Tata SteelÆs $12.2 billion acquisition of Corus
Buy side advisers to Tata Steel: ABN AMRO, Deutsche Bank, Rothschild
Original mandated lead arrangers for loan facility: ABN AMRO, Citi, Standard Chartered
Sell side advisers to Corus: Credit Suisse, HSBC, JPMorgan Cazenove
Legal advisers: De Brauw Blackstone Westbroek, Herbert Smith, Shearman & Sterling, Slaughter and May, Stibbe
It is rare for an M&A deal to be described as ôseminal for the countryö û or for advisers not involved in the transaction to point to it as shaping the landscape. Or for a deal to be considered responsible for letting loose a torrent of activity not only from the country in which the deal happened but across a region.
But Tata SteelÆs winning $12.2 billion bid for Corus merits all the praise listed above. If we had to capture one of the defining trends of 2007, it is the outbound M&A activity from Asia. Across investment banks, folks are talking about Asia-outbound opportunities with their clients and this is attributable in some degree to the Corus acquisition.
To put the size into context, consider that Tata Steel had a capacity of around 5 million tonnes pre-Corus. Corus added another 18 million tonnes. Tata SteelÆs consolidated revenue for fiscal 2007 was Rs274 billion ($7 billion) on which it earned a net profit of Rs42 billion. The outlay for Corus was a multiple of both.
A critical aspect of the deal is its financing. Being IndiaÆs largest leveraged buyout, the deal demonstrates the newfound ability of Indian companies to raise debt from a mixture of international and local lenders.
The original bid was supported by bridge loan financing, intended to be taken out by bank loans and high-yield debt. Citi led a syndicate that refinanced the bridge through a combination of a term loan A and B structure, which was launched in July during adverse market conditions, yet still fully subscribed. The ú3.7 billion ($7.4 billion) financing is the largest ever non-recourse facility put in place for an Asian sponsor.
Tata SteelÆs acquisition is already the subject of business-school case studies and is used as an example to illustrate the shifting balance of power from West to East. But for India and the rest of Asia it also represents a paradigm shift of how companies view the geographical boundaries in which they operate. And that lasting effect warrants our highest accolade.
BEST DOMESTIC M&A DEAL
Delisting of Maxis
Advisers: ABN AMRO, CIMB, JPMorgan, RHB Investment Bank
Legal advisers: Paul Hastings
Delisting a company that accounts for 4% of Bursa MalaysiaÆs total market capitalisation and which is the flagship company of one of MalaysiaÆs leading businessmen is impressive. Announcing the transaction before capital markets and equity investors get wind of the plan and then successfully buying out the 41% minority holding, puts this deal at a leading position to win this category. Then consider that the deal is the largest corporate transaction in Malaysia and the financing, via a $7.1 billion bridge loan facility, the countryÆs largest ever financing package. Further, the financing meets dual objectives of allowing the participating banks to provide commitments in US dollars while the borrower can draw down and fund onshore in Malaysian ringgit.
Any residual questions investors might have had about the rationale for the delisting were effectively answered when Maxis inducted Saudi Telecom as a strategic investor and announced an ambitious capital expenditure programme to kick-start its operations in markets like India.
But equally as compelling as the textbook deal execution of the voluntary general offer is that the Maxis delisting has made a number of Malaysian businessmen rethink the need to have their group companies listed. They are now contemplating similar deals, their confidence bolstered by the knowledge that a delisting can be effectively executed as the trailblazing path set by Maxis has established.
BEST LEVERAGED FINANCING
$600 million financing package arranged for KKRÆs acquisition of MMI Holdings
Arrangers: Credit Suisse, Deutsche Bank, JPMorgan
Legal advisers: Allen & Gledhill, Simpson Thacher & Bartlett, WongPartnership, White & Case
Some might say the KKR financing for MMI was less noteworthy than packages closed in the third and fourth quarter when financial sponsors were feeling the effects of the credit crunch. However, on balance, structuring and closing a financing package that met the financial sponsorÆs objectives with respect to the target asset deserves credit, even if the deal was done in a somewhat easier credit environment than later in the year.
MMI Holdings is a contract manufacturer of precision-engineering components and specifically a market leader in supplying hard disk drives, with operations spanning Singapore, Thailand, Malaysia and China. Its fortunes are closely linked to the information technology industry. Indeed, from a lenderÆs perspective MMI could be perceived as having a single-customer concentration and operating in a highly cyclical industry, and yet KKR still wanted to raise financing at an aggressive leverage level for Asian deals.
The leads used a $600 million term loan A and B structure, which they pre-funded. The debt was then syndicated among 19 banks. The fact that 39% of lenders were Asian is a strong reflection of how quickly the regional banking market is maturing. And market observers have commented favourably on the terms and conditions on which the leads syndicated the debt, including a $490 million senior secured term loan and a $110 million working capital revolver facility.
BEST PRIVATE EQUITY DEAL
MBKÆs $1.4 billion takeover of China Network Systems
Buy side adviser: Merrill Lynch
Sell side adviser: Morgan Stanley
Legal advisers: Debevoise Plimpton, Paul, Weiss, Rifkind, Wharton & Garrison
China Network Systems (CNS) is the largest cable television multiple system operator in Taiwan, measured in subscriber terms. The auction Morgan Stanley conducted for CNS followed on the heels of cable TV deals by both Macquarie and Carlyle in Taiwan. But the adviser still achieved the highest price on a per-subscriber basis for CNS. The pricing represents not only the attractiveness of the asset but also the aggression of winning bidder, MBK Partners, to emerge victorious.
Others in the fray for CNS at various stages included TPG, Goldman Sachs, Macquarie, KKR and CVC Asia Pacific. MBKÆs winning bid was, sources say, only marginally higher then the second bidderÆs, giving it just the edge it needed in an extremely competitive process while not putting too much on the table.
MBKÆs adviser, Merrill Lynch, also had to structure the deal to comply with TaiwanÆs regulations with respect to foreign ownership of cable assets and antitrust regulations.
MBK Partners characterises a growing trend of Asian home-grown private equity firms that are willing to take on the more established players head-on. And both sellers and advisers recognise that they will play a larger role going forward. Local private equity firms are already strong competitors in both Korea and India and are expected to play a defining role in China û an emerging trend that was also captured by this deal.
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