On 30 December 2009, the Financial Services Authority (FSA), acting in its capacity as the UK Listing Authority (UKLA), published the latest issue of its newsletter publication, LIST!. The publication covers the following topics:  

  • Share buybacks

The UKLA responds to queries it has received on its view of share buybacks via a tender offer that are coupled with a sale of shares (often referred to as a ‘mix and match facility’). The UKLA states that where an issuer undertakes a tender offer via an intermediary, the transaction will not constitute a related party transaction under the Listing Rules (LRs) even if the intermediary acquires over 10 per cent of the issuer’s shares since the UKLA will look past the intermediary to the company itself. A mix and match facility is a variation on this structure. Under such a facility, the shares purchased by the intermediary will be offered to new and/or existing shareholders before the eventual sale back to the company. In these circumstances, any shares purchased by the intermediary will be treated as treasury shares and therefore LR 9.5.10, LR 12.6 and LR 15.4.11 must be complied with in terms of the limitations on the price at which the shares may be sold, together with any other rules applicable to the sale of treasury shares.

  • Mix and match facilities in the context of a scheme of arrangement

The UKLA states that where a scheme of arrangement is used to effect an issue of new securities, such a transaction should not fall within the definition of a public offer for the purposes of the Prospectus Directive because each individual shareholder is not, under these circumstances, being asked to make an investment decision. However, where offers will be effected via a scheme which also provides mix and match facilities, each shareholder will be required to make an investment decision such that the transaction will constitute an offer to the public such that a prospectus will be required.

  • Documents which are required to be put on display

Item 24(b) of Annex I of the Prospectus Directive (as set out in Appendix 3 of the Prospectus Rules) should be interpreted as ‘all reports, letters and other documents, and historical information, which are either referred to or included in the registration document’ and these should all be displayed, whether or not prepared by an expert. The UKLA has also clarified that there is no requirement to display material contracts that have been summarised in the document under item 22 of Annex I. However, for a Class 1 circular, the UKLA will still expect the share purchase agreement (or similar) to be put on display.

  • Meaning of ‘overseas investment exchange’ and ‘overseas regulated market’ for the purposes of applying LR 13.5.27 and LR 13.5.28 acquisitions of publicly traded companies

LR 13.5.27 and LR 13.5.28, which deal with the requirement to include an accountant’s opinion in a Class 1 circular in accordance with LR 10 on acquisitions of publicly traded companies, apply to targets that are admitted to trading or listed on an overseas investment exchange or admitted to trading on an overseas regulated market. The rule provides a significant concession from the requirements for targets that are not publicly traded and the UKLA sets out a non-exhaustive list of factors that will be relevant to the assessment of whether these concessions apply, including auditing standards, auditor independence requirements, the quality of accounting standards and external independent scrutiny of accounts.

  • Is a communication an offer of transferable securities to the public under section 102B Financial Services and Markets Act 2000 (FSMA)?

The UKLA comments that some market participants consider that withholding certain information, such as the name of the issuer, in a communication relating to a structured security investment is sufficient to ensure that the communication does not fall within the definition of an offer of transferable securities to the public under section 102B Financial Services and Markets Act 2000 (FSMA). The UKLA strongly disagrees with this approach and stresses that the issuers, offerors and their advisers must carefully consider whether their activities or the activities of those who repackage structured securities to create an investment product fall within one of the existing exemptions set out in the Prospectus Directive and FSMA so as to avoid the need to produce a prospectus.

  • Where co-investment and co-financing arrangements constitute related party transactions

LR 11.1.5(2) provides that “an arrangement pursuant to which a listed company and a related party each invests in, or provides finance to, another undertaking or asset will constitute a related party transaction for the purposes of LR 11. The UKLA is prepared to listen to arguments that a co-investment or co-financing arrangement where the transaction is of a revenue nature in the ordinary course of business of the issuer could fall outside this definition.

  • Dealing with leaks or rumours

Whilst an issuer is not required to respond to a rumour that is false, when speculation or market rumour is accurate, or partly accurate, the issuer will be required to notify an RIS as soon as possible of all inside information. Such announcement should also be made following significant price movements. Holding statements should be used where it is not possible to make a full announcement immediately. The UKLA is increasing its monitoring of these holding announcements. Failure to comply with the requirements could lead to the UKLA invoking its powers to require an announcement or to suspend an issuer’s securities.

  • Amendments to the LRs taking effect on 6 April 2010

On 6 April 2010 the LRs will be amended. The most significant change relates to the categorisation of securities as ‘Premium’ for securities that are generally subject to super-equivalent standards and ‘Standard’ for securities covered by the standards based on the EU Directive minimum requirements. The UKLA will be writing to issuers, attaching a schedule containing the details of the company’s securities and their new categorisation. Issuers will be required to contact the UKLA if the categorisation of their securities is incorrect.  

(FSA, LIST! Issue No. 23, December 2009)