On October 23, 2012, King & Wood Mallesons advised Cathay Fortune Corporation (CFC), on its combined off-market takeover with the China-Africa Development Fund (CAD Fund) to acquire Discovery Metals Ltd. (DML) for AUD1.70 per share, AUD 824 million (about USD 850 million) in total. DML focuses on developing its key assets of copper exploration and production in northwest Botswana.
The Offer will be funded by a term loan facility to be provided by Chinese Bank. CFC and the CAD Fund will invest in Cathay Fortune Investment Ltd.(CF Investment), a joint venture of CFC and the CAD Fund, at the ratio of 75% and 25% respectively. CF Investment currently owns 13.7% of the ordinary shares of DML. The transaction has been approved by the National Development and Reform Commission of the People’s Republic of China and Foreign Investment Review Board (FIRB) of Australia. Other related applications for approval in Botswana are in process. This is a signature transaction of recent years among large-scale Chinese PE investments in overseas natural resources industry.
CFC was founded in 1997 and was engaged in the fields of data communications equipment, air transportion, mechanical and electrical automation, mining, finance, venture capital, etc. Its main asset includes 34% stake of China Molybdenum Co., Ltd. (Molybdenum), whose total assets are over CNY 100 billion in market value. Molybdenum is a listed company (A-Share and H-Share) and the world’s fourth largest producer of molybdenum.
Xiong Jin, a partner in the firm’s Beijing office who led the King & Wood Mallesons team, commented, “The transaction is one of the largest overseas acquisitions by Chinese enterprises in recent years, which involved complex transactional processes across three countries and four regions. This is a ground-breaking deal requiring innovative solutions to resolve various legal, commercial and regulatory issues. We are pleasured to have been able to assist CFC in this important transaction.”
The King & Wood Mallesons Chinese and Australian teams cooperated closely. The cross-border team also includes Melbourne based partner Stephen Minns, and Sydney based partner Alex Regan, Hong Kong based partner David Lam, and Beijing based partners Xu Ping and Liu Zhigang. King & Wood Mallesons underwent intensive and challenging negotiations, document drafting and project management coordination, andprovided high-standard seamless legal services covering every stage of the transaction, including the CAD Fund joint acquisition and financing arrangements, preparing transactional documents as well as obtaining regulatory approvals with Chinese and Australian governments.
“This is a particularly exciting deal for us because it represents a combined effort across our PRC, Hong Kong and Australia practices. It was originated in Beijing, with acquisition financing being run out of Hong Kong and the takeover in Australia. This is a great example of what the combination between King & Wood and Mallesons can achieve. With Discovery Mineral’s assets and secondary listing in Botswana, it also gives us an opportunity to show case our broader international counsel capability”, said, Stephen Minns, the Australian lead partner of this deal.
King & Wood Mallesons has provided advice and comprehensive legal services to clients in the natural resources, energy, and mining sectors. King & Wood Mallesons’ cross-border transaction team will continue to play an important role in the “going global” wave of Chinese enterprises.
