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A round up of key developments in corporate transactions covered by Lexis®PSL Corporate and Market Tracker this week, including an update on Visa’s bid for cross-border payments specialist Earthport, and a focus on placing and open offers in 2018.
The once recommended £233 million offer by MasterCard International Inc. (Mastercard) for Earthport plc (Earthport) lapsed on 8 March 2019 due to insufficient shareholder support. Rule 10 of the Takeover Code requires the acceptance condition of an offer to be set at shares carrying over 50% of the voting rights in the target. The total number of Earthport shares that Mastercard counted towards the satisfaction of the acceptance condition was 0.29% of Earthport’s issued ordinary share capital. The acceptance condition was not satisfied so the offer could not be declared unconditional and therefore lapsed.
Earthport had previously withdrawn its recommendation of Mastercard’s offer after it received an increased offer from Visa Inc. (Visa) for £247 million. On 13 March 2019, Visa announced that their offer had been extended until 30 April 2019 and that they had received acceptances of 41.02% of the issued ordinary share capital of Earthport which count towards satisfying the acceptance condition to the offer. The Visa offer remains ongoing and the Market Tracker team will continue to monitor developments in this transaction.
Lexis®PSL Market Tracker reviewed a total of 169 secondary offerings on AIM and the Main Market during 2018, the scope of which included all offers for subscription, placings, placing and open offers, and rights issues raising in excess of £10 million in gross proceeds for the company. The research has been conducted as part of our upcoming ECM Trend Report, which analyses IPOs and secondary offers over the last year, reviewing key developments and identifying emerging trends in market activity.
In the bulletin this week, we focus on open offers, a deal type which appears to have declined in popularity over the last few years.
Open offers made up 11.3% of all secondary offerings across both AIM and the Main Market in 2018. The gross proceeds for open offers across both markets was £1,405.7 million. Of the total money raised in 2018 by transaction type, open offers accounted for 8.4% of all total gross proceeds.
Open offers - Main Market
There were 13 placing and open offers on the Main Market in 2018, making up 14.3% of Main Market transaction volume across all transaction types. The 13 open offers raised a total of £1,302.9 million, which represents 9.6% of the total gross proceeds raised by all Main Market secondary offers in 2018.
Our 2018 findings indicate a decline of 12.6% in Main Market open offers as a total percentage of overall transaction volume compared with 2017, where there were 17 open offers on the Main Market out of a total of 104 secondary offers (16.4%).
In 2018, open offers represented a smaller percentage of overall gross proceeds raised by secondary offers compared to the 2017 transactions, where open offers represented 23.1% of aggregate gross proceeds.
Of the 13 Main Market open offers, 7 transactions (54%) listed investment as the main reason for the offer. Three companies listed acquisition as the reason behind the open offer (23%) and a further three companies (23%) listed debt repayment as the rationale for the open offer.
9 of the 13 companies (69%) that listed open offers on the Main Market are categorised in the investment sector (of the other 4 companies, two are in the retail sector, one in the financial services sector and one in the TMT sector).
As expected, the Investment companies that conducted open offers listed investment as the main reason for the open offer.
Open offers - AIM
There were 6 placing and open offer transactions on AIM in 2018, representing 7.7% of all transaction volume. In comparison to the Main Market, our findings show a significant decrease in open offers as a percentage of secondary offers on AIM. In 2017 open offers represented 17.2% of all secondary offer transactions, indicating a decrease of 55.3% in this transaction type in 2018.
The 6 open offers in 2018 contributed to 3.4% of the total gross proceeds raised by AIM companies via secondary offer in 2018. This represents a decline of 64.2% from £588.8 million in 2017 to £102.8 million in 2018.
Three of the six open offers listed investment as the reason for the open offer. Two companies stated the main reason for the offer as facilitating capital raising along with supporting future growth. One company listed debt repayment as the rationale for the open offer. Our findings suggest that there is no singular identifiable reason for AIM companies to opt for open offers over other types of secondary fundraising.
Our research indicates that a broad range of companies conducted open offers, and the transaction type is not dominated by one industry sector in particular. This can be contrasted with the Main Market, where the majority of companies carrying out open offers were in the investment sector.
