Deal news: In the current vibrant and optimistic market, it is not the number of IPOs a law firm can advise at one time, but the firm's creativity and multitasking skills that matters. Six law firms – Skadden, Fangda, Maples and Calder, Commerce & Finance, O'Melveny & Myers and Shearman & Sterling – have shown such qualities while acting on the ground-breaking deal between E-House (China) and SINA Corporation.
China Real Estate Information Corporation (CRIC), a leading provider of real estate information, consulting and online services in China, has recently launched its US$248m IPO and has listed on the NASDAQ Global Select Market. The transaction was structured as a carve-out IPO from its parent company, E-House, a leading real estate services company in China listed on NYSE.
The IPO was executed concurrently with CRIC's merger with the online real estate business of SINA, a leading online media company and mobile value-added service provider in China listed on the NASDAQ. The merger is valued at approximately US$775m. Upon completion of the merger, SINA became the second largest shareholder of CRIC, after E-House.
CRIC instructed Skadden and Fangda to be its US and PRC counsel respectively. Maples and Calder was Cayman Islands and BVI counsel to CRIC. The underwriters in the IPO – Credit Suisse, UBS and BofA Merrill Lynch – were advised by O'Melveney & Myers and Commerce & Finance, while SINA was acted for by Shearman & Sterling.
"This transaction is very unique in many aspects and is intellectually challenging," said Skadden's Hong Kong partner Julie Gao (pictured), who led the IPO team and co-headed the merger team with Hong Kong partner Jonathan Stone and New York partner Rita Rodin Johnston. Julie Gao also participated in E-House's NYSE IPO in 2007, as the issuer's counsel.
She explained that the story told to the investors included the businesses of two companies – CRIC's own business before the IPO and SINA's online real estate business, which hadn't become part of CRIC's business yet at the time of the IPO. And one of the conditions for the M&A closure was the successful launch of the IPO. As a result, the prospectus was prepared on the assumption that the IPO would close, and therefore, the M&A would happen – meaning that SINA's online real estate business will become a significant part of the future company immediately after the IPO.
"Describing something that will become part of the company upon the completion of the IPO was an essential part of the prospectus, which was completely new to everyone involved. The legal advisors needed to figure out an appropriate way to perform due diligence and disclose SINA's online real estate business, even though the merger with SINA's online real estate business was 100% forward looking," said Gao, "The concurrent execution of two transactions also presented a lot of challenges in terms of timing, the workload, and the multiple parties involved.
"This deal has certainly introduced a new business model by combining two segments of two public companies into one new business. Its success will lead more people and companies to think of creative ideas and innovative deal structures that could work in legally permissible regimes. The deal opens ways for people to imagine more and be creative, and find synergy among business segments of different companies," said Gao.
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