Market Tracker weekly bulletin – 21st September 2018

A round up of key developments in corporate transactions covered by Lexis®PSL Market tracker this week.

Transactions

Takeovers

Competitive bids for Sky plc by Comcast Corporation and Twenty-First Century Fox Inc.

The Takeover Panel (Panel) have intervened and established a rare auction procedure pursuant to Rule 32.5 of the Takeover Code, to provide an orderly framework for the resolution of the competitive bids for Sky by Twenty-First Century Fox Inc. (Fox) and Comcast Corporation (Comcast). The Sky takeover battle has run over nearly two years and the sealed auction bid will end the bidding war.

The auction is expected to commence on 21 September 2018 and end during the evening of 22 September 2018. The auction process consists of three rounds of bids; the lowest bidder, Fox, will make the first bid in the first round which will then be followed by the competing bidder, Comcast. For more detail on the auction procedure, see our news analysis in Lexis®PSL Corporate: Takeover Panel establishes auction procedure for competitive bids for Sky plc (subscription required).

The rare auction procedure is most likely to be implemented where a competitive situation continues to exist in the later stages of an offer period. Sky plc shareholders have reluctantly accepted the bids made by Fox and Comcast. Both competing bidders extended their offer periods after receiving low acceptances from Sky shareholders, Fox received acceptances of approximately 0.7% and Comcast received acceptances of approximately 0.29%.

The last time the Panel intervened was over 10 years ago, where Tata Group outbid Companhia Siderurgica Nacional to acquire British company Corus Group plc for £6.7 billion to create the world’s fifth largest steelmaker.

Equity Capital Markets

Aston Martin sets its sights on a £5 billion IPO

On Thursday 20th September, Aston Martin announced a price range of between £17.50 and £22.50 per share for its upcoming IPO, which would give the company a market capitalisation of between £4 billion and £5.07 billion upon listing. If the top end of the company’s price range is realised, Aston Martin will qualify for the FTSE 100.

Aston Martin will not be offering new equity through the listing.  The selling shareholders are offering between 56,305,622 and 57,380,300 shares. In its prospectus, the company states that it  ‘expects the selling shareholders and other selling shareholders to raise in aggregate approximately £1,135.5 million (assuming that the Offer Price is set at the mid-point of the Price Range and no exercise of the Over-allotment Option) before taking into account expenses’.

Prestige Motor Holdings, a significant shareholder, holds 24.3% of Aston’s issued share capital. Other selling shareholders include Primewagon (UK) Limited and Asmar Limited. Aston Martin’s senior management will also participate in the offer.

In an unusual direct retail offer structure, Aston Martin is making 15% of the share offering available to existing customers and employees. Customers are limited to a £50,000 investment and preferred customers may purchase up to £99,999 worth of shares at the offer price. For more detail on this transaction, see the company’s prospectus, which is also available on Lexis®PSL Market Tracker with an analysis of the transaction (subscription required).

Returns of value to shareholders

Rio Tinto

On 20 September, Rio Tinto announced a share buyback programme which will return £2.44 billion to the company’s shareholders. This is the fourth buyback programme the company has announced since September 2017, returning around £5.4 billion to shareholders upon completion of the most recent programme.

The newly announced programme is funded through disposal of the company’s coal assets and is indicative of sector’s prioritisation of maximising shareholder returns. The buyback will combine an off-market tender of up to £1.45 billion Rio Tinto Limited shares, and on-market purchases of Rio Tinto plc shares. For more information on this transaction, see Lexis®PSL Market Tracker (subscription required).

Glencore plc, a major competitor of Rio Tinto, are currently undergoing their own share buyback programme in which £755 million is being returned to shareholders. Our initial findings support the reports of an increase in share buybacks over the last 12 months, with a mean value of £1.37 billion in the first 9 months of 2018 in comparison to £310 million over the same period in 2017.

Latest developments

Chinese A-shares’ depositary receipts admitted to trading on LSE

The London Stock Exchange (LSE) has published notice N15/18, in favour of admitting the trading of Chinese A-shares’ depositary receipts to the main market and traded through the LSE’s International Order Book trading service. For more detail see Lexis®PSL Corporate (subscription required).

FTSE 350 companies must improve reporting on diversity

The Financial Reporting Council concludes that, although the majority of the UK’s largest companies have adopted policies on boardroom diversity, their reporting to stakeholders needs to improve. It was found that only 15% of FTSE 100 companies fully complied with the current UK Corporate Governance Code’s provision on diversity reporting. For more detail see Lexis®PSL Corporate (subscription required).

In focus: Blockchain

2018: The rise of blockchain

The term blockchain is commonly used to refer to software technology which enables the creation and operation of a shared, typically decentralised database in which time-stamped data entries are made confidential by cryptography or hashing (transforming data into a fixed length of characters which forms a digital fingerprint of the data it contains).

Entries can be submitted by multiple participants (often referred to as the nodes) and, after verification of the data entry, again by multiple participants in accordance with agreed rules or protocols (consensus), the record is added as the next block in the blockchain.

Numerous legal and regulatory issues are emerging as the technology evolves. This article does not aim to explore those, but they are comprehensively discussed in a number of resources available via Lexis PSL, for example, Blockchain—key legal and regulatory issues (for which a subscription to one of the TMT, Banking or Financial Services Practice Areas is required).

Meanwhile, Market Tracker is seeing an increase in references to blockchain and its associated technologies in annual reports and circulars.  For example, in its latest annual report, TUI AG noted that:

‘…we are striving to centralise our inventory on one database…. Blockchain as an underlying technology ensures transparency and trust as well as an immutable tracking of ownership. Suppliers can be on-boarded easily, including new partners from all over the world.’ Page 22, annual report.

Similarly, Anglo American, which owns the De Beers diamond empire, stated in its annual report:

‘De Beers also began the development of a new digital platform for the diamond industry, backed by highly secure blockchain technology, which will provide a single immutable record for every diamond that is registered. Currently in the pilot phase, this initiative is being designed to underpin confidence in diamonds and the diamond industry for all stakeholders, while streamlining existing manual processes and creating new efficiencies in the value chain.’ Page 48, annual report.

Whilst the annual report of the London Stock Exchange Group noted that:

‘The Group continues to assess opportunities that exist in Financial Technology (FinTech) such as distributed ledger/blockchain, machine learning, big data and cloud-computing. LSEG, through Borsa Italiana, announced in July, a collaboration with IBM to develop a blockchain solution to digitise the issuance of securities for unlisted SMEs in Europe. This aims to replace paper trading certificates, commonly issued by private companies, with a more streamlined and transparent process.’ Page 32, annual report.

Other companies exploring the possibilities include Standard Chartered, BP, Centrica, First Derivatives and J Sainsbury.

In its placing circular earlier this year, Draper Esprit plc explained that ‘the primary purpose of the Placing and Subscription is to raise further funds so that the Company may continue to develop its successful strategy since IPO of investing in early and growth stage European digital technology businesses in order to deliver attractive long term returns to investors.’ An example given of this was the £18 million invested by the Company in Ledger, the Paris headquartered cryptocurrency and blockchain security company.

Lexis and Market Tracker will continue to monitor the rising commercial importance of blockchain. Indeed, the technology and its opportunities for the legal profession are explored in a recent Lex Chat* podcast, which takes a deep dive into one of the most talked about emerging technologies in law - smart contracts.

*Launched in August 2018, Lex Chat is a brand new podcast from LexisNexis.
All statistical data in this bulletin is provided by Lexis®PSL Market Tracker, a unique service for corporate lawyers that allows users to access, analyse and compare the specific features of corporate transactions (subscription required).

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