Gilbert + Tobin International brochure

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We provide leaders

Gilbert + Tobin is one of Australia’s leading corporate law firms – with a difference.

Our clients look to us to help them on their most important and strategic matters. They are attracted by the fact that a very large proportion of our partners are indisputably Australian market leaders in their areas of specialty.

The Australian market is sophisticated and highly competitive. In deal terms, our market regularly represents more than a quarter of the value of Asia Pacific league tables. Gilbert + Tobin’s roles include: advising on Australia’s largest successful merger, Westpac Banking Corporation’s $47 billion merger with St. George Bank in 2008; advising on the TPG and Carlyle consortium’s bid for Healthscope in 2010, Australia’s largest leveraged buyout; and acting in much of Australia’s largest litigation.

We have a reputation for major and groundbreaking work: PBL Media’s $5.5 billion recapitalisation of its media assets (in advance of changes to media ownership laws in 2007); the recent privatisation of NSW Lotteries; and litigation that creates global precedents, such as Google’s current defence against regulatory challenges to its sponsored links (a case with worldwide significance) and the crackdown on the illegal music download business, Kazaa.

These matters continue our strong tradition of market-shaping work, starting with the deregulation of telecommunications in this country and the creation of Australia’s subscription television industry in the 1990s.

In 2010, we are proud to have added to our ranks several of Australia’s leading lawyers: Peter Cook, Nick Grambas and, through an alliance, Michael Blakiston.

In 2008 – 09, Peter led possibly the boldest bid in recent Australian history – Chinalco’s raid on Rio Tinto – and brings to us unparalleled regional M&A, capital markets and private equity expertise. Nick is one of Asia Pacific’s leading infrastructure and finance specialists and heads our newly established Melbourne office. Michael is the principal of Perth’s leading resources boutique law firm, Blakiston & Crabb, and is an expert mining and resources lawyer.

We are tremendously excited by the opportunities these additions to our firm represent.

We are also further developing our alliance with China’s largest law firm, King & Wood. Our work with King & Wood is growing as our respective clients’ investment activities increase in the Asia Pacific region.

China continues to be a leading consumer of Australian resources and increasingly, is an investor in, and buyer of, our non-resources businesses.

As you leaf through the pages of this booklet, we hope you get a sense of what we are building at G+T and what makes us different. We are ambitious – both for our clients and for the success of our firm. We believe that the most difficult matters require not only market-leading expertise, but also courage, creativity and leadership. We believe in our people. We believe in hard work.

We are also committed to doing what we can to strengthen civil society. We believe in the overarching importance of the rule of law and in our obligation to assist people who are disadvantaged, particularly through our Pro Bono practice.

Finally, I would like to thank our clients, our partners and staff – both past and present – without whom G+T would not be the success it is today.

Danny Gilbert AM Managing Partner

Lucky Australia looking for vision

By Alan Jury

Alan Jury has been one of the leading commentators on the Australian investment environment for more than 30 years. Prior to taking up his current position as an Executive Director of FD Third Person, Alan wrote the “Chanticleer” column on the back page of Australia’s leading daily business newspaper, The Australian Financial Review. In this article, Alan gives his perspectives on the Australian investment environment in 2010 and the challenges and opportunities facing our political leaders in light of recent history.

Donald Horne christened Australia “The Lucky Country” in 1964 and never has that appellation been more appropriate than now.

North America and Western Europe are grappling with the spectre of a double dip economic recession emerging in the United States later this year, even as they continue to struggle through the miasma produced by corporate and government debt.

Australia, on the other hand, continues to exhibit a remarkably resilient economy, and a corporate sector that emerged from the past financial year with better-than-expected financial health.

June 2010 quarter GDP data took virtually all economists by surprise, showing 1.2% growth for the quarter and year-on-year growth of 3.3%.

“Australia continues to be a standout performer among developed economies,” say economists from Macquarie Group. “The extended period of interest rates being on hold, combined with low unemployment, appears to have boosted prospects in the consumer sector, although there are prospects that the surge in business investment from mining projects will be more of a 2011 story than late in 2010, as previously anticipated.”

Let the good times roll. Or not.

For a start, one has to reconcile such economic optimism with a comparatively less certain political environment that has recently dented Australia’s reputation as a blue-chip investment destination. It’s not just the way in which initiatives

such as the national broadband network and the resources rent tax were announced with little consultation, but also the flip-flopping policy positions on things such as climate change and carbon tax that have unsettled investors.

So uninspired were Australian voters that they declined to deliver either major political party a clear mandate to govern in the August 2010 federal election, and it took two subsequent weeks of horse wrangling with minority parties and independents before incumbent Prime Minister Julia Gillard could form a minority government.

Consequently, there is a general view that the Government will be forced to tread warily and a period of policy paralysis may ensue, perhaps bringing down the curtain on 20 years of unbroken economic growth.

One hopes not. The Gillard Government does not have to look back very far in time to find sufficient inspiration for demonstrating vision and conviction rather than retreating into caution and indecision.

In 1984, for example, the first-term Hawke Government had its majority significantly reduced and was faced with a hostile Senate in its second term. Rather than defer its policies, however, it powered ahead with a reform program that included an overhaul of the tax system. Ditto the Howard Government in 1998, when it clung to a slender majority on preferences after losing the two-party preferred vote. It proceeded to implement its policy program, including an unpopular goods and services tax.

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That Labor retained power until 1996, and the Liberal-National Party coalition until 2007, should provide sufficient incentive for the Gillard Government to eschew caution in favour of demonstrating leadership and implementing policies necessary to keep Australia on the economic growth treadmill.

The Reserve Bank of Australia (RBA) says the past two decades represent “the longest period of growth that Australia has recorded for at least the past century”. It’s an achievement that RBA Deputy Governor Ric Battelino claims no other developed economy can equal.

Strong population growth has contributed, particularly in recent years, not to mention that we were well placed geographically and in terms of our resource wealth to take advantage of the industrialisation of large population countries such as China and India.

It’s not all luck, though. At least, not according to Battelino, who cites several other factors.

“The China story has been significant only over the past five years, [and] most of its significance still lies ahead,” he said in a recent speech. He also notes that Japan, which has been Australia’s major trading partner for 20 years and has only just been eclipsed by China in recent months, experienced two decades of subdued economic growth.

Moreover, several other of our Asian trading partners experienced severe economic crises in the 1990s.

“I would therefore conclude that our luck has been somewhat mixed, and we need to look to other factors to explain Australia’s good growth performance,” he said.

So too has the dream of establishing Australia as a regional centre of excellence through genuine reform so far failed to materialise, although the opportunity remains.

Battelino gives most credit to the 1983 decision of the Hawke-Keating Government to float the Australian dollar, something he says “ranks among the most important economic reforms, if not the most important reform, of the past 30 years” because it provided a stabilising influence by insulating the economy from various external shocks.

Former Prime Minister Bob Hawke tried to reposition Australia as “The Clever Country” in 1988 but it seems as if we’d rather just remain lucky. Perhaps that’s why those interests most willing to chance their arm expanding in Australia at the moment seem to be those domiciled somewhere else in the world.

He cites other reforms implemented over many years as well, such as changes to competition and industry policy, labour market practices, and various financial system reforms that provided greater funding capability and made Australia more attractive to foreign investors.

These reforms so boosted productivity in the 1990s that the RBA estimates Australia was able to produce an extra 1.5% of output per year simply by using capital and labour more efficiently.

By the middle of the next decade, however, it seems as if the reformist momentum was slowing as private wealth accumulation became a bigger priority.

An opportunity to channel the unparalleled prosperity starting to flow from the resources boom into social and economic infrastructure was arguably missed by the Howard Government. The Rudd Government recognised the need but failed to execute on a variety of promises.

Arrow Energy’s International Demerger Advising Arrow Energy Limited, one of Australia’s top 100 publicly listed companies and Australia’s largest coal seam gas acreage holder, on the proposed $3.5 billion demerger of its international assets. This transaction formed Dart Energy Limited and led to the proposed post-demerger acquisition of Arrow Energy by a bidding consortium comprising of Royal Dutch Shell Plc and PetroChina Company Limited.

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Mergers + Acquisitions

Privatisation of NSW Lotteries and WSN Environmental Solutions (WSN) Advising the NSW Government on the privatisation of its non-energy assets, including the sale of its lotteries business to Tatts Group and the current WSN sale process.

Xstrata’s bid for Sphere Minerals Advising Sphere Minerals on Xstrata’s $428 million cash takeover offer for Sphere Minerals.

GrainCorp/AWB merger Advising GrainCorp, one of Australia’s largest agricultural supply chain and logistics company, on its proposed $2 billion merger with AWB Limited.

M&A activity in Australia remains subdued, consistent with global trends, although the outlook is positive. Public company boards remain cautious although they are showing increased signs of engaging in activity. Australian M&A activity has in recent times been underpinned by Chinese investment in the resources sector as well as more recently in other areas.

Particular features of the current Australian M&A market are: Foreign and Chinese investment Largely due to its stable and transparent regulatory environment and the comparative advantages and opportunities in the resources sector, Australia is seen by many offshore investors as an attractive place to invest.

Investment by China-based investors, particularly in the resources sector, is strong.

There have been a number of high-profile transactions and we continue to see significant interest by Chinese investors in Australia, not just in the resources sector, but also in soft commodities and other non-mining-related businesses including agribusiness.

While interest in the resources sector remains high, questions have emerged relating to the investment environment in Australia. Firstly, over the last two years, concerns have emerged over the Australian Government’s policy on and attitude to foreign investment, particularly by Chinese state-owned enterprises (SOEs).

