2009 China Law Awards reveal quality performances
November 02, 2009 | BY
clpstaff &clp articles &The 2009 China Law & Practice Awards gave the legal profession an opportunity to reflect on 12 months of hard work and innovative dealmaking
By Stephen Mulrenan.
The period July 1 2008 through to June 30 2009 will forever be remembered as one of the most unstable and challenging times in financial history. With balance sheet financials heading south and pools of credit drying up, companies and financial institutions became heavily dependent on the sound technical advice and commercial acumen of external counsel. Fortunately for them, the legal profession in China delivered … and in abundance.
A quick glance through the list of winning transactions, law firms and legal teams from the 2009 China Law & Practice Awards reveals a succession of achievements where legal innovation was very much on display: click for Deals of the year, Teams of the year and Firms of the year.
For example, on the Sinosteel takeover of Midwest, which won M&A Deal of the Year and was the first hostile takeover of an overseas entity by a Chinese state-owned enterprise, counsel demonstrated skill and flexibility in bringing to a close a transaction that faced serious regulatory restrictions and a competitive bid.
“In the most tangible way possible, Sinosteel's takeover said to the world that Chinese state-owned enterprises are now global players that behave like any other company,” said Deacons' lead partner on the deal Ian McCubbin.
The Sinosteel Midwest deal structure was extraordinarily complicated and was essentially a defensive response to a hostile takeover bid for Sinosteel's joint venture partner by a Murchison Metals-Mitsubishi joint venture.
“So Sinosteel had no alternative but to bid for its own JV partner,” said McCubbin. “Its response was all about how it could protect itself, so the deal structure was driven by these particular circumstances.”
Among the complications, Sinosteel had to acquire approval from the Australian Takeover Panel before launching its bid. Despite this restriction, it defeated the alternative bid from Murchison Metals which was able to buy shares on the open market.
“Sinosteel was at a disadvantage because it couldn't go into the market to buy Murchison shares – which it might have done from a strategic point of view – because it needed FIRB [Foreign Investment Review Board] approval,” said McCubbin.
“The deal was also the first time that the Australian Takeover Panel had taken into account a law other than the Corporations Act to make the order to stop a US hedge fund buying Midwest shares. This was critical to the deal.”
As with China Oilfield Services' acquisition of Norway's Awilco Offshore ASA – which won Energy & Natural Resources Deal of the Year – the Sinosteel-Midwest transaction is symbolic of the recent trend of Chinese companies being more active overseas.
McCubbin is critical of the lack of transparency in Australia's regulatory approval process. “FIRB imposes conditions that are unpredictable,” he said, citing the recent conditions imposed on Yanzhou Coal Mining's takeover of Felix Resources (which include that Yanzhou list the local unit on the Australian stock market by 2012 and cut its ownership to less than 70%) – see page 36.
However, Sinochem's recent announcement of its intention to acquire Australia's Nufarm Ltd for US$2.44 billion suggests that Chinese investment will continue … and beyond the energy and natural resources sector to other industries such as chemicals and agri-business. “In time, Chinese investment will become quite diverse,” he added.
While Sinosteel's takeover of Midwest involved mostly Australian law issues, many of the other nominated transactions had a strong local law element to them. The domestic profession was given due recognition for its work in 2008/9 at the Awards, including across nine new cities categories.
The editorial team at CLP would like to congratulate all of the winners and finalists of the 2009 China Law & Practice Awards, and we look forward to toasting your achievements at next year's event.
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