Freehills’ partners Tim McEwen and Philippa Stone led the Freehills team advising the Macquarie Communications Infrastructure Group (MCG) on its recent acquisition by Canada Pension Plan Investment Board (CPPIB).
MCG is a triple stapled structure consisting of Macquarie Communications Infrastructure Limited, an Australian public company, the Macquarie Communications Infrastructure Trust, an Australian registered managed investment scheme and Macquarie MCG International Limited, a Bermudan company.
This transaction was a great opportunity for Freehills to work with a long standing client to achieve a successful outcome for its security holders. Freehills acted for MCG on its initial public offer in 2002 and has acted on all of its subsequent major transactions.
The MCG security price, like that of many listed entities, had declined over the 12 to 18 months to early 2009. The MCG Boards took the view that this was substantially due to market concerns regarding uncertainty of the future refinancing of asset level debt.
The MCG Boards therefore embarked on a portfolio review which explored several options to restore MCG security holder value and reduce the debt. It was through exploring these options that CPPIB took the opportunity to submit its proposal to MCG.
The initial offer from CPPIB, announced on 31 March 2009, was $2.50 per MCG stapled security which valued the equity of MCG at $1.37 billion and represented a 67 per cent premium to the last closing price of MCG securities and a 134 per cent premium to the three month average trading price.
The acquisition was to be implemented through inter-conditional Australian and Bermudan schemes of arrangement for the companies and an inter-conditional trust scheme (together, Schemes).
The multiple jurisdictions for the Schemes, and in which the assets were located, required Freehills to work closely with MCG and foreign counsel to properly structure the transaction and to meet the requirements of the various jurisdictions, in particular having regard to the interconditional nature of the Schemes.
Separate to the Schemes, CPPIB entered into an arrangement with the Macquarie Group to acquire all of Macquarie Group’s approximately 18.3 per cent holding in MCG. Through this separate transaction, CPPIB would also acquire Macquarie Communications Infrastructure Management Limited, the responsible entity of the Macquarie Communications Infrastructure Trust and the manager of Macquarie Communications Infrastructure Limited and Macquarie MCG International Limited.
The Scheme Meetings, and the necessary general meetings, were proposed to be held on 17 June 2009.
On 16 June 2009, the day before the Scheme Meetings were scheduled to be held, CPPIB made a revised offer under which MCG security holders would be paid an additional 50 cents per MCG security as a special capital distribution out of the Macquarie Communications Infrastructure Trust in addition to the $2.50 payment per MCG security from CPPIB. Revised Court orders were sought that afternoon from the Supreme Court of New South Wales and over that night from the Supreme Court of Bermuda approving the distribution of supplementary material in relation to the revised offer to MCG security holders.
Consistent with other transactions struck early in 2009 at a particularly difficult time in the capital markets, the subsequent improvement in markets effectively led to the offer being revised to encourage security holder, particularly institutional security holders, support. This provided an excellent outcome for security holders.
MCG released its supplementary disclosure in relation to the revised offer on 18 June 2009 following the receipt of orders from the Supreme Court of New South Wales and the Supreme Court of Bermuda. The revised meeting date was 30 June 2009.
The Schemes were implemented on 21 July 2009.
This article was written by Tim McEwen, Partner, Melbourne and Philippa Stone, Partner, Sydney.
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