The Government has recently sought to clarify its foreign investment policy but concerns remain as to the manner and basis upon which foreign investment policy is to be applied to Chinese SOEs. A further issue that has arisen most recently is the proposed super profits tax on the mining industry. While significantly modified from the original proposal, its manner of implementation and potential economic effect on the mining industry raised serious concerns with both the mining industry and the international investment community as to the merits of Australia as an international investment destination. This affected M&A activity to some extent.

General M&A activity While many public companies have strong balance sheets, general M&A activity has been subdued. However, there are increasing signs that public company boards are looking more closely at opportunities as asset prices and valuations return to more realistic levels. In addition, boards are also looking at more strategic acquisitions as confidence levels increase and shareholder sentiment improves.

We believe the outlook in the Australian market for increased M&A activity is strong.

Garry Besson Partner

Charles Bogle Partner

Philip Breden Partner

Andrew Bullock Partner

Peter Cook Partner

Marko Komadina Partner

T +61 2 9263 4007 E gbesson@gtlaw.com.au

T +61 2 9263 4367 E cbogle@gtlaw.com.au

T +61 2 9263 4050 E pbreden@gtlaw.com.au

T +61 2 9263 4126 E abullock@gtlaw.com.au

T +61 2 9263 4774 E pcook@gtlaw.com.au

T +61 2 9263 4136 E mkomadina@gtlaw.com.au

5 Mix of Australian deals by industry sector financial year 2009–10 – volume

Demergers As boards look to crystallise value and as confidence returns in M&A and capital markets areas, we are also seeing the re-emergence of companies looking to demerge certain businesses into new publicly listed vehicles. Recent examples include Arrow Energy’s demerger of Dart Energy in the context of a bid by Shell and PetroChina, Orica demerging its Dulux paints business and the Fosters Group’s proposal to demerge its wine business.

Transportation 4.9%

Lifesciences & Healthcare 5.8%

Construction 2.8% Agriculture 3.7%

Real Estate 2.8% Leisure 4.9%

Industrials & Chemicals 9.8%

Telecom 1.5% Media 1.2% Technology 5.2%

Financial Services 10.5%

Private equity Underpinning the Australian M&A market is activity sourced from financial sponsors. Australia’s market has, as its participants, many of the leading large global sponsors as well as a number of very active Australian-based sponsors. Australia has been historically a happy hunting ground and has matured into a very strong market. We have seen a number of recent deals involving both global and local sponsors and expect that activity to increase both on the acquisition and divestment side. (See also “Private Equity” on the following page).

Business Services 13.2%

Energy, Mining, Oil & Gas 24.3% Consumer 9.2%

Inbound geography breakdown financial year 2009–10 – volume Asia 33.3%

Africa 0.8% Middle East 0.8%

Americas 31.8%

“Gilbert + Tobin remains a key player in the Australian M&A market. The commercial sensibilities of the firm’s partners are particularly well regarded by clients.”

IFLR 1000, 2010

Rachel Launders Partner

Europe 33.3%

Source: Mergermarket

Adam Laura Partner

T +61 2 9263 4143 T +61 2 9263 4144 E rlaunders@gtlaw.com.au E alaura@gtlaw.com.au

John Williamson-Noble Partner

Gary Lawler Partner

Bryan Pointon Partner

T +61 2 9263 4008 E glawler@gtlaw.com.au

T +61 2 9263 4030 T +61 2 9263 4286 E bpointon@gtlaw.com.au E jwilliamson-noble@gtlaw.com.au

CARLYLE AND TPG’S BID FOR HEALTHSCOPE Advising The Carlyle Group and the Carlyle / TPG consortium on the bid for Healthscope, one of Australia’s largest health service providers. This included acting as sponsor’s counsel on its $1.5 billion clubbed acquisition debt package.

PACIFIC EQUITY PARTNER’S BID FOR ENERGY DEVELOPMENTS

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Private Equity

Advising Pacific Equity Partners funds on the unrecommended bid for Energy Developments Limited, a global landfill and coal mine methane energy producer.

STELLA MERGER WITH JETSET Advising Stella Travel Services (a portfolio company of CVC) in relation to its merger with Jetset Travel World, a subsidiary of Qantas.

CRESCENT CAPITAL Advising on the disposal of National Hearing and assisting Crescent Capital in the acquisitions of Covermore and Care Group.

Despite difficult conditions, private equity sponsors are still finding plenty of ways to stay active.

We are fortunate to have a broad and deep private equity practice and are currently seeing the following trends and developments.

Uncertainty around taxation of exit proceeds is becoming less of a concern The attempt by the Australian Taxation Office to restrain the repatriation of proceeds of the TPG-led consortium’s exit from Myer (a leading Australian retail chain) in 2009 caused significant uncertainty for foreign funds earlier this year.

Since then, the Australian Government has developed a structural safe harbour for non-property-related gains made by passive financial investors. Known as a managed investment trust, or MIT, it is still an imperfect solution for many investors, but is providing a more certain environment for structuring inbound private equity investment (for more information, see “Investment Funds”).

“Secondaries”areprovidingliquidityand tension for sponsors exiting investments Trade sale auction processes have been buoyed this year by significant interest from global and domestic sponsors. For example, Loscam was recently acquired from Affinity Partners by China Merchants Group after stiff competition from interested sponsors, and Study Group was sold

by CHAMP to Providence in its first successful deal in this market.

Capital markets exits are difficult In line with other public markets around the world, potential new entrants to the ASX are not finding it easy to attract institutional and retail support. In part, the post-listing trading levels of the most recent private equity IPO-exits (retailers Myer and Kathmandu) have disappointed investors making other exits difficult.

The issue is more widespread than in private equity, however, as Bilfinger Berger has recently found in trying to float its Australian business, Valemus.

Acquisition finance is available in both the mid-marketandthelargerbuyoutmarket Debt has broadly been available for mid-market deals in Australia throughout 2009 and 2010.

However, it is only in 2010 that we have seen debt for $1 billion plus buyouts return (see Healthscope deal in “Highlights”).

Public-to-privates are getting done Even in the heady days of 2006 and 2007, P2Ps were very elusive deals. However, in 2009 and 2010, we have seen three close: two which were hostile (or “unrecommended”) and one recommended after an auction process.

Charles Bogle Partner

Andrew Bullock Partner

Peter Cook Partner

Adam Laura Partner

Bryan Pointon Partner

John Williamson-Noble Partner

T +61 2 9263 4367 E cbogle@gtlaw.com.au

T +61 2 9263 4126 E abullock@gtlaw.com.au

T +61 2 9263 4774 E pcook@gtlaw.com.au

T +61 2 9263 4144 E alaura@gtlaw.com.au

T +61 2 9263 4286 T +61 2 9263 4030 E bpointon@gtlaw.com.au E jwilliamson-noble@gtlaw.com.au

Foreign investmenT The primary issues clouding Australia’s foreign investment climate are the uncertainty surrounding taxation arrangements (for more information, see “Transactional Tax”) and Australia’s approach to foreign state-owned enterprises (SOEs) investing in our resources sector.

Australia’s foreign investment approval regime continues to be comprised of a mix of legislation and policy. Much of the uncertainty in recent years stems from the policy (which has no legislative force but with which prospective investors are expected to comply) and its application to investments by foreign SOEs. Until recently, the policy only required “direct investments by foreign governments and their agencies irrespective of size” to be approved. This left foreign enterprises with partial or indirect government ownership unclear as to whether the policy applied to them. An inability to glean clear guidance from public reporting of decisions made by the Treasurer exacerbated the confusion.

In June 2010, the Treasurer released an update of the policy which gives much better guidance on these issues. The new policy: + confirms that almost all “direct investments” by a foreign government, or its “related entities”, require prior approval and defines, for the first time, what will constitute a “related entity” of a foreign government (an entity in which the foreign government, its agencies or its related entities have more than a 15% interest or which is otherwise controlled by such persons)

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+ defines, for the first time, the concept of “direct investment” (any investment that has “the objective of establishing a lasting interest in, and a strategic long-term relationship with, the target enterprise”, which includes any investment of 10% or more but may also include investments below 10% if criteria described in the policy are met) + leaves mostly unchanged the factors the Treasurer will consider, in determining whether an investment is contrary to the national interest, including the effect that proposal will have on national security, competition, other Australian policies and the general economy

For foreign investors with no government ownership, Australia’s foreign investment regime remains liberal and it is extremely rare that clearance becomes an issue in normal cross-border investment activity.

+ highlights character considerations that will be taken into account (including whether the applicant may be seeking broader strategic objectives on behalf of a foreign government).

While the new policy may not amount to a substantive change in foreign investment policy, and while many interpretive difficulties remain, the clearer articulation of that policy should result in fewer surprises for prospective investors, and more public accountability for the Foreign Investment Review Board. This should improve the experience of prospective investors in evaluating investment opportunities in Australia.

Garry Besson Partner

Philip Breden Partner

Peter Cook Partner

Deborah Johns Partner

Rachel Launders Partner

Bill Spain Partner

T +61 2 9263 4007 E gbesson@gtlaw.com.au

T +61 2 9263 4050 E pbreden@gtlaw.com.au

T +61 2 9263 4774 E pcook@gtlaw.com.au

T +61 2 9263 4120 E djohns@gtlaw.com.au

T +61 2 9263 4143 T +61 2 9263 4009 E rlaunders@gtlaw.com.au E bspain@gtlaw.com.au

GrainCorp Advising GrainCorp on a $600 million underwritten placement and accelerated entitlement offer to fund the acquisition of the United Malt Holdings Group.

