Herbert Smith Freehills' London and Madrid offices have teamed up to advise Telefónica SA on its agreement to sell O2 to Hutchison Whampoa, parent company of UK telecom operator Three, for an initial amount of £9.25 billion and an additional deferred payment of £1 billion to be paid once the cumulative cash flow of the combined company in the UK has reached an agreed threshold.
The combination of Three and UK will create the UK's largest mobile operator, with almost 33 million customers.
The Herbert Smith Freehills team was led by M&A partners Gavin Davies and Nick Moore in London and Nicolás Martin in Madrid, with telecoms expertise provided by the London TMT team led by Nick Elverston and Amanda Hale.
The transaction is expected to complete in 2016 and is subject to receipt of regulatory approval.
This is the first major M&A transaction on which Herbert Smith Freehills has been instructed by Telefónica.
The firm's top-tier telecoms practice has enjoyed a close relationship with O2 for a number of years.
This follows on from Herbert Smith Freehills' lead role in TSB's £1.7 billion takeover offer from Spanish bank Banco Sabadell, led by Senior Partner James Palmer and London corporate partner Mike Flockhart. Elsewhere in Europe, the firm advised on the largest acquisition in Italy and the largest takeover in Germany, as well as TUI Travel's $5.2 billion merger with TUI AG last year.
Gavin Davies commented:
"We are delighted to have supported the client on this major transaction. It is another great transaction for our European M&A team, which has had a great run over the last months on some of the most significant deals in the market."
Nicolás Martin, Head of Corporate at the firm's Madrid office, commented:
"We are proud to be representing Telefónica, one of the most significant Spanish companies. Our strengths in Spanish and UK M&A, and our particular specialist telecoms offering, placed us well to serve the client on this important milestone."
Hutchison Whampoa was advised by Linklaters on the transaction, and by Freshfields on competition law issues.
