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Dealwatch: Big M&A back on track as private equity backs Asda supermarket sweep and William Hill buyout

Whatever concerns City playmakers had about a coronavirus-related hiatus for big-ticket M&A in recent months appear to be well and truly allayed in the last few days, with the £6.8bn takeover of supermarket giant Asda capping off a prolific week.

Slaughter and May, Skadden, Arps, Slate, Meagher & Flom and Latham & Watkins won roles on the Asda deal, which sees the Issa brothers – founders and co-CEOs of UK petrol station retailer EG Group – and TDR Capital acquire a majority stake in the UK business of Asda Group from US parent Walmart for an enterprise value of £6.8bn.

Under the new ownership structure, Mohsin and Zuber Issa and TDR will acquire equal stakes in the UK supermarket giant, with Walmart retaining a minority equity investment and a seat on the board.

The acquisition is expected to close later this year or in H1 2021 and will result in Asda returning to majority UK ownership for the first time in two decades.

The auction process has elicited much interest from private equity houses, with Lone Star and Apollo also rumoured to have been eyeing up Asda.

Slaughters is advising Walmart with a team led by Victoria MacDuff, Sally Wokes and Claire Jackson. The wider Slaughters team included finance partner Guy O’Keefe and financial regulatory partner Ben Kingsley, tax partner Steve Edge, pensions and employment partners Padraig Cronin and Charles Cameron, IT/IP partner David Ives and real estate partner Jane Edwarde.

Skadden is representing the buyers, TDR and the Issa brothers, with a team led by George Knighton and including Simon Toms. Latham is advising the buyers on financing aspects with a team including high-yield partner Francesco Lione, banking partners Dominic Newcomb and Charles Armstrong; structured finance partner Sanjev Warna-kula-suriya; real estate partners Jeremy Trinder and Quentin Gwyer; and tax partner Sean Finn.

Skadden’s George Knighton noted the entrepreneurial spirit of the buyers and highlighted the UK-centric angle as another point of interest. ‘What is interesting for me is that this is a British business coming back into British hands, when so many companies in recent years have gone to overseas investors. It is a good story for GB Plc,’ he said.

He added that food retail, along with the tech sector, has been remarkably resilient in the face of market challenges wrought by coronavirus.  ‘Another interesting aspect of the transaction is that this is not a full exit, with Walmart remaining as a minority shareholder, so it’s an M&A deal but also involved creating a new partnership.’

Slaughters also won another major mandate to advise William Hill on its recommended cash acquisition by Caesars UK Holdings, a subsidiary of US casino operator Caesars Entertainment.

The deal will see William Hill shareholders entitled to receive 272 pence in cash for each William Hill share. The acquisition values the entire issued – and to be issued – share capital of the company at roughly £2.9bn and is expected to complete in the second half of 2021, subject to shareholder, antitrust and gaming regulatory approvals.

London Stock Exchange-listed William Hill was founded in 1934 as a postal and telephone betting service now operates 1,414 licensed betting offices in the UK and, since 2012, has operated sports books in the US.

The Slaughters team was led by David Johnson and Murray Cox while Linklaters is advising Caesars with a team led by London corporate partners Nick Rumsby and Ian Hunter. Weil, Gotshal & Manges is acting as US antitrust legal adviser to William Hill.

Elsewhere, Linklaters and Freshfields Bruckhaus Deringer won lead roles to advise as GIC and Massachusetts Mutual Life Insurance Company acquired a 36% stake in UK pension provider Rothesay Life from Blackstone’s Tactical Opportunities business.

Blackstone, GIC and MassMutual have been shareholders in Rothesay Life since 2013 and – since their initial investment – the pension insurer has grown its assets under management from £7.5bn to £56bn.

The deal comes after a record £16.3bn of new business underwritten by Rothesay Life in 2019 and continued momentum in the first half of 2020. The transaction will see GIC and MassMutual each become 49% shareholders in a transaction valuing Rothesay Life at £5.75bn.

The Linklaters team advising Rothesay Life was led by London corporate partners Lorna Tennent and Tracey Lochhead. The firm had advised Rothesay on the original investment by Blackstone, GIC and MassMutual in 2013 and the subsequent sell down by Goldman Sachs in 2017.

Freshfields advises Blackstone on the disposal with a team led by partners James Scott and Alastair Brown, while regulatory advice was provided by partners James Smethurst and Cyrus Pocha.