05 December 2017

Deal Wrap: The Ansell Acquisition

KWM acted as global counsel for Humanwell Healthcare (Group) Co., Ltd, a Shanghai listed healthcare company, and CITIC Capital on their US$600 million acquisition of ASX-listed Ansell Limited’s sexual wellness business.

The business manufactures and sells a wide variety of products across the world, including high quality condoms, lubricants, feminine hygiene products and vibrating devices under the Skyn, Lifestyles, Zero, Manix, Blowtex and Jissbon brands.

This matter represented one of Australia’s most significant M&A transactions in 2017, and showcased the power of the firm to manage and deliver a difficult global transaction involving significant amounts of global intellectual property in a highly regulated industry.

Find out more about the Ansell acquisition in the video below, in which our advising team discusses:

  • KWM’s role on this transaction and the advising team
  • The most significant challenges presented by the matter given it spanned multiple jurisdictions
  • How KWM was uniquely positioned to negotiate the cross border complexities
  • How KWM can help Chinese businesses navigate current PRC regulatory opportunities
  • The complexities which needed to be negotiated in separating the sexual wellness business from Ansell
  • The significant role IP played in this matter

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What was KWM’s role on this transaction and how broad was the advising team?

David Friedlander: We had the major role in the transaction which was to execute it for the party that was mostly likely to buy this asset. It is quite interesting we were involved right from the beginning but the seller then decided to run a process, but we won that process or our client did and our role was really to coordinate globally everything we did to buy this business - a big global business run primarily out of the US but in fact with a lot of heft in China and so it’s quite important that we have that capability.

Well straight away when the transaction came in we got engaged with our IP team - Scott Bouvier ran that part of the deal - but we really engaged with all parts of the firm because it’s a big business and it covers IP, it covers a lot of labour issues, it covers a lot of property issues. We obviously had to coordinate Counsel in a range of places and that’s something we do a lot because of our place in Asia.

Matt Egerton-Warburton: So we were dealing with local Counsel and 16 different jurisdictions but we managed it from Australia with our team working with our colleagues in Singapore, China and London and global Counsel around the world which was a unique aspect of this deal, but I think that we managed it as well as we would have if we were working out of Hong Kong, London or New York.

What were the most significant challenges presented by the matter given it spanned multiple jurisdictions?

Matt Egerton-Warburton: Now Ansell is a tremendously international company its nominally headquartered in Melbourne and listed on the Australian Stock Exchange, but for this business division only 6% of the revenue is in Australia, the rest of the revenue is all round the world.

The CEO of Ansell is in New Jersey, the General Counsel is in New Jersey, the CFO is in London and for our business division all the leading executives were in Belgium. The product is manufactured in Thailand, India and Brazil, and sold all over the world so we need to be able to operate in 16 to 20 jurisdictions to get this transaction completed.

The deal presented a lot of difficult challenges, the main one was understanding all the nuances that you needed to cover in each jurisdiction. For example, we needed to take a mortgage over a factory in India getting involved in Indian mortgage law. We had to transfer IP in France - dealing with French regulators there. We had to deal with regulators in China and Australia to get this transfer through.

So it was the number of issues that we had in every single different jurisdiction that was the most difficult thing and of course we are dealing with a product that is medically regulated so we had to deal with medical regulations in all those different jurisdictions as well. It was a tremendously complicated transaction.

How was KWM uniquely positioned to negotiate the cross border complexities?

David Friedlander: First we have this very significant China piece and there aren’t many people who’ve got that in fact there’s no one who’s got it and so we are well placed to do anything that touches China.

Why that’s more important than other places is that China is culturally more different than most other places. Most of the places on the planet try and do things the English way or the US way. They generally follow that. China does it its own way and so you know it’s quite important when you have a China transaction like this one with China clients that we can bring our expertise and our relationships and our cultural know how - what we call ‘AQ’ - to bear.

Lee Horan: Working with our Chinese clients we need to understand and be able to navigate cultural sensitivities and differences on global deals. That was really brought to bear here with our Chinese clients negotiating against largely a US and Australian counterparty.

It was also really important to bring to bear our Singapore capability on this deal, setting up the bid vehicle which was a JV between Citic and Human World in Singapore, and creating a management equity plan going forward that was also based in Singapore so the whole transaction involved bringing together the network in Asia and using our Chinese and Asian capability.

How can KWM help Chinese businesses navigate current PRC regulatory opportunities?

Xue Han: Firstly knowledge is power. It’s very important that you know the practice, you know how those policies play out in the province you operate in - that’s very important. We can’t really play magic here, but at least we can tell the client it was the best reality which could be accomplished in his province.

What complexities needed to be negotiated in separating the sexual wellness business from Ansell?

Scott Bouvier: This is about as complex a business separation as you can get. It’s a truly global business across about 20 countries around the world and Ansell have 2 main elements to their business, a commercial business and its sexual wellness business - all completely integrated.

So we had to split up regulatory filings, we had to split up people and all the different regulatory regimes about moving people around the world with French works counsels and complicated things in Brazil.

We had IT agreements, we were buying a business that didn’t actually have an IT system of itself so we really had to build up the transitional services arrangement. When you’re working in a business as integrated as that, they don’t really know how they service each other so there’s quite an exploratory exercise where we worked with EY and the client and the target closely to work out how we would do this.

We were buying something that was part of a business and we had to build it as we went so what was really great about is how collaboratively we worked together to get the process moved along and over several months came up with a pretty smooth transition so the business could sort of operate on day 1 in a fairly smooth manner.

Given the prominence of Ansell’s brands, how significant a role did IP play in this matter?

Scott BouvierNot only brands but also the patented technology was key to this business. So the skin product which is one of their growth products has got a proprietary technology that’s patented by Ansell and it had to be licensed in a very clever way by our client.

At the same time Ansell’s got global patent litigation involving this technology with a major competitor, Reckitt Benckiser, so we had to factor that into it. We had to understand that dispute, we had to get the right licence at the same time as analysing 1300 brands around the world and how strongly they were protected.

So the skin brand is a growth product that a lot of other brands, both local brands like Jissbon in China or Blowtex in Brazil, but then analyse how they were protected, what the disputes were - lots of different disputes involving trademarks around the world - and really present to our client the views that this was a strongly protected brand, the IP and the patents were there and we were able to buy the business with that confidence but also factor in the risk mitigations around things in terms of how those disputes would fall out.

A combined team from our Mergers & Acquisitions, Intellectual Property, Banking & Finance, Projects & Real Estate, Dispute Resolution and Taxation practices advised on the transaction, across KWM’s offices in Australia, Asia and Europe. If you have any questions about the transaction or would like assistance with cross border matters, please contact us.

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