Photon Group Advising leading marketing services group Photon Group Limited on its $102.5 million capitalisation (underwritten by UBS and Macquarie) comprising of a $62 million rights issue and a $40 million placement and renegotiation of earnout arrangements.

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Capital markeTs

SAI Global Advising SAI Global, a risk management specialist, on its $130 million capital raising to acquire Integrity Interactive, a leading US-based compliance and ethics solutions provider in a deal which will be funded by the equity raising on top of debt.

Consolidated Media Holdings Limited Advising Consolidated Media Holdings Limited (CMH) as the major shareholder of Australia’s leading employment website, SEEK Limited, on its participation in the placement, share purchase plan and top-up offer by SEEK followed by advising on the sale of CMH’s shares in SEEK Limited to institutional investors.

Credit Suisse Advising Credit Suisse as underwriter in the $100 million placement by Eastern Star Gas.

On a world scale post the global financial crisis (GFC), Australian equity capital markets were very active, although in 2010 they have been subdued.

the capital raising process by effectively treating institutional and retail shareholders equally.

Market recapitalisation

Moving forward, the Australian IPO market is experiencing very little activity. In November 2009, TPG successfully sold its Myer retail department store business by way of an IPO. It was thought this IPO would “open” the Australian market but a disappointing post-IPO share price performance combined with other subsequent under-performing IPOs has dampened enthusiasm. Most recently Bilfinger and Berger withdrew the IPO of their Australian building company subsidiary Valemus due to prevailing market conditions. Most topical at the moment is the potential $4 billion plus float of Queensland Rail which is expected to occur in the last quarter of 2010.

Amidst the aftershock of the GFC in the first half of 2009, Australian companies were able to raise an unprecedented amount of equity capital and indeed Australia led the world. Almost every major Australian company raised capital.

The primary purpose of such raisings was to plug potential holes in balance sheets and restore the strength of balance sheets having regard to leverage levels. In 2009 approximately $72 billion was raised by Australian companies. In the same period to mid August 2010, approximately $8 billion was raised. This was due, in part, to many Australian companies having raised capital, being in a stronger financial position as earnings and outlooks improved and market conditions not being as conducive to capital raisings.

Australian market participants were also able to take advantage of a legal regime which facilitated a faster and more efficient capital raising process.

The new “low doc” regime for capital raising was introduced in mid 2008 and basically provided that a prospectus was not required for rights issues. With this regime, issuers were able to conduct more opportunistic capital raisings with more efficient timelines and processes than what would be required using a registered prospectus.

Other innovative structures were also introduced such as the simultaneous accelerated renounceable entitlement offer, or “SAREO”, structure which also increased the integrity of

Current IPO activity

There were a number of recent IPOs in offshore markets that have been successful. A number of vendors (particularly private equity vendors) with high-quality businesses will look to sell, in whole or part, their businesses through an IPO in the next 12 months, as markets and earnings improve.

Another feature of the Australian market which is experiencing increased activity is M&A-related acquisition funding. GrainCorp, which acquired United Malt Holdings from CHAMP Private Equity for US$665 million in late 2009 is one example where capital raisings for the right transaction remains a viable alternative to facilitate an acquisition. We can expect to see more of these type of M&A-led raisings in the future.

Peter Cook Partner

Adam Laura Partner

Janine Ryan Partner

John Williamson-Noble Partner

T +61 2 9263 4774 E pcook@gtlaw.com.au

T +61 2 9263 4144 E alaura@gtlaw.com.au

T +61 2 9263 4051 E jryan@gtlaw.com.au

T +61 2 9263 4030 E jwilliamson-noble@gtlaw.com.au

Westpac Office Trust scheme for merger with Mirvac funds Advising Westpac on the merger (by way of trust scheme) of the Westpac Office Trust with the Mirvac Property Trust (a stapled company and trust in an Australian registered managed investment scheme), resulting in the acquisition of control over the Westpac Office Trust asset portfolio by Mirvac.

OneVentures Venture Capital Fund Advising OneVentures Management Pty Limited on the establishment of a $40 million venture capital fund (backed by the Australian Government under its Innovation Investment Fund program), focusing on start-up companies in the life sciences sector.

Rand Merchant Bank Assisting in the establishment and restructure of the Australian private equity holdings of the South African Bank – Rand Merchant Bank, by creating an onshore management structure without a separate onshore fund vehicle. This involved direct holding of title to investments in offshore vehicles.

Andrew Bullock Partner

Peter Feros Partner

T +61 2 9263 4126 T +61 2 9263 4163 E abullock@gtlaw.com.au E pferos@gtlaw.com.au

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investment funds

9 Two issues have dominated Australian fund raising in the past year: Allocation issues The first is the so-called “denominator effect” which has affected fund managers globally, exacerbated by the fact that Australian superannuation funds (a major source of investment for Australian investment funds) generally have smaller allocations to alternative assets than their counterparts overseas.

While this allocation issue appears to be easing, speculation is that Australian superannuation funds may be looking to diversify their alternative assets geographically by investing in offshore funds rather than Australian funds.

In the absence of available funds from traditional investors, Australian fund managers are creating smaller funds and, for the first time, tapping high net worth individuals in a significant way.

Another source of funds is the Australian Government’s Innovation Investment Fund program, under which the Australian Government invests $20 million in funds managed by licensed fund managers who must raise matching capital for investment in early-stage Australian businesses with the aim of commercialising Australian R&D.

In a favourable development since the ATO’s actions, amendments to Australia’s tax laws were passed introducing a new “safe harbour” for qualifying investment funds, called the Managed Investment Trust, or MIT regime. The MIT regime provides deemed capital account treatment (on the disposal of most assets by the MIT) thereby creating: + a complete tax exemption for foreign investors where the gain is made in respect of assets which do not comprise land or non-portfolio interests in land-rich entities + eligibility for a discounted tax regime for Australian resident investors who are individuals or superannuation funds.

For foreign investors in MITs, the MIT regime also provides for a final withholding tax rate of 7.5% on certain distributions (e.g. distributions made in respect of gains on land) made by an MIT to foreign residents – where those foreign residents reside in “information exchange countries” (including the United States, the United Kingdom, Canada, the British Virgin Islands and New Zealand and soon including the Cayman Islands, the Bahamas and Bermuda).

MITs

One important condition to the MIT benefits, however, is the requirement that the MIT not control an Australian trading company. This is a complexity that requires careful management.

The second issue was the uncertainty surrounding the tax treatments of distributions from investment funds following the attempt by the Australian Tax Office (ATO) to tax TPG’s gains resulting from the IPO of Myer Holdings Limited.

Consolidation plays for listed and unlisted property funds and mergers by trust schemes have also dominated the property funds sector, resulting in a number of offshore-backed vehicles controlling Australian property funds and fund assets.

Deborah Johns Partner

Adam Laura Partner

Janine Ryan Partner

John Williamson-Noble Partner

T +61 2 9263 4120 E djohns@gtlaw.com.au

T +61 2 9263 4144 E alaura@gtlaw.com.au

T +61 2 9263 4051 E jryan@gtlaw.com.au

T +61 2 9263 4030 E jwilliamson-noble@gtlaw.com.au

Advising the successful bidding consortium, comprising two leading global private equity firms, The Carlyle Group and TPG, on the financing aspects relating to its $2.7 billion successful bid for one of Australia’s largest private health care providers, Healthscope.

PRIVATISATION OF QUEENSLAND’S STATE FORESTRY ASSETS Advising a syndicate of banks comprising of Rabobank and two of Australia’s top four banks on the financing of the successful bid

by Hancock in the $700 million privatisation of Queensland’s State Forestry assets.

ABC LEARNING CENTRES Advising the GoodStart syndicate on the sale of over 670 childcare centres across Australia (involving social capital) by the receivers and managers of ABC Learning Centres. See the case study on page 27 for more details.

LANE COVE TUNNEL RECEIVERSHIP Advising BTA Institutional Services Australia Limited in various roles relating to the Lane Cove Tunnel receivership. The project’s funding structure was unique and represented the first toll road project to be financed exclusively by a debt capital markets funding solution. This is the first time that such a credit wrapped bond deal has gone into insolvency in Australia.

Nicholas Grambas Partner

James Lewis Partner

T +61 3 8656 3388 T +61 2 9263 4084 E ngrambas@gtlaw.com.au E jlewis@gtlaw.com.au

The Australian bank syndication market has proven to be especially resilient in 2010.

Although there was a period of belt-tightening in mid to late 2009, banks are becoming more comfortable re-entering the lending market and at times almost matching the pre global financial crisis (GFC) feverish appetite for M&A and resources deals that are coming to market.

The debt capital markets have staged a similar recovery, with the volume of debt raisings exceeding market expectations.

The effects of the GFC are still being felt and are likely to continue in the medium term. Market disruption clauses, for instance, are now almost never argued over. Upfront fees and margins are higher. There are also more club deals than underwritten deals, with sponsors preferring to deal with multiple lenders day one on a take-andhold basis, rather than running the gauntlet on market flex in the event of a failed syndication.

Also, many sound businesses that were hit hard by the GFC are now finding it challenging to trade out of their difficulties as the economy recovers, simply because they are carrying too much debt on their balance sheets.

Fortunately for sponsors, it is not all one-sided.

