EY slashes jobs

👋 G’day

Last week we covered the lawyers behind Chemist Warehouse / Sigma’s $30bn merger. 

Now the deal is done, let’s dive into the deal’s quirky features 👇

• Reverse listing structure: Chemist Warehouse has been floated as an IPO candidate for years. The founders started Chemist Warehouse in a gritty Northern Melbourne suburb and have grown the business to $3bn in annual revenue. But they haven’t been able to monetise their shareholding. Until now. With a dead IPO market, they were forced to get creative – a reverse takeover of this size (Chemist Warehouse owns ~86% of the group) is unorthodox but lets the founders finally cash out.

• ACCC clearance: Chemist Warehouse now has a 26% market share in Australia, and it took 6 months for ACCC clearance. A court-enforceable undertaking got it over the line, with Sigma allowing its franchisee pharmacies to exit. ACCC usually prefers structured undertakings requiring a divestiture, but this decision could mean a more relaxed stance going forward.

• Related party transactions: A whopping 84% of Chemist Warehouse’s 2023 revenue ($3.1bn) came from related party transactions with its directors, execs, and families. And so this deal created the potential for a “governance Frankenstein”. With ASX and ASIC sticking their nose in, the two companies had to be on the front foot, creating an independent board committee to manage these arrangements.

D-day is finally here – Chemist Warehouse starts trading on the ASX this morning. So franchisees of the pharmacy giant can now sell their shares, but the real question is how many will exit and how will it impact the share price?

Anyways, today’s brief:

• EY plans major job cuts in its legal team.

• High Court upholds judicial immunity for judges.

• Macquarie ditches Net-Zero Banking Alliance, and corporates ditch DEI.

Here’s the latest 👇

PRACTICE POINTS

Shifting the trustee’s focus

• The High Court has narrowed fiduciary duties. In Naaman v Jaken Properties Australia Pty Limited, the High Court ruled that a successor trustee doesn’t owe a fiduciary duty to a former trustee regarding indemnification rights. This decision confirms that trust administration is based on equitable proprietary rights, not fiduciary duties between trustees. While a former trustee has a right to be indemnified from trust assets, this doesn’t create a fiduciary relationship with the successor trustee. The successor trustee’s primary duty is to beneficiaries, not to protect the former trustee’s interests: The Lawerly

• NULIS, former NAB super fund trustee, is gunning for the first-ever indemnity costs in a class action that nosedived after the lead applicant rejected a $25m settlement offer. The Court has never granted indemnity costs in a class action where the lead applicant rejected a Calderbank: Lawyerly

• The Federal Court has slapped Firstmac Limited with an $8m penalty + ASIC’s costs for breaching design and distribution obligations (DDO). What are DDOs? Well, DDOs require issuers to design financial products to meet the needs of consumers and to distribute their products in a more targeted manner. In ASIC’s first civil penalty action against a distributor for a DDO violation, the court found Firstmac failed to ensure its High Livez investment product was distributed to the right customers.

WORD ON THE STREET

K&L Gates backpedals on diversity

• K&L Gates made some edits to their website, removing references to diversity and key stats about the firm demographics. The firm's Diversity and Inclusion committee even got a rebrand to Opportunity and Inclusion. The firm came out in a firmwide email admitting the changes to the website were "not handled as well as it should have been": Above the Law

• BHP has tapped former NAB CEO Ross McEwan as its next chairman, succeeding Ken MacKenzie, who held the role for just over eight years. McEwan’s no stranger to big roles, having led the Royal Bank of Scotland from 2013 to 2019, and taking the reins at NAB right after the Hayne royal commission: AFR

• Top silk steps up as senior public defender in the NSW. Richard Wilson SC will begin his seven-year term on 17 February. Mr Wilson previously worked as a barrister at Seventh Floor Garfield Barwick Chambers, before becoming a public defender, where he’s been for the past 12 years: Lawyers Weekly

• G+T adds yet another Dentons partner to its Sydney office. Stanley Mok joins the firm’s banking arm as a specialist in securitisation, structured finance and derivatives. Mok started at Allens before spending 7 years at Ashurst until he joined Denton’s partnership: Lawyers Weekly

• EY opts for job cuts. The Big 4 firm is set to restructure its regional law practice, a move expected to result in major job cuts. The firm has asked staff for feedback on the proposed changes as the restructure could lead to a reduction in the law team’s size. EY joins KPMG and PwC in scaling back their legal efforts, as consulting firms struggle to break into Australia’s legal market. After a tough year marked by redundancies and cost-cutting, EY’s legal team, which once had the largest practice among major consultancies, is now backtracking: AFR

