Seth P. Joseph, Maria Chang Mayer and Jason P. Jones (J. Albert Diaz)
Dealmakers: Seth Joseph, Maria Chang Mayer and Jason Jones
The Deal: The Carlton Fields Jorden Burt lawyers closed $86 million in fourth equity capital round for Virgin Mobile Latin America Inc. to launch its brand in Mexico and Brazil and fund further expansion in Latin America. The deal was done in two tranches two months apart, one for $36 million and one for $50 million with the latest closing May 14.
Details: Already operating in Australia, Canada, France, India, South Africa, the United Kingdom and the United States with 15 million mobile subscribers, Virgin Mobile set out to expand to Latin America in 2010 with the formation of Virgin Mobile Latin America. The company operates in Colombia and Chile, launched service in Mexico last week and plans to launch in Brazil in 2015.
With two new funding rounds, the company rebuilt its corporate governance while amassing funds for expansion.
While investors approached previous investments as venture financing, a large sovereign fund participated in the latest financing, bringing more elaborate requirements to the table.
“In the process, we were making a series of changes to the capital structure to improve the standing of the existing shareholders,” said Joseph, a shareholder at Carlton Fields. “We all had to manage expectations and come up with a lot of solutions to bridge gaps between what the different investors wanted.”
The latest equity round was led by a subsidiary of Temasek Holdings, an investment company owned by the government of Singapore with a portfolio worth $173 billion. The London office of UBS was Virgin Mobile Latin America’s investment banker in the transaction.
The funding created a shareholder group that includes Richard Branson’s Virgin Group; Hermes Growth Partners, founded by former Telefonica chairman and CEO Juan Villalonga; ePlanet Capital, a U.S. venture capital group; and Imb. El Coigue, the holding company of Grupo GTD, a leading Chilean telecommunications operator.
With the latest financing, Virgin Mobile Latin America has raised more than $140 million in three years.
One obstacle the Carlton lawyers dealt with was managing expectations for different types of investors.
“Usually a PE (private equity) investor is thinking in terms of control,” Joseph said. “We had to figure out what would please and satisfy them without impairing the rights of the other shareholders.”
Also challenging was the variety and geographic spread of the international investors. The lawyers had different expectations on how the documents should read based on the norms of their legal systems and jurisdictions. The VMLA legal team had to help the lawyers understand the context of the deal and the company.
Additionally, the legal team was dealing with numerous time zones, so coordinating conference calls was tricky, particularly for emergency meetings. “Some people had to stay up very late or get up very early,” Joseph said.
Another obstacle that delayed the closing was Easter observances in Mexico, which delayed the closing.
Negotiations for the first part of the deal began in February. The second part took 45 days to complete.
Duties were divided among team members with Joseph focusing on key issues in the documents and negotiations, Mayer coordinating document preparation and ensuring the documents were produced in time and Jones acting as the “closing king,” making sure the packets were assembled for new investors and existing shareholders.
VMLA general counsel Catherine Jones, who had all the historical documents, handled the due diligence, oversaw negotiations and bridged discussions with the company’s board of directors.
Quote: “Who says you can’t raise $90 million for an early-stage company,” Joseph said. “For a venture round, this was a very good-sized deal, bigger than most venture rounds that are done in Miami.”
Background: Joseph, a Miami shareholder, has twice served as general counsel of public and pre-IPO technology companies with substantial cross-border technology sharing. Mayer is an of counsel in the firm’s Miami office and has worked there for six years. Jones is a first-year associate in Carlton’s Miami office.