Although banks have been able to tighten their lending terms, sponsors have still been able to negotiate fairly good terms, particularly where there are strong credits underpinning the lending.

Banks are starting to provide funding certainty, a factor which has taken on even greater significance post-GFC. While the availability of funding was often taken for granted pre-GFC, perhaps even regarded as an after-thought, the bankability of a transaction is now front and centre before a transaction is even considered viable.

Robert McDonnell Partner

Duncan McGrath Partner

Leveraged Finance

BID FOR HEALTHSCOPE

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banking + finance While sponsors and banks spent the greater part of 2009 seemingly restructuring their debt, nobody could have predicted where the leveraged finance market would land once the GFC settled.

Having worked on several of this year’s high-profile leveraged finance deals, one recurring message for leveraged finance in the Australian market is that deals are coming back and banks are as hungry as sponsors for market share.

Healthscope, Study Group and Loscam are examples of where the leveraged finance market currently sits in Australia. Some of the trends we are now seeing are: + the re-emergence of the equity cure, the mulligan, clean-up and certain funds provisions, some with slight variations from the 2006–07 boom + banks focusing on lower starting leverage (around 4.0x) and reducing leverage sooner, with a preference for amortising A tranches at levels around two-thirds of the business/ deal-specific bullet tranche + a shift away from fully underwritten commitments to sponsors looking for club or take and hold positions + financial covenants with head room of around 20–25%.

Ros O’Mally Partner

T +61 2 9263 4021 T +61 2 9263 4340 T +61 2 9263 4743 E rmcdonnell@gtlaw.com.au E dmcgrath@gtlaw.com.au` E romally@gtlaw.com.au

John Schembri Partner T +61 2 9263 4752 E jschembri@gtlaw.com.au

The GFC was a challenging time for project and infrastructure financing.

It saw a reduction in available bank debt and the complete disappearance of credit-wrapped bonds that had previously supported the funding of major PPP projects in Australia.

However, infrastructure and public private partnership (PPP) investment in Australia has weathered the storm. During the depths of the GFC, governments stepped up to provide financial support to some significant projects. These included the South East Queensland Schools Project in mid 2009 (where Queensland Treasury provided funding during the operating phase of the project, reducing the project capital cost) and the Victorian Government agreeing to underwrite a portion of the $2 billion debt funding (for the Victorian Desalination Project towards the end of 2009).

Some current trends are: + strong demand for PPP projects: The list of PPP projects being brought to market in Australia has remained strong, notwithstanding the dramatic withdrawal of the $5 billion CBD Metro Project in New South Wales in early 2010 and the deferral of a number of other social infrastructure projects including Darwin Prison and Sunshine Coast Hospital. Queensland has been very strong with its infrastructure project financing – including the privatisation of certain forestry assets, the upcoming IPO of the Queensland Rail assets and the proposed sale of the Port of Brisbane. These projects have attracted significant bank debt funding. + patronage risk: As a consequence of a number of Australia’s recent PPP tollroad projects (including Lane Cove Tunnel, Cross City Tunnel and Brisbane Airport Link) not meeting traffic forecasts, it is widely believed that banks are unlikely to accept patronage risk on projects in the foreseeable future. This is evident with new projects, in particular the Victorian Peninsular Link project, which is based on an availability charge instead of tolling revenue. + electricity trends: Another current development is the proposed privatisation of NSW electricity networks including the disaggregation of its three electricity portfolios into five Gentrader bundles. Also of significance is the recently announced CopperString Project, which is a development of a 800km power transmission line from Townsville to Mount Isa (Queensland), with a total financing requirement in excess of $1 billion. There is also continued demand for renewable energy projects, with two Australian and New Zealand electricity generators recently announcing a joint venture to build the Southern Hemisphere’s largest wind farm.

Debt Capital Markets

Project + infrastructure Finance

11 Debt capital markets are gaining strength, with a number of transactions already completed this year and further transactions in the pipeline.

A number of transactions coming to market involve new programs being established by new domestic and offshore issuers. There is also serious consideration being given by the market to the possibility of retail bond issuance.

We have advised on a number of key transactions in debt capital markets this year, including the buy-back and reissue of bonds by Sydney Airport and the bond issues by Melbourne Airport. Recent bond issues and trends include: + the inclusion of financial covenants equivalent to the issuer’s banking covenants in the terms and conditions + an issuer call one year out from maturity of the bonds + an ability to convene bondholder meetings at shorter notice.

The alignment between the terms and conditions with an issuer’s banking covenants is something which we expect to see as increasingly standard going forward. It could also lead to it being market standard for note trustees to be included on transactions, as a way to address issuers’ concerns about the ability of bondholders to unilaterally exercise their rights under the terms and conditions.

The securitisation market is also showing encouraging signs of recovery as a number of issuers have returned outside of the Australian Office of Financial Management mandate. The securitisation industry is proactively working with the Australian securities regulator ASIC and other key regulatory bodies to reinvigorate the securitisation market.

Holcim’s $2.02 billion acquisition of Cemex Australia Advising Holcim Limited, a leading global cement, concrete and aggregates business, on income tax and stamp duty matters relating to its $2.02 billion acquisition of Cemex’s Australian assets. The acquisition involved a number of challenging aspects, including a very compressed negotiation timeframe and multiple cross-border elements.

market insights

highlights

Transactional Tax

CommonWealth REIT (CWH) Acting for CWH, one of the largest owners of office and industrial buildings in the United States, in connection with its proposed acquisition of the MacarthurCook Industrial Property Fund. This included advising on the income tax and stamp duty consequences of the proposed transaction.

Paddy Power’s acquisition of Sportsbet Advising Irish and LSE-listed corporate bookmaker Paddy Power PLC on certain income tax matters relating to its acquisition of 51% of Sportsbet Pty Limited and Sportsbet’s acquisition of ASX-listed International All Sports Limited, by scheme of arrangement.

12 Tax reform

Managed investment trusts

The most eagerly anticipated event on the 2010 tax calendar has been the release of Australia’s Future Tax System Review (the Henry Review) and the Australian Government’s response.

Australian income tax laws continue to evolve and represent a significant point of focus in structuring an investment into Australia. A very significant development for the investment fund industry this year has been the development of the Managed Investment Trust, or “MIT”, regime as a taxation concession for certain types of investment (for more information see “Private Equity” and “Investment Funds”).

The most notable element in the Government’s response (which rejected most of the recommendations made by the Henry Review) was the proposed introduction of a Resource Super Profits Tax (RSPT). Amongst other measures forming part of the RSPT regime, “super profits” of mining companies were to be subject to a 40% tax rate (in addition to corporate tax).

Following an unprecedented backlash by the mining industry, the Australian Government has now proposed a Mining Resource Rent Tax (MRRT) which proposes a 30% rate of tax, amongst other changes. While the MRRT appears to have the support of some of the larger mining companies, there remains significant dissatisfaction with the proposed MRRT. The present political uncertainty since the recent federal election means that there is less clarity regarding the final form of the MRRT (assuming it proceeds).

Employee equity plans Australia has recently emerged from a period of significant uncertainty regarding the taxation of employee equity-based incentives. We have guided many of our listed and unlisted clients through this period of uncertainty and have been at the forefront of advising on the tax treatment of both equity and “equity-like” employee incentives.

Hanh Chau Partner – GST & Stamp Duty

Peter Feros Partner – Income Tax

T +61 2 9263 4027 E hchau@gtlaw.com.au

T +61 2 9263 4163 E pferos@gtlaw.com.au

Goods and services tax Similarly, the Australian GST laws (including provisions dealing with financial supplies and real property transactions) are currently the subject of consultation between the Australian Government and taxpayers. As a consequence of this consultation, the GST laws have been, and will continue to be, amended in a piecemeal manner, but in some cases the amendments have given rise to both unintentional consequences and structuring opportunities.

Stamp duty Another tax which should also be considered in the structuring phase of a transaction is stamp duty. Each Australian jurisdiction has its own stamp duty legislation and administration despite years of attempts to harmonise the legislation and administration across the jurisdictions. Since the amount of stamp duty payable on a transaction can be significant, it is important to factor the duty into the cost of the transaction.

Brookfield Multiplex Advising Brookfield Multiplex on real estate developments, including the sale of strata title lots and all related property advice, as well as acting for Brookfield Multiplex in defence of complex Supreme Court proceedings in relation to the construction of a number of high-end multistorey residential buildings.

AREVA Advising AREVA on the construction of a multimillion dollar solar thermal addition to the 750MW Kogan Creek Power Station as well as on the bid for the construction of a 250MW solar thermal plant under the Australian Government’s Solar Flagship Program.

market insights

highlights

real estate + projects

NSW Maritime Advising NSW Maritime (a government authority) on a number of key redevelopments on Sydney Harbour, including Blackwattle Bay, Superyachts Marina Rozelle Bay, Rose Bay Marina, Point Piper Marina and Wentworth Park.

Twynam Agricultural Group Advising Twynam on its sale of river water entitlements to the Australian Government for $303 million – this was the single largest purchase of water for the environment in Australia’s history.

One of Australia’s FOUR major banks Advising on the design, construction and operation of its new metropolitan data centre in the State of New South Wales, and the redevelopment of one of its existing data centres.

13

Real estate markets continue to be subdued overall, with activity focussed in areas stimulated by the Australian Government, or as a result of the structure of a particular market.

Corporations with strong balance sheets continue to undertake real estate developments to support their businesses. Some trends and developments we are experiencing are:

Agribusiness

Governmentstimulusspendingandfundraising

BuildingEnergyEfficiencyDisclosureAct2010

+ Various government programs have been introduced as a response to the global financial crisis, with a dual aim of stimulating the economy and driving policy outcomes.

