A couple of years ago we wrote about Standard listings on the Main Market of the London Stock Exchange (LSE), principally in connection with cash shell or SPAC entities ('Cash Shells and Standard Listings'). At that time there had been a limited number of such listings, following the deregulation of the UK Listing Authority's listing regime in April 2010 to allow a broader range of companies (whether overseas or UK companies) to elect to join the Standard segment of the UKLA's Official List and trade on the Main Market.
Historically, the secondary listing segment (the precursor to the Standard listing) had only been available to overseas companies and typically would be used to obtain a London quote where the primary market was outside the UK. Ppaost-April 2010, UK companies were able to list directly on the Main Market by way of Standard listing.
In brief, the advantages of a Standard listing include the following:
- it gives a company a public listing on the Main Market of the LSE;
- no operational track record is required;
- there is no requirement to appoint a financial sponsor, such as an investment bank or broker, in respect of the company's corporate activities;
- the Model Code does not apply in respect of dealing in the company's securities by directors and employees, although the laws relating to insider dealing would still apply;
- the restrictions on related party transactions do not apply;
- shareholder approval is not required for significant transactions, including reverse takeovers (although in the case of a reverse takeover, the listing would be cancelled and the enlarged group would have to apply for a new listing and satisfy eligibility requirements at that time);
- the company is not required to give its shareholders pre-emption rights; and
- the restrictions and requirements in relation to the size and price of share issuances do not apply.
Current Trends
Cash shells and acquisitions
Our previous article focused on the large cash shell listings which were a significant feature of the market in the 18 months or so following the introduction of the Standard listing regime. Such companies as the Rothschild-backed Vallar plc and the Hugh Osmond-backed Horizon Acquisition Company plc completed major reverse takeovers, and the post-acquisition groups Genel Energy plc (following the US$2.1 billion acquisition by Vallar) and APR Energy plc (following the £527 million acquisition by Horizon) respectively retain their Standard listings.
Other major Standard listed shells of that period (including Nicolas Berggruen's Justice Holdings Limited, which acquired an interest in Burger King, and the Rothschild-backed Vallar plc, which acquired Indonesian coal miner Bumi Resources) have delisted from London following their reverse takeovers, Justice Holdings moving to a New York Stock Exchange (NYSE) listing on completion of the acquisition and Vallar (renamed Bumi plc) obtaining a Premium listing before reorganising and being renamed Asia Resource Minerals plc as a result of well-publicised corporate difficulties.
More recently, the trend for major Standard listed cash shells has continued, with the listing in May 2013 of Platform Acquisition Holdings Limited, raising net proceeds of US$860 million, and in April 2014 of Nomad Holdings Limited, raising US$474 million. Platform acquired chemicals firm MacDermid, Incorporated in October 2013 for approximately US$1.8 billion and listed on the NYSE, delisting in London; Nomad is yet to make an acquisition. In December 2013, Bob Diamond and African businessman Ashish Thakkar listed Atlas Mara Co-Nvest Limited, raising net proceeds of approximately US$300 million; Atlas Mara has recently completed the acquisition of a major stake in Union Bank of Nigeria for approximately US$270 million. In February 2015, Non-Standard Finance Plc listed, raising £102 million. Nomad, Atlas Mara and Non-Standard Finance remain Standard listed.
So, it can be seen that for major fundraisings and acquisitions, the Standard listed cash shell remains a compelling proposition and is becoming a common capital markets structure with which the UKLA is increasingly familiar. The same can be said for the micro-cap market, where sums of the order of £1 million - £1.5 million are raised by the shell.
In late 2012, Fladgate advised on the Standard listing of Acorn Minerals plc, which was followed by the listings of Xplorer plc in July 2013, Auctus Growth plc and General Industries plc in August 2014, Cleeve Capital plc and Mithril Capital plc in December 2014 and Challenger Acquisitions Limited in February 2015. All of these small shell companies have a mandate to pursue acquisition opportunities.
Secondary listings in London
It is also apparent that a Standard listing continues to serve its original purpose as a secondary London listing where the primary market is overseas. Canaccord Genuity Group Inc and Tethys Petroleum Limited are both dual listed on the Toronto Stock Exchange, and TSX Venture Exchange-listed Canadian Overseas Petroleum Ltd raised approximately £1.75 million and completed a Standard listing in April 2014. Notably, also in April 2014, Seplat Petroleum Development Company Plc took a dual listing on the Nigerian Stock Exchange contemporaneously with a Standard listing, raising approximately US$475 million.
Operational companies
In a significant recent development, a Standard listing has been used as a primary listing for a number of commercial companies that might otherwise have joined (or remained on) the AIM market of the LSE or taken a Premium listing. These include: Gulf Keystone Petroleum Ltd, which delisted from AIM and completed its Standard listing in March 2014; real estate developers BCRE-Brack Capital Real Estate Investments N.V. and Urban & Civic plc (formerly Terrace Hill Company plc) which listed in May 2014 (the latter transaction comprising the reverse takeover of Terrace Hill by the unlisted Urban & Civic group, raising approximately £161 million and delisting from AIM); and clean power technology company Intelligent Energy Holdings plc which listed in July 2014 raising net proceeds of approximately £49 million. Significantly, the AA group came to market by way of a Standard listing in June 2014, raising net proceeds of approximately £185 million.
A number of these operational companies have stated that they intend to consider or explore the possibility of applying for a premium listing, but give no timetable for doing so and make it clear that a Premium listing would be subject to additional eligibility requirements and that, accordingly, there can be no guarantee that the company could obtain a Premium listing. In contrast, a number of such companies make no statement as to the future listing of the company.
Regulatory Considerations
Following extensive consultation during 2012 and 2013, in May 2014 the Financial Conduct Authority (FCA) introduced a number of major amendments to the Premium Listing Rules, principally aimed at ensuring the company's independence from a controlling shareholder. The new Premium Listing Rules introduced a requirement for a controlling shareholders agreement, a dual voting structure for the election or re-election of directors, a requirement for the company to carry on an independent business at all times and certain related disclosure requirements where a major shareholder holds a stake of 30% or more. The Standard listing regime has not been amended to any great extent. We are often asked whether the Standard listing regime may be subject to regulatory change which could remove or diminish some of its advantageous features, and in our view this appears unlikely given the recent FCA review and implementation of new Listing Rules and the accelerating number, and breadth, of transactions utilising a Standard listing structure.
Conclusions
After an uncertain start in life, the Standard listing route to market is becoming more accepted as an alternative to a Premium listing or an AIM listing. It continues to serve well its original (pre-April 2010) purpose as a secondary London listing which adds little to the regulatory burden of a company's overseas primary listing. Very large and micro-cap cash shells alike continue to be established and to execute transformative M&A transactions, making use of the flexibility afforded by the Standard Listing Rules. Perhaps most significantly, major commercial companies - including household names - are opting for a Standard listing without setting out definitive - or, in some cases, any - proposals for transferring to the Premium list. The Standard listing model has clearly reached a critical mass in the eyes of corporates, financial advisers and investors alike and we look forward to the sector going from strength to strength.
