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Message: <blockquote data-quote="Rachel S" data-source="post: 20880" data-attributes="member: 3442">Hi guys, For the last commercial awareness update for January, topics are as follows:<a href="https://www.thecorporatelawacademy.com/forum/members/4422/" target="_blank">@Curtley Bale</a> - HS2.[USER=4295]@Jiraiya[/USER] - Xerox's Hostile Takeover of HP.@Heerim Hwang - Huawei gets the green light in UK 5G network.[USER=3115]@Ayah[/USER] - Coronavirus.[USER=3442]@Rachel Strickland[/USER] - Rolls-Royce Nuclear Reactors.An update on HS2: Price rises and more delays (Curtley Bale)The StoryAn independent review has found HS2 is likely to be over budget and behind its target delivery time. The investigation was commissioned by the Government in order to make a decision on the project’s future. The project initially had a budget of £56bn in 2015, but was revised to £88bn in 2019 (based on 2015 prices). Once again, there has been a further budget revision with the costs potentially spiralling to £106bn. It is also expected that Phase One from London to Birmingham will be delayed by 3-5 years with Phase Two from Birmingham to Leeds delayed by 7 years until 2040.Impact on Businesses and Law Firms HS2 has encountered significant difficulties along the way. The forecasts for completion are set to be almost a decade later than expected, something hitting businesses hard. Around 30,000 jobs in the construction sphere are at risk as companies have been recruiting extra talent and buying more materials in order to complete the project. Despite £8bn already being spent, there has yet to be any actual construction. It is thought that only 80% of Phase One designs are fully complete. If the Government decides to stop working on this project, the businesses who are already invested in HS2 will suffer significantly.Law firms DLA Piper and Eversheds Sutherland have been advising HS2 Ltd throughout the project. One tough area has proved to be the purchasing of properties along the planned HS2 route. It was expected this would cost around £1.1bn but has risen to around £5bn. Some property owners are stuck in debates with HS2 over the valuations of their homes and fair compensation.Interestingly, many regional law firms have developed a specialist HS2 practice. These have been developed to advise those who live or work in close proximity to the proposed routes. Firms such as Myerson and Wright Hassall have been advising clients on their legal rights regarding the disruption caused by HS2. This line of work looks set to grow as the project has yet to acquire all of the necessary land or compensate those it has inconvenienced.Xerox’s hostile takeover over HP(Jiraiya)Story The metaphor of a snake swallowing an elephant is particularly apt in this week’s story. Xerox, a company specialising in manufacturing printers for office and business use with a market value at approximately $8bn, has initiated a fresh proxy fight over its behemoth rival, HP, which is worth $30bn after Xerox’s offer to buy HP for $33bn was rejected in late November. The Two companies, if combined, would have nearly $70bn annual revenues.Impacts to businesses and law firms In simple terms, a hostile takeover occurs when a target company’s board of directors rejects the bidding offer and the acquiring company decides to skip the board and directly engages with shareholders to close the deal. It can be done through (1) tendering offers to shareholders to directly purchase their shares or (2) a proxy contest which means the acquiring company will campaign publicly to persuade existing shareholders to vote out of the incumbent board and to vote in a new board that is receptive to the acquirer’s proposal. Xerox is opting for the latter, an unusual move when its target is almost 4 four times its size.Why would Xerox be so bold? With the rise of electro-communication, digitalisation and smartphones and tablets substituting the need for personal computers, HP is undergoing a strategic overhaul. Its last-quarterly revenues were up less than 1% than its previous year. Similarly, Xerox is not immune to the broader market decline. This deal is believed to bring significant efficiencies and cost-saving. However, there is a price: Xerox would have to finance heftily: $24 bn. Such a loan would be added to the combined entity’s debts. The fact that both sides were still willing to talk after knowing all of this already indicates the industry outlook. Lawyers have a crucial role in a hostile takeover from planning to implementation. Xerox’s lawyers will help arrange financing. Based on the highly leveraged position, they must understand the target’s structure and set out a detailed scheme of repayment. HP’s lawyers may deploy several defence tactics. For instance, HP’s existing board could vest shareholders an option to purchase the target’s stocks at a substantially reduced price following a merger. Huawei gets the green light in UK 5G network (Heerim Hwang)The storyDespite months of pressure from the US based on security concerns, the UK has greenlit for Huawei to have a “limited role” in its 5G networks. Huawei will be banned from supplying the kit for the “security-critical core” and restricted to only account for 35% of the 5G market share (currently holds 34%). The government has said that legislation will be passed on the 35% market share cap and enforced by Ofcom.Impact on businesses and law firms Relations between the UK and the US (which has banned Huawei’s kit from being used there) are likely to take a hit. As part of the Five Eyes security partnership, the intelligence-sharing schemes between the US, UK, Australia, Canada, and New Zealand are likely to be affected due to concerns that the Chinese government could use Huawei’s equipment as a “backdoor” to monitor UK communications.The decision coincides untimely with an upcoming post-Brexit UK-US trade deal to be discussed. To further dampen relations, the UK will push ahead with a Digital Services Tax which would affect giant tech companies such as Facebook, Amazon, and Google.However, the decision to allow Huawei to have a role in the UK’s 5G networks has preserved the UK’s relations with China. The Chinese government had warned that “substantial repercussions” may have been inflicted on other investment and trade plans otherwise.The UK’s partial approval of Huawei means operators such as EE, O2, Three, and Vodafone (which have all launched 5G services in the past six months) do not have to spend more money to completely remove the Huawei equipment already installed. However, they must comply with the 35% cap and, according to material released by the National Cyber Security Centre (NCSC), this must be done within the next three years. Operators such as Three may have to diversify their suppliers to meet this limit - Three have agreed for Huawei to be the sole supplier for their 5G equipment.5G will offer internet 10 times faster than 4G which will in turn encourage for more things to be connected to the internet e.g cars. This presents a significant security concern for businesses and it is likely that law firms will need to assist their clients through potential legislation on cybersecurity as the matter increases in relevance.</blockquote>

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