April 22, 2012 12:38 PM
Dealmaker of the Week: Iain Wagstaff of Linklaters
Posted by Tom Huddleston Jr.
Iain Wagstaff, 37, an M&A partner in Linklaters's London office.
Courbevoie, France–based GDF Suez. The company, which counts the French government as its largest shareholder, became one of the world's largest utilities with its 2010 acquisition of a majority stake in International Power (IPR).
On Monday, GDF said it had reached an agreement with IPR to buy the 30 percent of the British utility it doesn't already own for $10.8 billion.
GDF will pay roughly $6.74 per share in cash for the IPR stake it did not acquire in 2010. The price is 7 percent higher than the $6.29 per share GDF offered for the same stake at the end of March, according to our previous reporting. IPR rejected the initial bid, prompting the sweetened offer. IPR's independent board of directors has approved the deal. If shareholders do the same, the transaction is expected to close by mid-July.
GDF obtained its current 70 percent stake in IPR in exchange for a collection of its own assets—including its non-European power generation business and assets in the U.K. and Turkey—to IPR shareholders, who, in addition to retaining the 30 percent stake in the company, received a $2.2 billion dividend payment.
THE BIG PICTURE
GDF views taking complete control of the British utility as a move way of expanding its existing presence in emerging markets where demand for energy is rising, including South America, the Middle East, Southeast Asia, and Australia.
The Wall Street Journal's Andrew Peaple suggests GDF's willingness to up its offer to such a degree, and within a matter of weeks, may have been driven by political considerations. Because the French government is a part owner of the company, GDF needs political support to proceed with the acquisition. According to Peaple, though the Sarkozy administration backs the deal—which would send French funds to foreign investors and boost the utility's overseas spending—a win by the Socialist Party in France's May presidential elections could imperil it. Peaple asks whether this explains GDF's reluctance to wait out IPR and strike a more favorable deal.
Says Wagstaff: "If that was [GDF's] strategy, it's not something that was shared with us."
Linklaters was Suez's go-to outside counsel in 2008 when the company merged with Gaz de France to create GDF Suez in a $157.5 billion deal. Paris-based M&A partner Marc Loy, who led the Linklaters team that advised Suez on that deal, is leading the Paris-based Linklaters contingent working on this week's IPR deal.
The London-based Wagstaff and his team generally work on U.K. transactions for GDF Suez, including last year's sale of North Sea oil fields to French energy company Total. Wagstaff also worked on GDF Suez's acquisition of shares in energy units owned by China Investment Corporation for $3.8 billion last year. And, as they did with this week's deal, Wagstaff and Loy also teamed to help shepherd GDF's initial acquisition of its controlling stake in IPR.
GDF had the option of making a full meal out of IPR two years ago. Instead, the utility opted to leave 30 percent of the target on the table, Wagstaff says. The resulting two-stage purchase allowed GDF to minimize debt that could have hurt its credit ratings, as Bloomberg notes. Whatever the calculation at the time, Wagstaff says an acquisition of the outstanding stage was always a possibility.
"If you own a 70 percent stake in a listed company, it's always on the horizon that at some point, if you think the times right, you may come back and take out the minority," he says.
For the Linklaters team, the work already done on the previous deal proved valuable on this transaction. In 2010, GDF and IPR engaged in talks on and off throughout the year before finally reaching an agreement. The time around, Wagstaff says, the companies' shared history helped move things along.
GDF put the Linklaters team two work on the deal in March, setting the stage for a lightning-quick turnaround. The utility's initial proposal went out later that month and the eventual agreement signed just weeks later. "It's been a busy six weeks or so," Wagstaff says.
The process moved quickly despite IPR's rejection of GDF's initial offer. Wagstaff says he wan't surprised the two sides went back and forth on the deal price. "In U.K. takeovers, it is pretty unprecedented for a target board to accept the first offer they receive," he says.
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