TALKING POINTS

High Court upholds judicial immunity

• The High Court has overturned a controversial ruling that held a judge liable for a man’s false imprisonment. The Court was asked to interpret the rule that judges could not be held accountable for their decisions. The Court ruled that judicial immunity extends to actions taken in both actual and "purported" exercise of jurisdiction, protecting judges like Judge Vasta, who made many “egregious errors” in his treatment of Mr Stradford, who he sentenced to 12 months in prison for contempt: Lawyerly, AFR

• A new form of lending in Australia lets borrowers use cryptocurrencies like Bitcoin as collateral, despite their volatile nature. If Bitcoin’s price rises during the loan term, borrowers can access more funds—for a car or home deposit, for example. If it drops sharply, they’ll need to put up more cash: ABC

• 1 in, 4 out: Trump’s shaking up federal staffing with an executive order to cut four jobs for every new hire. Speaking with Elon Musk in the Oval Office, Trump said new hires will need DOGE approval— yep, Musk’s efficiency department: The Economist

TREASURY

DEAL ROOM

Biggest Aus health deal?

• Will this be the biggest 2025 deal in Aussie healthcare? Swedish PE group EQT joins The Carlyle Group and CV Capital in the $1bn auction to buy Device Technologies. Device's largest market is in healthcare robotics: The Australian

• Insignia Financial is in the middle of a three-way takeover showdown, but the drama doesn't stop there. Mercer’s circling the ring, ready to pounce if the talks fall apart or if one of the winners is open to breaking up the business The Australian

• David Di Pilla and health insurer Bupa are teaming up to make a play for Healthscope, Australia’s second-largest private hospital operator. Di Pilla, who runs HMC Capital, is swooping in as Healthscope struggles with rising debt and ballooning operating costs. While Bupa doesn’t run hospitals in Aus, it does have 20 hospitals across Spain, Chile, Poland, and the UK: The Australian

SECTOR SPECIFIC

Yacht deception

🚜 DIGGERS

• Ellison’s taking a hit from the MinRes board, starting with a $3.8m penalty for two payments made to his offshore entity. He’s already paid up. On top of that, he’s forfeiting his bonuses and will shell out $1m annually for the next five years to an unnamed charity. Still, Ellison maintains he’s innocent, arguing the board’s actions were too harsh: AFR

• Amidst a soaring gold price (above $US2900 an ounce), Evolution Mining has almost quadrupled its profit and tripled its dividend: AFR

🏦 FIN

• Macquarie Group, a big player in global green energy investments, has followed US banks like Goldman, Morgan Staley, JPMorgan and others in ditching the finance sector's top climate alliance – Net-Zero Banking Alliance: Bloomberg

• McKinsey is opting for a "diverse meritocracy" to comply with the Trump administration’s crackdown on DEI programs. No quotas or rigid targets here—just a softer "aspiration" for gender parity: AFR

• CBA is doubling down on tech, with its latest results showing investment spending hit nearly $1.1bn in the six months to December 31, up from $988m last year. Annualised, that’s a projected $2.2bn for the fiscal year, marking a solid 10% increase from the previous year: The Australian

🏡 RETAIL & REAL ESTATE

• Queensland’s sovereign wealth fund, QIC, is shifting its focus to tackle the state’s housing and healthcare shortages, eyeing strong returns in those sectors. Under the leadership of Deborah Coakley, who took charge of QIC’s $14.5bn real estate platform in April 2024, the fund is moving away from shopping malls and into affordable housing and healthcare. QIC plans to build affordable housing projects, leveraging its vast land holdings along the eastern seaboard.

• Lawyers for ASIC have alleged that former Star Entertainment executives suggested using receipts for yachts, private jets, and golf days to mislead a Chinese financial institution, making it appear that transferred funds weren’t being used for gambling at their casinos: AFR

📱 TECH

• Telstra is mulling over the sale of its data centre assets, which are worth $100m–$200m, making it Telstra's first infrastructure sale since 2021: AFR

• Australian data centre giant AirTrunk is dropping around $2.5bn to establish a new facility in Malaysia, aimed at supporting AI and cloud computing services, its first major move since being acquired by Blackstone: AFR

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