Government funding has been most prevalent in the alternative energy, schools and social infrastructure space

In the second half of 2010, owners or head tenants of commercial spaces of 2,000 sqm or more will be required by law to disclose energy efficiency data at point-of-sale or time of leasing.

+ Cash-strapped State governments continue to divest non-core State-owned assets in an effort to raise funds.

REITS + Although the Australian REIT sector was considerably affected during the global financial crisis (GFC), it is now becoming more stable, as trusts return to their real estate roots after a difficult period of major restructuring + Small companies with secondary properties have had more trouble repositioning than larger companies with premium assets + Debt is still very difficult for property developers to obtain, requiring very high levels of equity contribution and pre-sales.

There is still interest in the acquisition of agriculture assets by overseas buyers and specialised funds, although deals are taking some time to reach fruition. Commentators are starting to raise concerns that the Australian Government, when assessing foreign acquisitions of agriculture assets, is not adequately addressing food security issues.

The legislation will: + place responsibility on sellers and lessors of commercial office buildings to obtain, register and advertise energy efficiency information when selling or leasing relevant projects + provide significant support for building energy efficiency, which is likely to continue to be an important building selling point in the future.

Demand for Australian office space Demand has improved in certain Australian markets, after the GFC, with research from the Property Council of Australia reporting demand for leased premises over the last six months at double the 20-year average. Some of this demand results from limited construction of new premium-grade buildings over the past years and limited available sites, particularly in Sydney.

Christine Burke Partner

Emanuel Confos Partner

Amanda Hempel Partner

Robert McDonnell Partner

Noni Shannon Special Counsel

Diane Skapinker Partner

T +61 2 9263 4342 E cburke@gtlaw.com.au

T +61 2 9263 4059 E econfos@gtlaw.com.au

T +61 2 9263 4017 E ahempel@gtlaw.com.au

T +61 2 9263 4021 T +61 2 9263 4235 T +61 2 9263 4297 E rmcdonnell@gtlaw.com.au E nshannon@gtlaw.com.au E dskapinker@gtlaw.com.au

“Is there an Australian law firm more eagerly watched and commented upon than Gilbert + Tobin? Led by the wily Danny Gilbert, the firm has been one of the very few mid-size players to establish a place in the top tier, poaching liberally from the ‘big six’ along the way. An associate relationship with China’s King & Wood, a new Melbourne office … are some of the recent highlights of the G+T journey.”

Australasian Legal Business Magazine, July 2010

Oakajee Port & Rail Customer Contracts Blakiston & Crabb is acting for Oakajee Port & Rail Pty Ltd in relation to the supply chain agreements it is intending to enter into with three iron ore producers in the mid-west region of Western Australia. The initial capacity of the $4.5 billion facility will be 45 million tonnes per annum.

market insights

highlights

blakiston & crabb

Sundance Resources Iron Ore Project Blakiston & Crabb is acting for two subsidiaries of Sundance Resources Limited which are negotiating contracts with the Governments of the Republic of Cameroon and the Republic of Congo in relation to the development of a 33 million tonnes per annum iron ore project which will mine iron ore in both countries.

This, added to the limited capitalisation of various governments, placed a real burden on project development in the resources sector. The renewed demand for resources, however, has subsequently revived much of the activity in the industry, with Australian companies now at the forefront of pursuing such opportunities.

The resources industry has rebounded quickly from the global financial crisis (GFC) as a result of the strong demand for commodities, predominantly from China.

We are also seeing the emergence of South Korea and the re-emergence of Japan as countries now actively looking to invest in Australia. In our experience, investors from those countries are mainly looking to invest either directly into projects, or indirectly by acquiring shares in project companies.

Much has been said about India as a potential driver of resource development. As yet, however, we have not seen the same level of interest from Indian investors as many other Asian countries.

Corporate activity has certainly increased over the past 10 months, as companies look to acquire resource projects rather than spend money on exploration and development.

Harmony Gold Mine disposal

The major area of investment has been in the iron ore sector where the commodity price has continued to climb. Having said this, however, the ability of the iron ore juniors to mitigate risks has seen the market capitalisation of companies in this sector diverge, as investors learn more about the profit drivers.

Blakiston & Crabb acted for Harmony Gold Operations Limited in relation to the disposal of the Mount Magnet Gold Mine in the mid-west region of Western Australia.

United Minerals – BHP Merger Blakiston & Crabb acted for United Minerals Corporation Limited on the $202 million scheme of arrangement for the acquisition of United Minerals Corporation Limited by a subsidiary of BHP Billiton Ltd.

At the onset of the GFC, those companies operating within developing countries were immediately hit as their ability to raise money for project development disappeared overnight.

While these companies are positioned to reap significant rewards should their projects be successful, there is simultaneously much to lose, with many of these projects relying on successful exploration to attract investment and form a viable business.

In addition, these start-ups are often faced with the challenges associated with doing business in a developing economy, such as project delays and cost blow-outs.

Finally, 2010 will likely be remembered as a year of significant instability for the Australian resources sector, due to the Australian Government’s various proposals to introduce discriminatory taxes on resources companies (see “Transactional Tax” for more details).

Many people believe such a policy would deter investors and damage an industry that has played an enormous role in protecting Australia from the full brunt of the GFC.

Julie Athanasoff Partner

Michael Blakiston Partner

Claire Boyd Partner

Anthony Burton Partner

Marcello Cardaci Partner

Mark Gerus Partner

Romanie HollingworthDavid Martino Partner Partner

T +61 8 9322 7644 E jathanasoff@ blakcrab.com.au

T +61 8 9322 7644 E mblakiston@ blakcrab.com.au

T +61 8 9322 7644 E cboyd@ blakcrab.com.au

T +61 8 9322 7644 E aburton@ blakcrab.com.au

T +61 8 9322 7644 E mcardaci@ blakcrab.com.au

T +61 8 9322 7644 E mgerus@ blakcrab.com.au

T +61 8 9322 7644 E rhollingworth@ blakcrab.com.au

T +61 8 9322 7644 E dmartino@ blakcrab.com.au

highlights

king & Wood Pfizer/Wyeth Merger King & Wood assisted Pfizer with antitrust relating to its US$68 billion acquisition of Wyeth, including obtaining necessary clearances from China’s Ministry of Commerce (MOFCOM).

Major International Coal Mining Merger King & Wood advised Yanzhou Coal Mining as local counsel on its US$2.57 billion merger with Australian coal producer Felix Resources.

These policy changes are good news for overseas exporters and also foreign retailers/franchisors which see the Chinese market as a source of growth for decades to come.

Policies to foster innovation are multifaceted and include improved laws aimed at stimulating filings and research in China, as well as massive investment by authorities in R&D centres and new technologies. The focus on innovation will likely result in foreign companies both setting up R&D facilities in China, as well as benefiting from technology developed in China or by Chinese companies abroad. We are currently working with Gilbert + Tobin on one such initiative.

market insights

Increasedcomplianceandimplementation China weathered the global financial crisis (GFC) well Despite global financial turmoil in 2009, China experienced 8.7% growth in GDP and is on track for a 9.5% increase in 2010. China also ranked third by volume of companies listed in Fortune Magazine’s Global 500 list in 2010 with 46 companies, up from 16 in 2005 (an increase of 65%).

Fromexportstoconsumptionandinnovation China is renowned for its global exporting capacity.

Although labour-intensive exports will continue to be a significant part of China’s economy, there is a trend towards policies aimed at boosting domestic consumption and fostering innovation. Policy changes include opening up the retail sector, easing of restrictions when issuing credit cards and permitting the entry of consumer finance companies.

In the last 20 years, China has built up an increasingly sophisticated legal regime. In the past, pervasive, strict enforcement was often challenging.

However, a recent trend has been a more assertive stance by Chinese authorities. Foreign-invested and domestic companies will see a more robust approach by authorities in areas such as tax collection, anti-monopoly (both market concentrations as well as cartels), environmental infringements and commercial bribery.

Foreign-invested companies should be aware that the cost of doing business in China in a noncompliant manner will rise in the coming years.

Increasing employee dissent The biggest change brought about by the PRC Employment Contract Law of 2008 was not in its text, but rather in the change of attitude that it

Tang Lizi Partner

Susan Ning Partner

Mark Schaub Partner

T +86 10 5878 5588 E tanglizi@kingandwood.com

T +86 10 5878 5588 T +86 21 2412 6000 E susan.ning@kingandwood.com E schaub@kingandwood.com

brought. PRC employees always had robust rights on paper but these were often ignored.

However, there is a growing political awareness in China that workers have not received their deserved share of China’s economic miracle and this issue needs to be addressed. Recent strikes at Honda and unrest at Foxconn show a marked trend that Chinese employees are increasingly willing to take action.

China goes global The history of outbound investment flows from China is short but spectacular. China’s high savings rate, massive foreign exchange reserves and a desire to shore up strategic assets have resulted in the country rapidly becoming a substantial overseas investor.

Outbound flows have risen at a compound average growth rate of roughly 60% from 2000 to 2008 and overseas investment has gone from virtually zero in 1990 to an expected US$60 billion in 2010. Australia has been a key destination for Chinese investment.

According to the Heritage Foundation China Investment Tracker, Australia received US$ 31.4 billion in investment from 2005 to 2009 (high-profile deals include Felix Resources and Oz Minerals).

