AUSTRALIAN LAWYERS on both sides of the Atlantic had a substantial role in the BHP Billiton bid for Rio Tinto. Lawyers at both Slaughter and May and Blake Dawson have been working closely together on the transaction since BHP indicated its interest in a takeover late last year.
Slaughter and May partners Andrew Balfour and John Papanichola were in Australia last week, and discussed the unique challenges posed by the deal in an exclusive interview with Lawyers Weekly.
“Basically it’s a very novel deal because it involves a dual-listed company making an offer for another dual-listed company. It’s never been done before,” Balfour said.
Another unusual feature of the deal is the regulatory clearance precondition. This means that BHP is committed from the beginning to make the offer for Rio Tinto, subject only to obtaining the necessary regulatory clearances.
“That’s relatively unusual,” Balfour said, “because people normally say ‘yes we’re interested’ and then go through the process of getting regulatory clearances, and then decide they’re going to proceed with the offer.”
Balfour, who is head of the firm’s financing practice, has been heavily involved in the transaction, working on a complex $55 billion-financing arrangement in anticipation of a successful bid by BHP.
“The bid itself does not have a cash component to it,” Balfour said. “But during the course of the year, Rio Tinto made a bid for Alco, the aluminium manufacturer, and for that purpose had to put in place a $40 billion-credit facility, which of course had a change of control provision.”
In the event of a Rio Tinto takeover, the company will have to be refinanced to the tune of $40 billion, says Balfour. To make his task even more difficult, BHP has announced its intention to return $30 billion to shareholders if the takeover bid is successful.
Slaughters has more than 30 lawyers working on the project at any one time, working through M&A, corporate and anti-trust clearances. The Slaughters team corresponds with Blake Dawson as well as members of the BHP in-house council team in both London and Melbourne. Balfour says the firm is better equipped to handle the international project management of the transaction than its rival magic circle firms in the UK.
“Unlike some of our competitors, our international approach is to work with independent law firms in other countries. So the manner of working here [in Australia] is very familiar to us,” Balfour said.
Establishing a productive relationship with in-house council is also a key part of a successful corporate transaction, he said.
“Obviously BHP have a large in-house team, so for example I’m working with Anthony Austin who’s based in Melbourne, who’s one of the in-house team there. Interestingly he used to be an associate at Slaughter and May, so in fact there was a contact there. We’re also working with the legal team in London; they have a legal department both in London and Melbourne.”
The firm prides itself on its strong position in the corporate market, acting for more FTSE 100-listed companies than any other law firm in the UK. Such dominance offers little breathing space in the highly competitive corporate market however. Demands from clients are increasing as they become more attuned to their own needs and measuring the outcomes of work done by external law firms
“The biggest institutions are becoming very sophisticated in the way in which they analyse what different law firms are able to offer them,” Balfour said.
The longstanding nature of many of its client relationships gives Slaughters the edge when it comes to handling deals such as BHP.
“Companies don’t do these sorts of transactions very often. So they want really reliable service from people that they’re familiar with,” Balfour said.
“To some extent that’s much less sensitive to panel reviews or reviews of legal services, a lot of it is about relationships and having familiarity between the people from the company and the people at the law firm.”