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Message: <blockquote data-quote="Jaysen" data-source="post: 12938" data-attributes="member: 1">Hi everyone!Welcome to this week's commercial news update. Happy reading!Commercial News Update: 21 August 2019The topics covered this week are:<ol> <li data-xf-list-type="ol">Hong Kong Billionaire Li Ka-Shing to Buy Greene King (by [USER=2115]@LJ[/USER])</li> <li data-xf-list-type="ol">Competition in the Media Industry (by [USER=525]@Sara Moon[/USER])</li> <li data-xf-list-type="ol">Streaming Battles: Apple TV+’s splurge (by [USER=1160]@Alice G[/USER])</li> <li data-xf-list-type="ol">IPOs: The Up-C Structure’s Growing Popularity (by [USER=1562]@ELA[/USER])</li> </ol>1. Hong Kong Billionaire Li Ka-Shing to Buy Greene King (by [USER=2115]@LJ[/USER])The StoryLi Ka-Shing’s property investment firm, CK Asset Holdings Ltd., has agreed to buy the pub operator and brewer Greene King Plc for £4.6 billion. It is paying £2.7 billion for the company, while taking on its £1.9 billion worth of debt. This is following concerning performance over the last year for Greene King, with full-year pre-tax profit down 12.5%. CK’s strategy for Greene King is currently unclear, but they have explicitly stated that they have no intention to cut any of the 38,000 staff.Impact on Businesses and Law FirmsAs news of this transaction was released, the shares of rivals like JD Wetherspoon and Mitchells & Butlers were lifted. This is due to the potential of CK attempting to shut some of its pubs and breweries in an attempt to cut costs, opening up market share to these other competitors.This deal is in the wider context of foreign buyers purchasing British brewers, with Fuller, Smith & Turner being bought by Asahi and Camden Town Brewery becoming a wholly owned subsidiary of AB InBev (the world’s largest brewer). There seems to be confidence in the long-term prospects of traditional British breweries, as well as a seizing of opportunities given the current low pound.Interestingly, Li Ka-Shing recently weighed in, slightly ambiguously, on the Hong Kong protests. It could potentially be claimed that Ka-Shing’s calls to stop violence are economically motivated by the benefits restored peace could bring to his transaction. Likewise, a stop to the unrest will further stabilize his property firm. Indeed, Ka-Shing has suffered paper losses of $3 billion as Hong Kong’s political turbulence undermines the value of his assets.M&A lawyers will have helped on this transaction, generally helping draw up contracts while pooling support from other departments like tax, real estate and employment. It is likely restructuring lawyers may be needed if CK decides on implementing any significant changes to Greene King.2. Competition in the Media Industry (by [USER=525]@Sara Moon[/USER])The StoryThis Monday (19th Aug), Disney announced that it will begin its streaming television service called “Disney Plus” in November. It is seeking to rely less on cable channels and develop online streaming services which Netflix is currently dominating. As part of this plan, it acquired some of 21st Century Fox assets last March.AT&T, America’s biggest phone company, also has similar plans. It acquired WarnerMedia last year with an aim to make use of its contents and is planning to launch a new online streaming service called “HBO Max” next year with exclusive shows not available on other platforms. Its premium content is said to amount to 10,000 hours.Viacom and CBS agreed to merge last Tuesday to compete against streaming services rivals. This deal will combine CBS’s streaming services like CBS All Access and broadcast and news networks with Viacom’s TV networks like Nickelodeon, MTV and Comedy Central.Impact on Businesses and Law FirmsThe Financial Times described the current deals in the media industry as signals of “a second wave of media M&A”. According to Parrot Analytics, Netflix currently accounts for 68% of the demand for online streaming services. Netflix is followed by Amazon Prime Video, which accounts for 10% and Hulu, which accounts for 9%.With Netflix’s secret to success being its bulk of original shows, other companies in the media industry are looking for M&A deals to quickly maximise the content they provide in order to compete with the media giant. As more people move from TV shows to online streaming services, the number of M&A deals in the media industry is expected to soar. This is good news to many law firms which play central roles in these deals, from negotiating the initial deal to drafting the