos Holdings Limited from Orica Australia and ExxonMobil. 

For years Australian firms have scrambled for work like this, forming alliances with Chinese law firms and putting partners on the ground in Hong Kong, Beijing and Shanghai in an effort to scoop the work and build relationships there. But competition is high, and Corrs has been nabbing much of the work. The firm itself puts its success in the region down to long-term relationships. 

One source from an Australian top-tier firm, who spoke anonymously to The New Lawyer, said some firms are offering very competitive rates on major Chinese SOEs in a bid to force their way on to the deals. He said firms will even drop their rates up to 40 per cent to claim the prize. 

Pressed about this trend, Denton derided the idea that law firms might be lowering their rates in this way, labeling the prospect "hilarious". 

He said a firm cannot pretend to have expertise and relationships in the Chinese market, and suggested clients were too savvy for such trickery. 

Of such rumours, Denton said: "I mean these are serious people. This is not rate play and anyone who puts it that way is not operating at the right level of the market, they are operating at the marketing office level discussing these things," he said. 

The firm's longevity in the market has given it a chance to compete with other international firms for this work, said Denton. 

"You can't just put up the shingle and say 'we've got a China practice," he said. Denton said the firm has a long-standing and well-understood strategy about engaging with clients and organisations internationally. Denton himself first entered the China market in 1985, and said he has applied some "rigour" to the development of his relationship with China. 

"I was the first Australian lawyer ever to have been privileged to have a private conversation with president Hu. I saw him this time last year and I saw him again in November this year," Denton said. 

"We are no new coming. We are the long-term players in the market. We do it differently to our competitors. We don't set up marketing offices, we don't see it just as bricks and mortar. We see it about long, hard yards being built around developing relationships in the right places with the right people."

Agreeing that the firm's work in the region and on Chinese SOEs is an effort for it secure it position, Denton said: "We would say that we set the tone for the quality of Australian law firm work in Beijing. I think it's indisputable that we have the most impressive access and certainly the most authoritative."

For law firms of any size to compete in the Chinese SOEs market they need to have a perspective in China, said Denton. They need to participate in the "big discussions about strategic policy" and about global economic policy. "We're talking about very senior players on a global level". 

When questioned as to how a new law firm in the market might build a relationship with major players in China now, Denton said clients like organisations and individuals who show a commitment through good times and bad times, and being interested over a long period of time in China. 

"People who suddenly lunge on the horizon and put up a sign and try and sell a glossy document or put a partner in for six months and say 'where is the work', that is not developing relationships in China," Denton said. 

"And that is certainly now being respectful. I think that is a very important part of the traditions and success of modern China. It works with people it respects and it respects people who respect China. You can't dream that up."

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