📶 Slaughters and Links act on the Vodafone-Three merger
In today’s email:
Instant Pot is going bankrupt
Travel through space on your laptop
Ukraine's largest bank is trying to clear its reputation
The gang who did the London Legal Walk raised £750,000
See if you can name the location and date based on a historical photo
Three and Vodafone are merging to make the UK’s biggest mobile service company
… and more!
EDITOR'S RAMBLE 🗣
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FEATURED REPORT 📰
📶 Slaughters and Links act on the Vodafone-Three merger
What’s going on here?
Vodafone and Three have decided to merge to create the UK's largest mobile phone operator with 27m customers, knocking EE off the top spot.
Why have they decided to merge?
📉 Vodafone’s been struggling: Its share price has dropped from above £2.50 in 2015 to below 75p now. It’s needed to change things.
😡 Vodafone came under investor pressure: Xavier Niel, a French telecoms billionaire, prompted Vodafone to “pursue consolidation opportunities”.
🤏 They were both too small: The UK market is dominated by two big network providers, EE and O2. If Vodafone and Three merge, they are a similar size to the other two — well, bigger actually. This means they’re better placed to compete with them.
Is it all completed?
Not even close - the two have only just agreed between themselves that they will merge.
So, what’s left to do?
The deal needs to be approved by regulators and the UK government.
🔎 CMA, UK’s competition regulator
The Competition and Markets Authority (CMA) needs to sign off on the deal. It’s not a certainty that they’ll sign off — they recently blocked the Microsoft-Activision Blizzard deal.
Also, in 2016, when Three tried to take over O2, the CMA blocked it arguing that it would have resulted in higher prices for customers.
📡 Ofcom, UK’s telecoms regulator
Ofcom, the UK’s telecoms regulator, also needs to sign-off on the deal. If the regulator thinks the deal could harm consumers, it could advise that the merger be blocked or delayed, or that conditions be imposed on the deal (like requiring Vodafone to sell off some of its assets).
🇬🇧 UK government scrutiny (NSI Act)
The UK government will also look at the deal under the National Security and Investment Act 2021 (NSI Act).
This is a law that was recently passed to give the government power to block deals that could be a risk to national security.
The government might be worried because:
Vodafone has a number of UK government contracts, and
Three is owned by CK Hutchison - a Hong Kong-based company.
How are the companies trying to convince the regulators?
👍 Improved service: Vodafone and Three have said customers will benefit from the deal — they’ll “enjoy a better network experience with greater coverage and reliability at no extra cost“.
💲 Price freeze: They could promise to freeze customers’ prices for a period of time (Three made a similar promise to regulators when they unsuccessfully tried to acquire O2 back in 2016).
💰 Technology investment: The two have also said that, after the merger, they would invest £11bn into 5G technology in the UK over the next 10 years.
When will the deal actually complete?
Assuming things all go smoothly, the merger is expected to complete by the end of 2024.
What’s the deal structure?
Vodafone will own 51% of the new business while Three’s owner, CK Hutchinson, will hold the remaining 49%.
Which law firms are involved?
This was party was Magic Circle only.
Linklaters represented CK Hutchison Holdings and Three UK Group.
Vodafone UK was advised by Slaughter and May.
Why should law firms care?
This story is huge news in the telecoms game — the UK’s biggest mobile operator is being formed in front of our eyes.
But the more interesting things for law firms are the regulatory challenges and UK government scrutiny that the deal now faces.
These are things that all corporate lawyers who advise on big mergers will be looking at to find out how their deals might be impacted in the future.
Regulators can change their position over time. In 2016, Ofcom was against the idea of the four UK mobile service providers consolidating (by.a merger of two of them) into three providers.
But now, they’ve softened that position — that change will have encouraged this deal.
The CMA has been more willing to intervene in deals recently. It’s important to see what (if anything) they raise issue with in this deal.
No one know exactly how the NSI Act should be used. The law gives the government intentionally broad powers, so they can do what they need to to keep the country safe. The downside is that when lawyers are advising their clients on how the NSI Act will interfere with their deal, they can’t be sure what the government will do.
Seeing this merger go through these steps will help lawyers understand the current position of regulators. That’ll be important information to have when advising clients looking to make their own acquisitions.
A BIT OF FUN 😄
IN OTHER NEWS 🗞
🥊 The PrivatBank trial, where Ukraine's largest bank is suing its former owners for $2bn, kicked off this week. The former owners are accused of using their power to steal money from the bank. The trial is a test of Ukraine's commitment to fighting corruption.
🍲 Instant Brands, the company that makes Pyrex and Instant Pot, has filed for bankruptcy. The company saw major growth during the pandemic when people spent more time indoors. More recently, it’s suffered from lower demand. The company also blames high interest rates for its failure as it couldn’t borrow money as cheaply.
🧪 WE Soda, the world's largest producer of natural soda ash has binned off its plans to sell shares on the London Stock Exchange. Soda ash is a chemical used in the manufacture of loads of stuff like soap and glass (it’s nothing to do with soda drinks). This new announcement has come less than two weeks after announcing the sale in the first place. The decision is a major blow to the UK’s reputation as a financial centre.
🐾 This week’s the London Legal Walk saw £750,000 raised in support of free legal advice agencies. Here are some pics of the event that Legal Cheek posted.
AROUND THE WEB 🌐
🎥 Fun: You know the game GeoGuessr? This is the same thing but for historical photos (history buffs, this is the game for you).
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