This trend is likely to continue and indeed many commentators expect it to accelerate. China’s engagement with the outside world is becoming increasingly sophisticated and multilayered.

Foreign companies will start having Chinese partners not just in the People’s Republic, but also in their own jurisdictions.

Pfizer/Wyeth merger Advising Pfizer on the Australian and New Zealand competition aspects of its complex US$66.8 billion global merger with Wyeth, including the negotiation of detailed remedies with Australia’s antitrust regulator, the Australian Competition and Consumer Commission (ACCC).

Virgin Blue alliances Advising Australia’s second largest airline on competition and regulatory issues since its inception in 2000. Most recently we advised on its alliance with Delta Airlines and Air New Zealand.

Marine Hose Cartel Representing Dunlop Oil & Marine in the ACCC’s prosecution in relation to the Australian aspects of the alleged international Marine Hose Cartel, achieving a favourable settlement. We attained the maximum discount on penalty available for cooperation.

Advising the Hong Kong Government on new Competition Law Helping the Hong Kong Government to formulate a cross-sector competition law framework that reflects international best practices. The bill (currently before the legislative council) was in response to government consultations seeking a competition law that maintained Hong Kong’s competiveness, while enhancing consumer protection.

Elizabeth Avery Partner

Liza Carver Partner

market insights

highlights

competition + Regulation

18

Recent developments in the Australian competition law landscape have been numerous and far-reaching.

Active merger review by ACCC In recent times, the ACCC has been increasingly active in its close scrutiny of mergers. In the past year, it has opposed or required remedies in a significant number of transactions with domestic and international ramifications. The ACCC is also increasingly relying on statutory powers to compel oral examinations and document production.

NewcriminalcartelprovisionsinAustralia’s main competition legislation, the Trade Practices Act New provisions include criminalising competitor price fixing, output restrictions, market allocations and bid rigging (“cartel conduct”), subject to a limited exception and defence for joint ventures.

International companies doing business in Australia need to be aware that any employee found to have engaged in cartel conduct may now serve jail time and be subject to penalties (up to 10 years and/or $220,000 per contravention for criminal sanctions and $500,000 for civil sanctions). Companies can also be subject to hefty criminal or civil penalties (for each contravention, in an amount not to exceed the greater of $10 million, 10% of corporate annual turnover or, if it can be determined, three times the total value of the benefits obtained as a result of cartel conduct).

The new provisions make it particularly important to ensure that joint ventures between competitors and potential competitors are appropriately structured to benefit from the joint venture defence.

Catherine Dermody Gina Cass-Gottlieb Moya Dodd Partner Partner Partner

T +61 2 9263 4362 T +61 2 9263 4005 T +61 3 8656 3320 E eavery@gtlaw.com.au E lcarver@gtlaw.com.au E cdermody @gtlaw.com.au

T +61 2 9263 4006 E gcass-gottlieb @gtlaw.com.au

Increase in consumer protection A unified national Australian Consumer Law was introduced in stages throughout 2010. Significant changes already in effect include enhanced enforcement penalties and powers available to the ACCC and the introduction of an unfair contracts regime, which means that unfair terms in standard-form consumer contracts will be void. The remaining reforms will come into effect from 1 January 2011. After this date, the Trade Practices Act will become the Competition and Consumer Act. Increased cooperation with foreign competition agencies Australia’s competition regulator, the ACCC, has brought a significant number of cases in coordination with other competition regulators around the world, including the US Department of Justice (DOJ), the European Commission and the UK Office of Fair Trading, often obtaining key evidence to facilitate prosecution through interagency cooperation agreements. This practice places a premium on consistent representation across all jurisdictions.

Increase in the Australian competition regulator’s powers Concurrent with the introduction of the new criminal cartel provisions, the ACCC received additional investigative powers in relation to telecommunications warrants, for example, to allow phone tapping and the use of telecommunications surveillance devices.

Further, the enhanced enforcement penalties and powers under the Australian Consumer Law allow the ACCC to issue public warning notices, substantiation notices, infringement notices, financial penalties, disqualification orders and consumer redress orders.

Simon Snow Partner

Martyn Taylor Partner

T +61 2 9263 4432 T +61 2 9263 4246 T +61 2 9263 4711 E mdodd@gtlaw.com.au E ssnow@gtlaw.com.au E mtaylor@gtlaw.com.au

Case Study Nick Taylor Partner

Peter Waters Partner

The Pfizer/Wyeth Merger

19

Creating the world’s largest research-based pharmaceutical company Gilbert + Tobin was the competition law advisor to Pfizer in Australia and New Zealand on its complex US$66.8 billion merger with rival drug maker Wyeth.

Specialist lawyers from our competition group worked closely with Pfizer’s inhouse legal and business development teams in Australia and the US, to ensure all competition issues were addressed in order to obtain timely merger clearance in Australia and New Zealand.

The regulatory clearance for this merger was particularly complex and challenging because of the global nature of the deal and the significant number of overlaps between the Pfizer and Wyeth businesses, both in human and animal health products.

Many aspects of the deal required an understanding of the position in other jurisdictions such as the US and the EU. Gilbert + Tobin drafted detailed submissions to both the Australian Competition and Consumer Commission (ACCC) and the New Zealand Commerce Commission, addressing overlaps in more than 20 separate markets spanning human and animal health products in Australia alone, incorporating input from stakeholders across five time zones.

Luke Woodward Partner

T +61 2 9263 4255 T +61 2 9263 4233 T +61 2 9263 4014 E ntaylor@gtlaw.com.au E pwaters@gtlaw.com.au E lwoodward@gtlaw.com.au

To secure clearance, Gilbert + Tobin negotiated and drafted a detailed undertaking to the ACCC in relation to Pfizer’s post-completion divestiture of certain animal health assets in Australia.

The choice of divestiture products had to be coordinated across multiple jurisdictions, and the specific nature of the products meant that there was a highly complex set of requirements under the divestiture undertaking, including detailed transfer plans for a number of individual products.

Gilbert + Tobin continued to work with Pfizer’s in-house team through the divestiture process, involving multiple bidders, to ensure all requirements of the undertaking were complied with and the successful bidder obtained all necessary regulatory clearances and approvals.

The merging of these two pharmaceutical companies created a global leader of therapeutic solutions with an enhanced ability to innovate, by bringing together a robust pipeline of biopharmaceutical research and development projects.

“Gilbert + Tobin is at the ‘top of the tree’ in competition law, and possesses ‘very deep competition experience across a wide range of industries, and a lot of depth in the team’.”

Legal 500, 2010

The Google Case Acting for the world’s leading internet search engine, Google Inc, in defence of legal action brought by Australia’s antitrust and consumer protection regulator, the ACCC, regarding its sponsored links AdWords system.

Motion Picture Studios Representing all the major international film studios in their groundbreaking action against internet service provider iiNet in a claim that the ISP is authorising copyright infringement on its network.

We also act for individual studios including Warner Brothers and Universal Studios on a variety of matters.

Constitutional Challenges Representing Betfair in its successful constitutional challenge to Western Australian legislation prohibiting punters using betting exchanges. This case had important implications not only for Betfair’s operations, but also for state regulation of businesses operating across State borders.

We are also acting for the recording industry in its High Court challenge to the copyright royalty caps for radio.

Significant Resource Disputes Advising BlueScope Steel, one of Australia’s largest steel-makers, in litigation brought by three Xstrata companies regarding the purchase of coal.

We also act in a range of other resource disputes involving domestic and international resource companies.

20 market insights

highlights

Litigation The litigation landscape is changing as Australia emerges from the global financial crisis (GFC).

There is a big push for businesses to resolve disputes in quicker and more cost-effective ways, with legislative reform occurring at various levels.

We have seen the following key developments emerge: Focus on efficient case management There is an increased emphasis by Australian courts to run cases more efficiently, to avoid costly mega-litigation seen in the past and reduce court time. Proposed changes to Federal Court proceedings include compulsory pre-litigation requirements for parties to take reasonable steps to try to resolve their disputes before commencing court action. Similarly, the High Court has confirmed the importance of case management in litigation matters which is reflective of the changes to court rules requiring the court to consider the importance of a speedy and efficient resolution of the real issues in dispute. The Federal Court’s roll out of the “Fast Track” system sees a move away from formality to focus on speedy dispute resolution, which is a further example of this trend.

Increase in shareholder class actions The emergence of litigation funders is a relatively new phenomenon in Australia. An increase in funders and plaintiff law firms has given rise to more aggressive class actions in the wake of several high-profile corporate collapses in

Rani John Partner

Australia. Securities class action filings have increased steadily, with a record number of cases filed in 2009 and expectations of further growth in 2010. This trend is likely to continue with the NSW State Government recently announcing a proposal to make class actions more attractive to be heard in the Supreme Court of NSW, typically regarded as Australia’s preferred court for resolving commercial disputes.

Greater powers being given to Australia’s securities regulator (ASIC) ASIC was given greater powers beyond its initial scope of regulating securities, in light of 11 insider-trading convictions since January 2009.

From 1 July 2010, ASIC took on the enormous role of regulating all forms of consumer credit nationally.

International large-scale arbitration opportunities Law reform at a State and Federal level has seen an increase in the number of international arbitrations being heard in Australia. Reforms include increased powers to arbitrators and coordination between the courts and arbitrators to make the arbitration process more attractive to litigators.

This has given businesses a cost-effective and efficient alternative to litigation that reflects international best practices. Opportunities are bound to increase with Australia’s first dedicated international dispute resolution centre opening in Sydney in August 2010 to compete with other Asia Pacific centres in Singapore and Hong Kong.

