Transaction Reports
Discovery Metals Ltd Combined Takeover of
by Cathay Fortune Corporation and the China-Africa Development Fund
Legal advisor to Cathay Fortune Investment Ltd: Legal advisor to CADF: Legal advisor to Discovery Metals: Legal advisor to China Development Bank: Deal Overview
Joint takeover bid for Discovery Metals Limited by Cathay Fortune Corporation and the China-Africa Development Fund
IOn 4 October 2012, Discovery Metals Limited disclosed that it had received an indicative, non-binding proposal from Cathay Fortune Corporation and China-Africa Development Fund to acquire all of the shares in Discovery Metals for AUD$1.70 per share.
On October 11th 2012, Discovery Metals advised the representatives of CFC and CAD Fund that the price proposed was inadequate on several fronts. The value of the Company’s operations and expansion plans to increase the Boseto Copper Project to 5 million-tonnes per annum; the potential to increase the resources on the Company’s tenements through further exploration; the strategic value of the Company with an operating project and management team in Botswana; and the scarcity value of the Company.
Subsequently, on 23 October 2012, Cathay Fortune Investment Ltd announced its intention to proceed with an off-market takeover offer for Discovery Metals, and the Company reaffirmed its view that the offer price was inadequate.
The offer is one of the largest takeover bids launched by a Chinese enterprise in recent years. Spanning across three countries and four regions, the transaction requires innovative solutions to resolve various legal, commercial and regulatory issues.
Asia’s leading law firm, King & Wood Mallesons, advised Cathay Fortune Corporation (CFC), a private equity firm based in Shanghai, on its combined off-market takeover, together with the China-Africa Development Fund (CADFund), of Discovery Metals Limited, a copper exploration and production company based in Botswana, Africa.
To guide the takeover from commencement to closing, King & Wood Mallesons formed a cross-border team comprising Sydney based corporate partner Stephen Minns, Beijing based corporate partner Jin Xiong and Hong Kong based banking & finance partner David Lam.
The firm’s ability to practice law in all three of the jurisdictions above enabled the cross-border team to advise CFC on all legal aspects of the transaction, providing legal advice to cover every stage of the complex transaction.
International law firm King & Wood Mallesons is currently advising Cathay Fortune Corporation, a private equity firm based in Shanghai, on its combined off-market takeover, together with the China-Africa Development Fund, of Discovery Metals Limited, a copper exploration and production company based in Botswana, Africa. We spoke with David Lam, a King & Wood Mallesons partner, about their involvement in the deal...
Q
Please introduce yourself, your role and the company.
I am a partner in the banking and finance department of the Hong Kong office of King & Wood Mallesons.
My practice specializes in advising lead arrangers, lenders, sponsors and corporate borrowers in acquisition financing, pre-IPO financing, real estate financing, privatisation financing, and general syndicated and bilateral lending.
Prior to joining King & Wood Mallesons, I worked for another international law firm for over 10 years in Hong Kong, London, Beijing and Shanghai offices. I worked “on the ground” in mainland China for almost four years.
I am qualified to practise law in Hong Kong and England & Wales. I have also passed the Bar Exam of the People’s Republic of China. My qualifications in multiple jurisdictions put me in a favourable position in advising clients in cross-border transactions in particular those involving China.
I have been named: “Leading Lawyer” by IFLR2013 for my work in the bank lending sector and “Deal Maker of the Year 2012 Winner” by Finance Monthly
Discovery Metals? Q
The Hong Kong, Australian and PRC offices of King & Wood Mallesons are currently advising Cathay Fortune Corporation (“Cathay Fortune”), a private equity firm in Shanghai, on its joint takeover of Discovery Metals Ltd, made in conjunction with the China-Africa Development Fund.
King & Wood Mallesons is acting as international counsel to Cathay Fortune and is advising the Shanghai-based firm on all aspects of the transaction.
I am leading a team in Hong Kong to advise Cathay Fortune in relation to the acquisition financing from China Development Bank for the takeover.
Q David Lam 116
www.finance-monthly.com
Who at your company is leading the transaction?
I am leading the financing side of the transaction and am working seamlessly with my Australian and PRC partners, Stephen Minns and Xiong Jin, who are advising Cathay Fortune on matters pertaining to the takeover and China’s outbound investment laws, respectively.
Please confirm your involvement in the transaction between Cathay Fortune and
Q
What are the main challenges & complexities for you and your company regarding this
transaction?
This transaction is particularly noteworthy for its cross-border structuring and regulatory complexity. The Hong Kong, Sydney and PRC offices of King & Wood Mallesons are coordinating closely to ensure that the financing and security structure work in the context of the takeover, and deadlines for obtaining financing and multiple regulatory approvals are met in time in order for the transaction to close successfully. Certain funding requirements under Australian and Botswana laws have placed constraints in the negotiations over financing documentation with China Development Bank. Not only must we ensure that the financing terms satisfy Cathay Fortune’s commercial needs, we must also ensure that certain funding requirements are met.
As a cross-border team, we are drawing extensively from the legal expertise at each of our offices in order to deliver optimal results to our client.
Q
Is this a typical transaction for you? What other types of transactions have you been involved in?
Yes. I have recently acted for Chinese banks on a number of acquisition-financing matters for both outbound and inbound investments in China, primarily relating to natural resources but also involving other businesses such as toll roads, power-plants and real estate.
My bank clients have expressed strong interests in cross-border financing transactions in China in light of the continuing globalisation of the Renminbi and relaxation of financing and security rules. My expertise and experience in structuring cross border financing transactions, and my understanding of local legal requirements and international market standards have helped immensely to establish my role as a trusted legal advisor to my clients.
On a local front, I recently acted as legal counsel to the Hong Kong Mortgage Corporation Limited in relation to its launch of a micro-finance scheme in Hong Kong as mandated by the Hong Kong Financial Secretary. The scheme aims to assist people who may wish to start their own business or receive training for skill upgrading or certification but cannot do so due to a lack of financial means or difficulties in obtaining loans from traditional finance sources.
These announcements appears as a matter of record only
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