Market Tracker weekly bulletin – 4 April 2019

A round up of key developments in corporate transactions covered by Lexis®PSL Corporate and Market Tracker this week, including an update on Sports Direct’s possible offer for Debenhams and a look at further issues on AIM and the Main Market by transaction type.


Sports Direct continues retail rescue mission

On 25 March 2019  Sports Direct International plc (Sports Direct) announced that it was considering a possible offer for the entire issued and to be issued share capital of Debenhams plc.  Sports Direct is emerging as an active bidder in the retail industry, and the possible acquisition follows a string of high-profile transactions involving the company, including its acquisitions of House of Fraser, Evans Cycle, HMV, Patisserie Valerie and Findel plc (Findel), and a recent bid to rescue struggling fashion retailer LK Bennett.

The possible acquisition of Debenhams comes after media speculation on Debenhams’ refinancing and restructuring. Sports Direct offered to assist Debenhams in its short-term liquidity requirements by acquiring Magasin Du Nord, Debenhams' Danish business, for £100 million in cash. Debenhams had announced the sale of Magasin Du Nord in 2018. Sports Direct proposed a 12-month option to enable Debenhams to purchase back Magasin Du Nord at the price at which it was sold to Sports Direct. It was also proposed that Debenhams would have the right to continue to market the business and would gain the benefit from any uplift above the initial sale consideration if sold to a third party within the 12-month option period.

Debenhams noted the possible offer and confirmed that it will consider a firm offer if made by Sports Direct provided that it includes the following:

  • An offer price, form of consideration and any other terms of such possible offer
  • a clear plan of how Debenhams' existing debt - which will fall due on any change of control - will be repaid; and
  • a proposal that addresses the immediate funding requirements of the business.

Debenhams highlighted that in light of the timetable of a firm offer, it was likely that it would not be in time to address its funding requirements and confirmed that it intended to continue with its plan to obtain the funding required, as outlined in its statement of 22 March 2019.  

Sports Direct is currently involved in two offers simultaneously. In addition to the possible offer for Debenhams, the company made a hostile mandatory offer for Findel on 4 March 2019. Under Rule 9 of the Takeover Code, the mandatory offer was triggered after Sports Direct unconditionally agreed to acquire 36.8% of the existing issued share capital of Findel, held by City Financial Absolute Equity Fund. The mandatory offer requires Sports Direct to acquire the remaining Findel shares not already held by Sports Direct International, at a price of 161 pence per Findel share.

On 27 March 2019, Findel published its defence document against the offer of Sports Direct urging shareholders to not accept the offer of 161 pence per Findel share and stating that it significantly undervalues the company and its future prospects.

Market Tracker will continue to monitor developments in both these transactions.

In focus: Secondary offers by transaction type

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 the different types of further issues on AIM and the Main Market.

2018 secondary offering volume by transaction type - AIM

Our findings indicate little diversity among transaction type on AIM with placings emerging as the most popular method of fundraising by a wide margin. In 2018, 92% of all secondary offers on AIM were conducted as a placing. There were no rights issues or offers for subscription during 2018, which confirms a three-year trend that has seen placings dominate transactions on AIM.

2018 secondary offering volume by transaction type - Main Market

Our findings indicate a greater diversity in type of transaction on the Main Market than on AIM. Although placings remain the transaction type of choice for secondary fundraisings on the Main Market, rights issues have increased in popularity during 2018, claiming 16.48% of all secondary offers, up 186.6% from 2017, where there were only 6 rights issues of a total 104 secondary offers. Offers for subscription have decreased from 15.4% of all secondary offers in 2017 to representing 6.6% of all secondary offers in 2018. Combined placing and open offers showed a slight decline from 16.4% of all secondary offers in 2017 to 14.3% of all secondary offers on the Main Market during 2018.

Our upcoming trend report will look in more detail at secondary offerings across a three-year period and will be published next month.

Latest developments

Strategic Trade Advisory Group members announced to advise on future trade policy

The Department for International Trade has named the members of the Strategic Trade Advisory Group. The group—made up of 16 representatives—will advise the government on future trade policy strategy and issues, including new trade agreements. It will be chaired by Trade Policy Minister, George Hollingbery. For more on this story see our news article: Strategic Trade Advisory Group members announced to advise on future trade policy - (a subscription to Lexis®PSL is required).

Revised version of Takeover Code published

The Takeover Panel (the Panel) has published a revised version of the Takeover Code (the Code) to reflect three recent amendments. This first concerns amendments made by Instrument 2019/1 (asset valuations and other matters), published on 6 March 2019. The second concerns amendments made by Instrument 2019/2 (amendments to references to the UKLA and other matters), published on 25 March 2019. The third relates to Practice Statement No 20 (secrecy, possible offer announcements and pre-announcement responsibilities), which has been amended in order to bring cross-references to certain provisions of the Code up to date.

ESMA updates MAR Q&As

The European Securities and Markets Authority (ESMA) has updated its Q&A document regarding the implementation of the Market Abuse Regulation (MAR).

The purpose of the Q&A document is to promote common supervisory approaches and practices in the application of MAR (Regulation (EU) 596/2014) and its implementing measures. The update includes new detailed answers on:

• the meaning of  'parent' and 'related undertaking' in Article 17(2) of MAR, and

• disclosure of inside information concerning emission allowances, referring to installations of other undertakings of the group of the EAMP

ESMA publishes final guidelines on disclosure of risk factors in prospectuses

The European Securities and Markets Authority (ESMA) has published its final guidelines on how national competent authorities (NCAs) should review risk factors, as required by the Prospectus Regulation (EU) 2017/1129. The guidelines aim to encourage more appropriate, focused and streamlined risk factor disclosures for securities, which is presented in an easy to analyse, concise and comprehensible form.

ESMA notes that the purpose of including risk factors in a prospectus is to ensure that investors can assess the risks related to their investment, therefore allowing them to make informed investment decisions. The guidelines are intended to assist NCAs in their review of risk factor disclosure.

The final guidelines take account of the feedback to ESMA’s July 2018 consultation paper. The final report provides an overview of the feedback received as well as ESMA’s responses. Annex II to the report contains the final text and the explanatory text. The guidelines will become effective two months after they are translated into the official EU languages and published on ESMA’s website.

In 2019, ESMA will focus on the consistency of application of the guidelines by national competent authorities.

ESMA advises Commission on information document for takeover, merger and divisions

The European Securities and Markets Authority (ESMA) has published its technical advice on the minimum information content of documents describing a takeover, merger or division. For more on this story see our news article: ESMA advises Commission on information document for takeover, merger and divisions - (a subscription to Lexis®PSL is required).

Please note that this is the last edition of the Market Tracker Weekly Bulletin until further notice.


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