Dianne Banks Partner

Tim Castle Partner

Steven Glass Partner

Colleen Platford Partner

Siabon Seet Partner

Michael Williams Partner

T +61 2 9263 4041 E dbanks@gtlaw.com.au

T +61 2 9263 4062 E tcastle@gtlaw.com.au

T +61 2 9263 4010 T +61 2 9263 4348 T +61 2 9263 4026 T +61 2 9263 4232 T +61 2 9263 4271 E sglass@gtlaw.com.au E rjohn@gtlaw.com.au E cplatford@gtlaw.com.au E sseet@gtlaw.com.au E mwilliams@gtlaw.com.au

Case Study

GOOGLE

21

Defending google’s sponsored links

Gilbert + Tobin is acting for the world’s leading internet search engine, Google Inc (Google), in defence of legal action brought by Australia’s antitrust and consumer protection regulator, the Australian Competition and Consumer Commission (ACCC), regarding their sponsored links AdWords system.

The proceedings in Australia are the first of its kind in terms of the appearance of sponsored links on websites. It is standard industry practice for search engines to place sponsored links on search results pages.

The ACCC alleges that certain aspects of the appearance of sponsored links on Google’s AdWords system are misleading and deceptive, in particular that the difference between sponsored links and organic search results is not sufficiently clear.

The allegations made also relate to certain of Google’s AdWords customers using competitor names in the headline of sponsored links.

Gilbert + Tobin was engaged by Google when the proceedings began in 2007. Our role involves guiding Google through the myriad of allegations made by the ACCC, preparation of affidavit evidence from local witnesses, as well as subject matter experts from Google’s US headquarters in Mountain View California.

We are also advising on various interlocutory processes, the conduct of the trial, preparing submissions and confidentiality issues.

This is a test case for online advertising practices around the world, as it will address the way users interact with businesses selling services online.

The case is significant in that it will consider the processes of the internet in dealing with a massive amount of information and processing that information in only seconds, benefiting users of search engines and customers.

The low cost of online advertising is due to the effective and innovative ways it has been appropriately automated, allowing for large volumes of sponsored links to be published.

This aspect of Google’s AdWords system is widely recognised as helping smaller businesses, as they gain greater exposure to a larger market. This case will address questions such as the extent to which search engines should be held liable for third party content.

The outcome of this case has the potential to influence the liability and responsibility of all internet search engines when publishing sponsored links in what is largely an automated process.

The final decision will be eagerly anticipated and followed closely by industry participants around the world.

Recording Industry Representing the major recording companies across a range of work, including the leading rate-setting cases in the Copyright Tribunal.

Dangerous Goods Patent Infringement Acting for the leading supplier of rigid plastic and industrial metal packaging in Australia and New Zealand in defence of major patent infringement proceedings.

market insights

highlights

Intellectual property

Motion Picture Industry Copyright Action Representing the major international film studios in their groundbreaking action against an Australian internet service provider iiNet, in a claim that the ISP is authorising copyright infringement on its network.

Google Brand Protection Providing ongoing advice and assistance in relation to attempts by other companies to dilute the Google, YouTube and Adwords brands through the registration of similar trade mark and domain names or false advertising claims.

Red Bull’s Anticounterfeiting Program Acting for Red Bull for a number of years in relation to its Australian anticounterfeiting program.

22

Australia continues to be an important market for IP law. Increasing globalisation has seen a rise in foreign IP owners entering the Australian market, which has resulted in an increase in international companies enforcing their IP rights in Australia. We are seeing the following emerging IP developments: A number of large IP cases being conducted through the Australian courts Cases including Google’s sponsored links case and the motion picture industry’s copyright infringement case (see opposite), are being heard in Australia, as our court system is perceived as being stable and relatively efficient, relative to other comparable jurisdictions. See “Litigation” for further details on case management efficiency and the Google case.

Disputesoverbrandprotectionareontherise As more large overseas retailers enter the Australian market, counterfeit products are following suit. American Apparel established a standalone store in 2009, with major retailers ZARA and Gap expected to open their first stores in Australia in 2011. Multinational organisations seeking a presence in Australia should consider securing their IP rights before entering the market, to protect their brand from infringement.

Significant changes to copyright law affectingnewmediaandfactualinformation The recent decision in the High Court of Australia, in relation to the replication of an Australian TV network’s electronic program guide (the IceTV

Lisa Lennon Partner

Peter Leonard Partner

Siabon Seet Partner

Michael Williams Partner

T +61 2 9263 4190 E llennon@gtlaw.com.au

T +61 2 9263 4003 E pleonard@gtlaw.com.au

T +61 2 9263 4232 E sseet@gtlaw.com.au

T +61 2 9263 4271 E mwilliams@gtlaw.com.au

case) involved claims that the electronic guide was a compilation, and therefore a literary work subject to copyright protection under Australian laws. The High Court decision found that no copyright infringement took place.

Valuing IP We have been acting in some of the most important IP valuation proceedings in Australia which will determine the value of music used in the radio, television and fitness industries.

Advent of an innovation patent system An innovation patent system has been introduced to encourage Australian businesses, particularly SMEs, to develop inventions and market them in Australia, by offering a quick and less expensive protection of inventions with a lower inventive threshold. In exchange, protection is given for only eight years, as opposed to 20 years for a standard patent. An increase in enforcement of industrial, electrical and business method patents is likely to occur in the coming years.

Changes to cigarette packaging laws In a world first, the Australian Government is proposing a radical plan to remove the last form of tobacco advertising by imposing plain packaging laws from the beginning of 2012. The move involves banning all forms of branding logos, colours and promotional texts from cigarette pack designs. This has significant implications to brand owners’ rights as it affects consumers’ ability to identify one brand from another.

23

NSW Government’s public transport smartcard project Acting for the NSW Government in its procurement of a new, multimodal smartcard ticketing system.

Transformational work for a major Australian bank Acting for one of the big four Australian banks on several of its strategic IT initiatives, including its core banking project, online banking project, and the renewal of its existing outsourcing arrangements.

Major international service provider Advising a major international service provider on a range of commercial arrangements which will support its offering of cloud services to customers.

Astro Group Acting on a large, complex procurement process in which a global vendor is to provide managed services to Astro to manage and operate its billing and CRM systems.

market insights

highlights

it Cloud computing, service offshoring and fundamental shifts in the way that organisations procure IT are just some of the significant changes we are currently seeing in the Australian IT industry.

Cloud computing There is little doubt that cloud computing dominates discussion in the IT industry at present. It is important to understand that cloud computing is a broad term that can be used to describe a range of different technologies – from web-based services like Google Docs, to hosted enterprise applications like Salesforce.com, through to bare server capacity provided in dedicated virtual private environments.

In this area, we are still seeing a gap between the hype and reality. Large customers have been slow to embrace cloud technology, particularly in regulated industries such as banking. This is not helped by vendors whose contractual commitments regarding performance, confidentiality and security often fail to meet customer expectations.

There is no doubt that cloud computing is here to stay for the foreseeable future. However, the technologies and delivery models are still in the early stages of their evolution, and care needs to be taken with the associated contractual risks.

Offshoring Offshoring, on the other hand, is becoming more established, and indeed is starting to be considered as just another way to do business.

Many of the IT vendors from markets such as India have business models that are starting to

Michael Caplan Partner

Tim Gole Partner

Bernadette Jew Partner

Peter Jones Partner

Peter Leonard Partner

look similar to the more established US vendors.

In both cases, local subsidiaries are used to contract with customers, and a mixture of onshore and offshore resources are used to deliver services. Significant risks remain, however, in relation to security, privacy and IP that need to be dealt with through appropriate contractual structures.

Best-sourcing In the outsourcing area, we are still seeing the break-up of some of the large “whole of IT” deals that were signed at the turn of the century.

Customers of these deals are actively looking to best-source their IT services from vendors that are the best fit for particular service towers, rather than necessarily looking to re-outsource all of their IT operations to a single vendor.

Multivendor arrangements, with their associated risks and complexities, are a feature of the outsourcing market at present.

Virtualisation Virtualisation has been quietly revolutionising the way in which IT infrastructure operates.

Virtualisation provides the ability to host multiple virtual machines on individual physical servers. It can dramatically improve the efficiency with which existing IT infrastructure is used, resulting in processing, space, heat and cost savings.

We are seeing virtualisation as a growing transformation activity that our clients perform, both when implementing new IT systems and also when refreshing their IT infrastructure (for example, when renewing their existing outsourcing arrangements).

Sheila McGregor Partner

T +61 3 8656 3333 T +61 2 9263 4077 T +61 2 9263 4032 T +61 2 9263 4125 T +61 2 9263 4003 T +61 2 9263 4152 E mcaplan@gtlaw.com.au E tgole@gtlaw.com.au E bjew@gtlaw.com.au E pjones@gtlaw.com.au E pleonard@gtlaw.com.au E smcgregor@ gtlaw.com.au

Ken Saurajen Partner T +61 2 9263 4154 E ksaurajen@ gtlaw.com.au

Telstra National Broadband Network (NBN) program Advising Australia’s leading telecommunications company, Telstra, on its participation in the Australian Government-funded A$43 billion fibre-to-the-premise (FTTP) NBN program which aims to deliver ubiquitous high-speed broadband access across Australia.

Maxis Communications Berhad Advising Maxis, Malaysia’s leading mobile communications services provider, on large scale technology services procurements and the ongoing management of relationships with its global technology suppliers.