Our upcoming trend report will look in more detail at secondary offerings across a three-year period and will be published later this year.
The Financial Conduct Authority (FCA) has published Primary Market Bulletin 22 which focuses on Brexit and summarises the key changes to the Listing Rules (LR), the Disclosure Guidance and Transparency Rules (DTR) and the Prospectus Rules (PR) that will apply if the UK leaves the EU in a no deal scenario. For more on this story see our news article: FCA Primary Market Bulletin 22 summarises changes to rules and guidance in a no deal Brexit - (a subscription to Lexis®PSL is required).
On 18 March 2019, the CMA published guidance on the functions of the CMA after a ‘no-deal’ exit from the EU. The guidance explains how a no-deal Brexit would affect the powers and processes of the CMA for merger control, antitrust and cartel enforcement and consumer protection law enforcement after exit day (as defined in the European Union (Withdrawal) Act 2018 (EU(W)A 2018)). The guidance is intended to come into effect on 29 March 2019 (exit day), only in the event that the UK leaves the EU in a no deal scenario, and the Competition (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/93) has come into effect. If the UK does not leave the EU in a no-deal scenario, the guidance will be withdrawn. For more on this story see our news article: CMA: Guidance on CMA functions in a ‘no-deal’ Brexit scenario published - (a subscription to Lexis®PSL is required).
The European Commission has published a report on progress achieved on the capital markets union (CMU), including with regard to sustainable finance, ahead of the upcoming meeting of the Council of the EU on 21-22 March 2018. The Commission has called on EU leaders to keep up the political engagement necessary to lay down the foundation of the CMU. For more on this story see our news article: European Commission reports on progress towards capital markets union ahead of Council meeting - (a subscription to Lexis®PSL is required).
The European Commission has adopted two Delegated Regulations on certain provisions in the Prospectus Regulation. One Delegated Regulation (C(2019) 2020 final) concerns the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The other Delegated Regulation (C(2019) 2022 final) relates to regulatory technical standards (RTS) concerning key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus, and the notification portal. For more on this story see our news article: Commission adopts two delegated regulations on certain provisions in the Prospectus Regulation - (a subscription to Lexis®PSL is required).
The Financial Conduct Authority (FCA) has published a supervisory statement (SS) setting out how it intends to operate the pre- and post-trade transparency regime for the secondary trading of financial instruments if the UK leaves the European Union on 29 March without a withdrawal agreement.
Under the UK legislation that will then take effect the FCA will be responsible for many of the tasks the European Securities and Markets Authority (ESMA) currently undertakes under the EU legislation, MiFID II (the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (MiFIR)).
The SS takes into account the statement issued by ESMA on 5 February 2019 regarding the use of UK data in ESMA databases and performance of MiFID II calculations in case of a no-deal Brexit. It also takes account of the statements issued by the FCA and ESMA regarding post-trade transparency. Finally, the SS is intended to supplement statements of policy issued by the FCA on 4 March 2019 about how it intends to use its temporary powers for the MiFID II transparency regime that are set out in the onshored MiFIR.
HM Treasury has announced that over 800,000 employees in the UK are now covered by the Women in Finance Charter, as more than 30 new companies sign up to the government’s plan to tackle gender inequality in financial services.
The announcement comes with the Treasury’s launch of the second Women in Finance Charter Annual Review. The review indicates that female representation in senior management at firms who have signed up to the charter has increased, with 86% of signatories having upped or maintained the proportion of women in the top jobs.
The economic secretary to the Treasury, John Glen, noted: ‘Gender equality is not just a moral imperative, it’s also better for employees and better for business. Which is why it’s vital that we see conversations on gender diversity taking place across the financial sector.’
The Women in Finance Charter asks financial services firms to commit to four industry actions to prepare their female talent for leadership positions, namely:
• appoint one member of the senior executive team who is responsible and accountable for gender diversity and inclusion
• set and publish internal targets for gender diversity in senior management
• publish progress annually against these targets in reports on their website
• have an intention to ensure the pay of the senior executive team is linked to delivery against these gender diversity targets
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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