contracts.3. Streaming Battles: Apple TV+’s splurge (by [USER=1160]@Alice G[/USER])The StoryApple has reportedly committed $6 billion towards developing original shows and films for its online streaming service, set to launch towards the end of this year. Apple had initially set a budget of $1 billion but it would seem that the growing competition within the streaming sector has led the tech giant to ramp up its efforts. One show in production is set to star A-list celebrities including Steve Carell, Jennifer Aniston and Reese Witherspoon, and is projected to pay such a hefty sum to the actors per episode that it will rival the wage packets of those received by HBO’s Game of Thrones’ stars.Impact on Businesses and Law FirmsApple has been struggling of late with the increased tensions between the US and China. The Apple TV+ venture is an interesting development and will shed light on Apple's ability to adapt within a new division. A successful venture would reflect Apple's brand strength and loyal customer base. People are highly unlikely to hold several different streaming service subscriptions and so we will likely see, over the next two years, the increased attempts of streaming services to ‘win’ the favour of consumers. Apple has vast amounts of cash on its balance sheets to fund the expensive productions costs and Netflix will no doubt be apprehensive of Apple TV’s launch.Further down the line, as competition becomes increasingly fierce, it is possible that streaming services might enter deals to merge or one might acquire another. M&A lawyers would be involved in this and antitrust lawyers would be called upon to ensure any such deals do not monopolise the market unfairly. Currently, the entertainment sector is one that is growing and as streaming services vie for productions and licensing rights, lawyers will be instrumental in drafting up the necessary documents to facilitate these rights deals.4. IPOs: The Up-C Structure’s Growing Popularity (by [USER=1562]@ELA[/USER])The StoryFor its upcoming Initial Public Offering (IPO), WeWork has turned to a corporate structure called an umbrella partnership corporation, commonly referred to as “Up-C”.This corporate structure was first used by Barnesandnoble.com in 1999 but didn’t used to be particularly popular. However, in The Financial Times, Eric Platt notes that it has been used increasingly in the past decade: 74 Up-Cs having gone public since 2010, including Shake Shack and TradeWeb. Moreover, Platt adds that WeWork’s IPO would be the largest Up-C IPO to date and that given the publicity that surrounds it, it could be followed by more.Impact on Businesses and Law FirmsIf Up-Cs are likely to become more widespread, corporate lawyers need to be aware of their structure, mechanics and implications, in order to be able to assess their suitability for clients. Here is a brief introduction:Up-Cs have a two-tiered structure. First, there is the pre-IPO company, which holds all the assets and operations of the business. It may be organised in any legal form that is taxable as a partnership (often a limited partnership or a limited liability company). Second, there is another entity, organised to be taxable as a corporation.The owners of the pre-IPO companies are the only ones who continue to directly hold stakes in it. Public investors do not directly by stock in the pre-IPO company; instead, they have a chance to buy shares in the second entity – a holding company – which in turns owns stakes in the underlying partnership.For pre-IPO owners, the Up-C structure has tax benefits. Indeed, because the entity they own is a ‘partnership’, it is not subject to corporation tax. Pre-IPO owners thus pay taxes on their share of any profits at individual income tax rates. IPO investors’ profits, on the other hand, are taxed on two levels: 1) the holding company pays corporation tax, and 2) shareholders pay taxes on dividends. In some cases, parties enter a tax receivable agreement, which establishes a percentage of the tax benefits to be shared with investors. This would be a crucial point of negotiation for lawyers.There is a lot more to be said about the implications of Up-Cs. If you’re interested, you can find out more in this helpful document: <a href="https://www.stblaw.com/docs/default-source/related-link-pdfs/up-c-initial-public-offering-structures-overview.pdf?sfvrsn=4" target="_blank">https://www.stblaw.com/docs/default-source/related-link-pdfs/up-c-initial-public-offering-structures-overview.pdf?sfvrsn=4</a></blockquote>

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