Cobbetts’ Russian steps to energy boom
Law firm Cobbetts – which has a major office in Colmore Square in Birmingham – has been given an Excellence Award by the Law Society for its work with mining companies around the world.
And the international work the firm pioneered has seen the regionally-based team compete with much larger firms from London.
Their Public Markets team racked up more than 100,000 air miles in the last few years looking for mining and exploration companies to float on the Alternate Investment Market (AIM) – the smaller cousin of the London Stock Exchange.
“If you look at our main competitors they are mostly City firms,” said Charles Bond, a partner at Cobbetts in Birmingham and a senior lawyer on the Public Markets team.
“It’s completely overcrowded now, but at the start there were three or four of us at the vanguard. Over the last three or four years we have got a lot of other firms trying to pile into the market, but the problem is they often don’t have the skills. It’s different from just plain vanilla flotation work.”
The idea of floating foreign mining and exploration companies on AIM was pioneered by Cobbetts partner Andrew Wright, who persuaded junior companies in Australia there was money to be made on English markets. The reverse gold rush took off, and the firm soon found itself inundated with work.
Probably the biggest flotation Cobbetts worked on, and the one that brought the team most recognition, was bringing Russian firm Highland Gold to AIM, which was valued at £210 million when it came to market, looking to raise around £20-40 million.
At the time it was the second-largest company on AIM with a market cap of £210 million. The company prospered, later selling a 40 per cent stake to Millhouse, the investment vehicle of billionaire Chelsea owner Roman Abramovich for about £200 million.
After the AIM flotation idea caught on in Australia, the firm found itself signing deals with firms from African, China, Canada and further afield. But the Highland deal opened up other former CIS countries like the Ukraine and Kazakhstan.
“Some of those companies have grown terrifically,” said Mr Bond. “One Australian company started at three or four cents a share and is now a £6 billion company. And a lot of investors in London have done very well out of it.”
But in recent months the AIM has been hit by the credit crunch, like all markets around the world, hitting the number of deals being done.
Mr Bond said: “The AIM market is very quiet at the moment. People are shifting towards either raising the money privately or of course going to the shareholders and doing a rights issue or if you are really desperate, getting yourself taken over.
“But it’s going to come back, the fundamentals are still very good.”
And while some deals may be drying up, the firm is still signing deals with major companies. It recently advised AIM-quoted Russian oil explorer Timan Oil & Gas on a £63?million loan facility from Kazakhstan firm Kamanisk Holdings, despite the lack of global liquidity.
Timan has its main assets in the Timan-Pechora region of Western Russian and the Caspian Basin. The transaction was set up to let Timan use the financing over a five-year period for working capital and to continue to increase its current Russian drilling operations.
Mr Bond said: “Although there have been difficulties in the economy, this transaction shows that there are still deals to be done in the oil and gas sector as the underlying assets remain attractive to investors. Securing this funding arrangement with Kamanisk is testament to this, and we are certain that it will help support Timan’s aims to become a leading independent producer of oil and gas.”
And the firm’s Russian operations have proved so popular it has started to work on Russian-only deals.
“We are working on purely Russian transactions where there’s a Russian backer, Russian seller and Russian target company but it’s being done under English law and we are doing the English law bit of it,” said Mr Bond. “They want to do it under the English legal system because the Russian one is a bit looser and untested.”