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Legal Issue 1. |
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Antitrust/C&F/HR Issue Update |
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Successful Joint Efforts by Yulchon's Antitrust/Corporate & Finance/HR Specialists |
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Yulchon's Antitrust, Corporate & Finance, and HR Lawyers Advise
GSK in Its Global Three-Part M&A Transaction with Novartis |
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| Yulchon provided comprehensive, multi-disciplinary advice to its global client GlaxoSmithKline plc (GSK) to help complete its complicated global three-part pharmaceutical M&A transaction with Novartis. Yulchon's expert advice on the Korean portion of the transaction spanned from antitrust merger clearance to corporate M&A advice to HR guidance. Remarkably, GSK's two different global coordinating counsel for three different disciplines all relied on Yulchon as their Korean local counsel of choice. In the process, Yulchon demonstrated once again its superb capabilities to handle the most complex and highest-profile matters alongside elite global law firms that handled the foreign portions of this transaction. |
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| Valued at well over $25 billion just accounting for two of its three-part deal structure, this transaction was one of the biggest and most closely watched pharmaceutical deals announced in 2014. More specifically, the overall transaction involved three distinct interrelated components: (1) GSK's acquisition of Novartis' vaccine business for $7 billion; (2) GSK's formation of and obtaining control of a newly formed consumer healthcare joint venture with Novartis with a book value of over £6.5 billion in 2013 sales; and (3) Novartis' acquisition of GSK's cancer drug business for $16 billion. |
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Antitrust Advice – Obtaining Unconditional Antitrust Merger Clearance from KFTC |
| Regarding the antitrust merger clearance task, given its global nature, the transaction required merger filings with antitrust enforcement agencies in some 18 separate jurisdictions. As GSK's Korean antitrust counsel, Yulchon prepared and filed merger notification reports with the Korea Fair Trade Commission (KFTC) in connection with the first two components and also assisted GSK in working with Novartis' Korean counsel that handled the filing for the third component. |
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| This three-part "business swap" deal between GSK and Novartis has been hailed as an "innovative" game changer for M&A by some commentators. Of course, this is certainly not the first "business swap" deal between two competitors occupying the same sector. In the early 1990's, DuPont and ICI swapped their "nylon" and "acrylic" businesses so that each can concentrate better on their true core strengths. But it has been a while since two companies in the same sector successfully swapped their diverse business lines. |
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| Because of the "swap" nature and multi-components of the overall transaction, it was all the more difficult and complicated even to explain to the KFTC the structure of the deal, who is acquiring what from whom, and the like. We took the necessary time to educate the KFTC as part of our front-end work and run some ideas in advance of formally filing merger notification forms. In the end, this approach helped reduce the KFTC's review time. |
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| To avoid undue delays, we carefully examined all of the potentially relevant substantive issues and strategically decided what areas to focus first and what to save for later discussions. After establishing a proper context, we were able to process a large amount of information and managed to direct the KFTC's attention to truly important issues. |
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| Among other things, we had to handle the market definition issue carefully and delicately. While starting the initial market definition discussions based on the globally accepted active drug ingredients categorization, the ATC (Anatomical Therapeutic Chemical) classification system, we convinced the KFTC to further fine-tune market delineation by also considering intended drug usage, efficacy and existence of alternatives and substitutes. As a result, we succeeded in establishing that, despite the size and complexity of the overall transaction, there were only few overlaps in Korea and even then they did not raise significant competitive concerns. |
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| This transaction shows that careful upfront planning is a must and goes a long way to reduce overall review time and avoid unnecessary confrontations or debates with the KFTC. Undoubtedly, each jurisdiction requires a somewhat different approach. Yet, close coordination with GSK's global coordinating antitrust counsel, GSK's counsel for some of the major jurisdictions as well as Novartis' global and local antitrust counsel was absolutely crucial and successfully achieved even though it was difficult and time-consuming to harmonize all their views at times. |
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| Utilizing our extensive experience in handling merger matters before the KFTC, coupled with our unique international antitrust capability and sensitivity to potential issues and developments in other jurisdictions made possible by Cecil Saehoon Chung, our head of international antitrust team who was a former U.S. FTC attorney and antitrust partner at two global law firms in Washington, D.C., Yulchon was confident to chart its clearance strategy and delivered the best possible outcome. In the end, we exceeded the client's expectations by securing "unconditional" antitrust merger clearance in Korea ahead of the client's target clearance date and also ahead of clearance in other major jurisdictions. |
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| As Korea and other emerging jurisdictions in Asia become even more important in the global M&A area, merging parties will have to have a clear game plan to secure clearance with the least amount of delays and complications. This GSK/Novartis transaction shows that, with right local counsel in Korea with the requisite experience and expertise before the KFTC and sophistication necessary to coordinate seamlessly with global coordinating counsel and counsel for major jurisdictions, global companies need not worry about the Korean merger control regime becoming a bottleneck. Instead, with right local counsel in Korea, global deal makers may even expect Korea to lead the way and help assuage other jurisdictions. |
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| For this antitrust merger clearance task, senior foreign counsel Cecil Saehoon Chung and Seuk Joon Lee took the lead with able assistance from partner Kyu Hyun Kim, associates Woo Yul Lee and Jun Woo Cheong, and foreign attorneys Tae Yong Kim and Young Jo Lee. |
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Corporate & Finance Advice – Providing Various Corporate M&A and Regulatory Advice |
| Yulchon's Corporate & Finance Group represented GSK on all transactional, regulatory and closing aspects of the transaction in Korea to consummate and implement the (i) formation and establishment of the Korean consumer healthcare joint venture; (ii) transfer of the consumer healthcare business from GSK Korea and Novartis, respectively, to the consumer healthcare joint venture company; (iii) purchase of Novartis Korea's vaccine business by GSK Korea; and (iv) sale of GSK Korea's cancer drug business to Novartis Korea. |
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| More specifically, Yulchon's Corporate & Finance Group advised GSK on a wide range of legal issues, including (a) regulatory compliance for the transfer of all licenses and permits under the Pharmaceutical Act; (b) foreign exchange regulations and controls; (c) foreign investment and foreign exchange transaction matters under the Foreign Investment Promotion Act and the Foreign Exchange Transaction Act; (d) labor law matters; and (e) general tax advice. |
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| By successfully handling the Korean corporate M&A portion of this global transaction, Yulchon has shown once again its unmatched level of expertise on innovative M&A transactions in general and in the healthcare industry in particular. |
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| Corporate & Finance partner Ki Young Kim, who is also co-head of Yulchon's Healthcare Team, led the Corporate & Finance advisory team's efforts, along with partner Hyun Suk Jin, senior foreign counsel Raymond M. Kang, senior associate Jin Wook Lee and foreign attorney Richard D.H. Han. |
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HR – Advising on Korean HR Issues |
| Yulchon's HR team worked closely with GSK's global HR counsel and local GSK staff in Korea, to provide counselling on Korean labor law issues arising from the transaction, including analysis of various options for transferring employees in phases such as secondment or via transition services agreement, employee consent requirements, and more. |
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| Yulchon's HR Team partner Sang Wook Cho, senior foreign counsel Soojung Lee, associate Jae Woo Park and foreign attorney Christopher Mandel handled the HR issues. |