PT Excelcomindo Advising the third largest mobile operator in Indonesia on the ongoing acquisition of various complex and large-scale services and products from a range of equipment vendors and service providers.

Emirates Integrated Telecommunications Company (du) Advising the second largest licensed operator in the UAE in relation to mobile network rollout, next generation network interconnection agreements with Etisalat (the incumbent), passive facilities sharing, mobile site sharing agreements, and agreements to access Etisalat’s submarine cable landing stations.

market insights

highlights

telecommunications

24

A global fibre rush is on. Stakeholders everywhere are jostling to optimally position themselves in the new market.

Politicians worry that their market will not have enough fibre compared to others (“Japan and Korea fibre envy”). Incumbent operators fret that if they don’t roll out fibre fast enough, a competitor or, more likely these days, a government will beat them to it. Entrants rail that incumbents will deploy fibre and undo years of painstaking gains made through regulated access.

Whatever is driving it, the fibre rush is overturning many of the unquestioned assumptions that have underpinned the last 15–20 years of commercial decision making and public policy in telecommunications.

First, facilities-based competition was once seen as the ultimate goal because it delivered more innovation and lower prices. Now, however, there is a growing view that the deployment of competing, high-speed broadband networks is not economically feasible, and that fibre networks will only be created if built by a monopoly.

Second, governments in the past sold off their interests in the incumbent because private enterprise was seen as a more efficient provider of services. However, governments are now piling back into fibre networks under the pretext of ‘nation building’. The Australian Government, for example, is investing A$43 billion in a national fibre network to service 93% of homes and high speed wireless and satellite network to serve the rest. Funding through a separate governmentowned company (USO Co) will continue the

availability of copper lines (see diagram on next page). Third, regulators have toiled for the last decade to set terms of access as the antidote to the incumbent’s control of bottlenecks. But there is now widespread doubt that the existing regulatory model can deliver an innovative, vibrant next-generation network (NGN) market.

More radical solutions, such as full structural separation between networks and services, are being touted. The Australian incumbent, Telstra, is the first to agree to decommission its existing network and become an access seeker on the new government network.

There are, of course, fibre doubters. They argue that current technologies, such as DSL on copper lines, can deliver the speeds which most customers will want for the foreseeable future.

However, they fail to fully appreciate what it is about fibre which will have the transformative effect. It’s not speed per se, but the unmatchable capacity in the upchannel.

Fibre allows us to move from a read-only download culture in which content is owned centrally, often offshore, into an upload culture in which individual users are able to generate their own content and applications. In the fibre rich economies like Hong Kong, Japan and South Korea, the volume of upchannel capacity now exceeds the amount of downloaded capacity.

That’s millions of users involved in creating and innovating. While the content may be good, bad or indifferent, it should help create a more innovative, tech savvy society.

Michael Caplan Partner

Moya Dodd Partner

Peter Leonard Partner

Richard Pascoe Partner

Bill Spain Partner

Martyn Taylor Partner

T +61 3 8656 3333 E mcaplan@gtlaw.com.au

T +61 2 9263 4432 E mdodd@gtlaw.com.au

T +61 2 9263 4003 E pleonard@gtlaw.com.au

T +61 2 9263 4263 E rpascoe@gtlaw.com.au

T +61 2 9263 4009 E bspain@gtlaw.com.au

T +61 2 9263 4711 E mtaylor@gtlaw.com.au

25 New Post NBN Industry Structure

End users

End users

Commonwealth Retail service providers (including Telstra) Layer 3 and above services

Retail service providers (including Telstra)

Wholesale service providers (including Telstra)

100% owned + funding of $100m pa

Wholesale services

Telstra copper network

NBN Co wireless satellite

funding

USO Co

Levy

Layer 2 wholesale services

NBN Co fibre Telco industry

Layer 1 physical infrastructure

93%

7%

Percentage of residential and business premises nationally

5447312_1.vsd

“Gilbert + Tobin’s lawyers impress with ‘their depth of understanding and commercial sense’ as they focus on regulatory and infrastructure work in

Peter Waters Partner

Cameron Whittfield Partner

T +61 2 9263 4233 E pwaters@gtlaw.com.au

T +61 3 8656 3311 E cwhittfield@gtlaw.com.au

the telecoms sector.”

Chambers Global 2009

Surpassed the National Standard Pro Bono target by 200% In the last year, Gilbert + Tobin provided over 13,000 hours of pro bono work, an average of around 71 hours per lawyer.

This is more than double the aspirational target of 35 hours set by the National Pro Bono Resource Centre, the leading consulting body to the Australian legal profession on pro bono services.

The value of this work is conservatively estimated at $4.8 million.

Multimillion dollar debt release We assisted an indigenous organisation in a dispute over a multimillion dollar loan and were successful in having millions of dollars of debt written off.

Switch to Green Power results in top energy rating In March 2010, we received the highest possible energy efficiency rating of 5 stars by one of Australia’s recognised performancebased rating system, the National Australian Built Environment Rating Scheme (NABERS).

This is the direct result of Gilbert + Tobin moving to 50% green power 18 months ago.

26 market insights

highlights

community Pro bono We believe that as lawyers, we are in every sense the housekeepers of our legal system. It is our responsibility to ensure that the system is just and equitable, and that everyone in our society has access to justice.

Pro bono work is a vital part of what we do and who we are. We were the first Australian law firm to appoint a full-time in-house pro bono lawyer and we now have three lawyers dedicated entirely to pro bono work and management of our Pro Bono practice. Lawyers and partners across the firm also undertake pro bono work.

In the last year Gilbert + Tobin: + advised on 343 pro bono matters for 102 individuals and 241 community organisations + had 80% of our lawyers and partners provide pro bono advice + provided more than $4.8 million worth of pro bono services (see opposite).

We are committed to assisting marginalised and disadvantaged people, either individually or through organisations that work to empower or assist them. We have a particular focus on indigenous clients, people with disabilities, young people and refugees.

We undertake a broad variety of pro bono work, including test case and public interest litigation, corporate and commercial advice and assistance, submissions, policy work and community legal education. We treat the interests of our pro

Michelle Hannon Partner T +61 2 9263 4110 E mhannon@gtlaw.com.au

bono clients in the same innovative, industrious and diligent fashion as our commercial clients.

In addition to our lawyers using their specialist skills to serve our pro bono clients, they are encouraged to branch into other areas of law in order to service our clients’ other needs.

This includes refugee law, human rights and discrimination law, victims compensation and assisting victims of predatory lending schemes.

Our aim is to build a successful business in the Asia Pacific region while retaining our philanthropic heart and diverse culture. As a firm with sustainable business practices embedded in its DNA, we will remain a firm which empowers employees to make a difference and value contributions at all levels.

Case Study

using “social capital” to de-corporatise childcare

27

GoodStart Childcare’s acquisition of ABC Learning For nearly 10 years, one company was seen as the face of “corporate” childcare in Australia. More than 30 times larger than the next largest childcare chain, ABC Learning operated on an enormous scale. It spawned national property trusts and facilities managers (among others) to support its evergrowing business.

In 2008–09 however, the growth slowed (some might say the music stopped) and in the resulting stress and examination, Australia’s behemoth listed childcare provider was revealed to have been vastly less profitable than the market had believed and entered receivership.

In late 2009, as the bulk of the group was being prepared for sale, a group of social entrepreneurs had a bold idea: to acquire the whole of the remaining ABC network – some 670 centres – and snatch a once-in-a-generation opportunity to create a step-change in the (relatively poor) quality of early learning in Australia.

They also saw that childcare centres represent an unmatched opportunity to identify and address in early childhood many of the problems in family lives that sustain intergenerational disadvantage – or lead to criminal and other antisocial behaviour in later years.

From a deal perspective, the challenge was significant. How could a handful of social entrepreneurs and charitable institutions cobble together $100 million to buy a barely profitable business out of receivership, in competition with private equity, global corporate childcare providers and local industry operators?

A consortium of four leading Australian charities (Mission Australia, The Benevolent Society, The Brotherhood of St. Laurence and Social Ventures Australia) was created and led by Robin Crawford, a founder of Macquarie Bank, and Michael Traill, an ex-banker and Head of Social Ventures Australia.

They then appointed a group of advisors including

KPMG, Gilbert + Tobin and private equity executives from Pacific Equity Partners and CHAMP. Tax exempt status was quickly achieved – a critical step given that exemption from payroll tax more than doubled the target’s EBITDA. From a fundraising perspective, however, the conventional not-for-profit corporate structure – a company limited by guarantee – brought a peculiar challenge in that it provided no ability to issue share capital.

Working with the clients’ leadership team and the other advisors, we adapted the layered debt structures from the mezzanine financings of our buy-out experience to GoodStart’s capital structure.

The result was a capital structure (outlined below) that achieved all commercial objectives.

NAB ACQUISITION FINANCE AND OTHER FACILITIES (secured) $120 million Australian GOVERNMENT (secured – 2nd ranking) $15 million Social Capital Notes (Philanthropists etc) (unsecured) $22.5 million Members’ Subordinated Notes (unsecured) $7.5 million Members’ Deeply Subordinated Notes (unsecured) $10 million Most importantly, this facilitated the charities and more than 40 socially minded foundations and individuals to provide the critical $30 million of subordinated debt necessary to support the loans from the National Australia Bank (NAB) and the Australian Government. GoodStart called these notes “social capital” – an instrument we hope will be put to good use and found in many more investors’ portfolios in years to come.

Alliances