Monday, 28 January 2019

Deal watch: City and US firms defy tough M&A market with deal duo as Gateley takes the cake on Patisserie Valerie collapse

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Deal watch: City and US firms defy tough M&A market with deal duo as Gateley takes the cake on Patisserie Valerie collapse

Slaughter and May, Sullivan & Cromwell, CMS Cameron McKenna Nabarro Olswang and Ashurst have defied a challenging market to take key roles on a pair of UK mergers as listed Gateley leads on the collapse of Patisserie Valerie.

Last week saw the £3.3bn takeover of UK listed plastics manufacturer RPC Group by funds managed by Apollo Management IX, as well as Primary Health Properties’ £393m acquisition of MedicX Fund Limited in an otherwise sedate UK M&A market.

Slaughter and May took the company-side mandate to advise RPC on a recommended offer for all shares by Apollo. Each RPC shareholder will be entitled to 782 pence in cash for each RPC share, valuing the deal at roughly £3.3bn. The shares have been issued by Rome UK Bidco, a vehicle created by the buyer of RPC, which designs and engineers plastic products, including for the plastic packaging markets.

The deal was led by Slaughters head of corporate Andy Ryde with a team including corporate partner and future rising star candidate Paul Mudie.

A Sullivan & Cromwell team led by Ben Perry acted as lead adviser to Apollo on the UK takeover elements of the deal with Paull Weiss London-based M&A partner David Lakhdhir providing additional advice to that firm’s core client in the US.

The sale process has been relatively protracted, becoming public last September and being subject to numerous takeover panel extensions. Bain Capital was also pegged as a potential acquirer of the business but later pulled out of the process. The transaction also includes a significant debt financing piece.

Ryde told Legal Business: ‘RPC’s plastic packaging business has grown rapidly in recent years through acquisition and it was felt that a private equity owner would allow it to continue this acquisitive strategy.’

He added: ‘It is a sign of market confidence that a takeover of this size of a FTSE 250 company can be done in a challenging market. The deal first became public last September and required five takeover panel extensions to finalise the due diligence process. RPC is a decentralised business with seven divisions operating across 33 countries so the deal took time to cross the line – but it got there in the end.’

The deal is slated to close in the second quarter of 2019.

Meanwhile, Ashurst has landed a role advising MedicX Fund, the healthcare infrastructure fund owned by Octopus, on its takeover by Primary Health Properties Plc (PHP).

The deal is being done via a Guernsey law scheme of arrangement and sees the share capital of MedicX issued in exchange for new shares in PHP, a deal which is valued at roughly £393m.

MedicX, a specialist primary care infrastructure investor in healthcare properties in the UK and Ireland, was advised by a team led by Ashurst corporate partner Tom Mercer and including corporate partner Tara Waters.

CMS advised PHP on the deal, with a team spearheaded by partners Glyn Taylor and Jack Shepherd.

MedicX is a closed-end investment company with UK REIT status, listed on the London Stock Exchange. Its investment portfolio includes 166 properties with a value of around £806.7m.

FTSE 250 company PHP is also a listed UK REIT which leases properties to GPs, the NHS and other healthcare providers. It has a market capitalisation of £875m and investments of £1.5bn.

Elsewhere, woes continue to plague the UK high street as Patisserie Valerie succumbed to the dark cloud of ‘significant fraud’ overshadowing the fancy cake chain as it brought in KPMG to administer its collapse earlier this week.

Parent company Patisserie Holdings plc announced the move on Tuesday (22 January), saying that as a direct result of the significant fraud it had been unable to renew its bank facilities.

Last October, a £40m black hole was discovered in the company’s accounts overseen by former finance director Chris Marsh who was then arrested on suspicion of fraud, bailed and then resigned from the company.

Patisserie Valerie’s chairman Luke Johnson has taken out a loan in order to pay out January wages.

Listed law firm Gateley has been unforthcoming about its reported role advising KPMG on the administration. The firm has declined to comment on whether Birmingham-based partner James Madill is advising, as one restructuring source suggests.

On 23 January, KPMG announced the closure of loss-making stores, including 27 Patisserie Valerie stores and 19 Druckers stores. A further 25 Patisserie Valerie concessions in Debenhams (the UK department store which has itself been on restructuring counsel’s watch list for several months), Next and motorway service areas have also closed, along with the company’s bakery in Spitalfields. The closures have resulted in 920 redundancies.

nathalie.tidman@legalease.co.uk