London Stock Exchange – Elite firms land $4.7bn Signature Aviation deal

Private equity heavyweights gained major mandates as the bidding war for Signature Aviation took a riveting twist, while the US-driven special purpose acquisition companies (SPAC) craze looks set to take off outside the States.

Kirkland & Ellis, Slaughter and May, Cleary Gottlieb Steen & Hamilton and Linklaters acted on the proposed take-private of Signature Aviation by a consortium – Brown Bidco – including Blackstone, Cascade and Global Infrastructure Partners (GIP).

The recommended cash acquisition will see Signature shareholders receive $5.62 per share in cash and values the entire share capital of the London Stock Exchange-listed aviation services company at $4.7bn.

The move sees another twist in the tale for the public- to -private transaction as the bid trounces a $5.50 cash offer made by GIP on its own in January. Signature Aviation has been hotly contested, with the Carlyle Group also rumoured to have been eyeing up the company.

Cascade Investment, the wealth management company owned by Bill Gates, already held a 19% stake in Signature Aviation and, as such, the Takeover Panel had to be applied to for joint offeror status in an unusual move.

The deal will eventually see Blackstone Infrastructure and Blackstone Core Equity own 35%, GIP own 35% and Cascade own 30% of Bidco.

Kirkland advised Blackstone and the consortium with a team led by David Holdsworth, Dipak Bhundia and David Higgins and also including debt finance partners Stephen Lucas, Kirsteen Nicol and Melissa Hutson, tax partners Timothy Lowe and Mike Beinus and antitrust and competition partners Mike Robert-Smith and Paula Riedel.

Higgins told Legal Business: ‘We think that financial investors will continue to be very interested in take private transactions given the opportunities for larger equity tickets and perceived value in the public markets.’

Holdsworth added: ‘Signature Aviation was a complex deal and so it was fantastic to get it launched.  There have not been many occasions since Canary Wharf where joint offeror status has applied and so it was great to add to that list.  A coincidence that we were helping Pamplona with Signature Foods at the same time – Signature deals for Kirkland!’

Cleary advised Cascade, fielding London transactional partners Michael Preston, Sam Bagot and Michael James as well as tax partners Meyer Fedida in New York and Richard Sultman in London.

The team also includes London financing partner David Billington and Paul Gilbert, who is advising on antitrust and foreign direct investment matters.

Speaking to Legal Business, Preston noted: ‘Private equity (PE) funds have a good cash position, and especially US dollar-denominated funds have been attracted by UK assets given the declining value of sterling and declining share prices. It has led to a huge rise in US funds executing deals. These are the conditions for a strong public to private market.

‘PE is an attractive buyer because it is a one-stop-shop for future capital needs, so if the company has expansion plans there is a shareholder with an enormous bank account. It’s also attractive if you are a director or a senior member of management as private equity offers equity incentives programmes to senior management.’

Added Bagot: ‘There will be a continuation of consortium deals where private equity firms team up to bid for assets. What’s interesting with Signature Aviation is the premium, in excess of 50%, whereas before it had been in the range of 30%.

‘Target boards dealing with these situations are becoming increasingly sophisticated. They are increasingly focused on doing the right thing for shareholders, getting the best price and going out to other potential bidders to achieve that.’

Slaughters acted for Signature Aviation with a team including corporate partners Robert Chaplin and Andrew Jolly, employment and incentives partner Phil Linnard, competition partner Anna Lyle-Smythe, pensions partner Sandeep Maudgil and finance partner Azadeh Nassiri.

Linklaters advised GIP on this and its previous solo bid with a team led by London private equity partners Chris Boycott and Nick Rees. Nicole Kar in London and Jonathan Gafni in Washington DC led on the antitrust and foreign investment aspects of the transaction. London partners Alek Naidenov and Tom Waller advised on the financing, with the team also including pensions partner Claire Petheram and employment partners Sinead Casey and Jillian Naylor.

Elsewhere, keen observers of the now ubiquitous SPAC deals will have noticed a pair of deSPAC transactions in recent days, notably both with non-US companies listing on US stock exchanges.

The deSPAC is the process through which the combined SPAC and the target company become listed in a similar outcome to an IPO, straddling M&A and capital markets.

Skadden advised on both deals and has been very active in the space. Speaking to Legal Business, Lorenzo Corte, co-head of its M&A group, observed: ’With deSPACs you can use projections to market a target company to investors, which you cannot do in the context of a US IPO. A lot of high growth or relatively young companies do not have the proven revenue track record, so it is important to be able to show projections to potential investors to better market the company.  Also, the PIPE process allows a company to have some visibility and say on which investors are brought into the company through the de-SPACing transaction.’

Skadden acted for Alussa Energy on its combination with FREYR, a Norway-based developer of clean, next-generation battery cells, to list on the New York Stock Exchange in the first ever Nordic deSPAC.

The combined company will be renamed FREYR Battery, and will aim to accelerate the decarbonization of transportation and energy systems by delivering the world’s cleanest and most cost-effective batteries. Following the combination, the pro forma equity value of the combined company would be roughly $1.4bn.

The Skadden team was led in London by Danny Tricot and Denis Klimentchenko, while Wilson Sonsini partner Mark Baudler advised FREYR.

Skadden also advised Kismet Acquisition One, a (SPAC) listed on Nasdaq in its $1.9bn initial business combination with Nexters Global, in the first deSPAC transaction involving a Russian company.

Nexters Global is the owner of blockbuster mobile game Hero Wars and is a top five independent game developer in Europe that builds mobile, web and social games used by millions of players globally. Kismet Acquisition One is the first SPAC formed by Ivan Tavrin, TMT entrepreneur and executive, and founder of Kismet Capital Group.

The Skadden team in London and Moscow, was led by Pranav Trivedi and included corporate partner Denis Klimentchenko and Dmitri Kovalenko, London tax partner James Anderson and a Palo Alto team included corporate partner Gregg Noel and IP and tech partner Ken Kumayama. Latham & Watkins acted for Nexters in the transaction with an M&A and capital markets deal team led by partners David Stewart and Ryan Maierson.

Skadden’s Denis Klimentchenko noted a substantial uptick in the number of American SPACs looking for European targets to list in the US.

‘European exchanges are getting on the bandwagon – Stockholm has changed rules to attract SPACs and Amsterdam is more flexible. There have been more enquiries from sponsors. We are at the very beginning of a wave and there is increased interest and demand.’

‘2020 was the year of the SPAC IPO and 2021 will be the year of the deSPACs,’ Klimentchenko concluded.

nathalie.tidman@legalease.co.uk