$5 billion Port of Melbourne role ripe for taking, and not just for top-tiers

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The Victorian State Government has put out a call to law firms and investment banks to pitch for advisory roles on the sale of the Port of Melbourne, a deal with a potential $5 billion price tag.

The deadline for responses is July 18, and the Department of Treasury and Finance said it will offer a medium-term lease to operate the port, Australia’s largest container port, reported The Australian.

The Port of Melbourne, which is the last publicly owned port in the East, is to be sold irrespective of what party wins the upcoming election in November.

Cristean Yazbeck, the president of the Commercial Law Association of Australia (CLA) and principal at Rockwell Olivier (Sydney), told Australasian Lawyer that apart from the obviously huge financial benefits, the brand recognition that comes from acting on a deal as large as the port is “enormous”.

“It’s a great way for the team to “cut their teeth”, so to speak, by concluding a deal with so many facets and players. The deals themselves are usually quite complex, and go beyond the core transaction itself,” he says. “Also bear in mind that we’re talking here about Australia’s largest container port: Melbourne accounts for around 37% of the country’s container trade. We also understand the government will offer a 40-year lease to operate the Port of Melbourne – documenting that lease will be an exercise in itself.”

And the deal won’t necessarily be clinched by a top-tier – boutiques and mid-tiers are becoming increasingly well equipped to do the work traditionally reserved for their larger competitors, says Yazbeck.

This is because the Australian legal landscape has been through a significant change thanks to the arrival of the international mega-firms: This has not only added skills, but it has seen talent spread from many of the top-tiers to the internationals, boutiques and mid-tiers.

“This means that any firm which has skills should make a pitch, and a prudent purchaser of legal skills may consider ‘slicing and dicing’ the legal work for a large project to retain the best talent for specific tasks,” he says.

Transactions such as the Port of Melbourne and the more unusual pitching process being undertaken provides a “wonderful” bridge between commerce, law and government and is one that the CLA is keen to encourage, Yazbeck says.

He expects many firms will be seriously looking at this opportunity because it makes commercial sense, and says the timing of the sale is consistent with a pick-up in the Australian M&A space.

“One would think the traditional players in the large M&A space will be interested, and creative lawyers (irrespective of size) with certain skill sets would definitely be looking at demonstrating their value proposition to the Victorian Government. What is the worst that can happen: one misses out on this large project but impresses enough to be in the running for a smaller project given each state government’s desire to recycle old assets to fund new assets?”

The Port of Melbourne sale comes after the sale of a 98-year lease over the Port of Newcastle in April reaped an unbelievable $1.75 billion price tag.

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