Mix and match schemes to require a prospectus

On 20 August 2018, the FCA published Primary Market Bulletin No.30 which includes a consultation on a new Technical Note on whether a prospectus is required where securities are issued pursuant to a scheme of arrangement. (Primary Market/TN/606.1 - When a prospectus is required where securities are issued pursuant to Schemes of Arrangement)

In this draft Technical Note the FCA confirms the well-established position that a takeover which involves the issue of transferable securities, but which is achieved by way of a statutory scheme under Part 26 of the Companies Act 2006 ("scheme"), does not require a prospectus since there is no offer of transferable securities to the public. This is because the target shareholders make no decision whether to buy or subscribe for securities. Instead there is a court procedure under which the target shareholders are asked to vote on and approve an arrangement which results, if the scheme becomes effective, in the securities automatically being allotted to them. There may, however, still be a requirement to produce a prospectus if shares are being admitted to trading on a regulated market (and an exemption is not available)..

These has been some ongoing uncertainty whether a takeover offer using a scheme which includes mix and match facilities (ie. to vary the mix of cash and shares received), requires a prospectus, if there are no other exemptions available.

This draft Technical Note confirms the FCA's view that if a shareholder is being asked to decide between different forms of consideration then a prospectus should be produced (absent an exemption) because an investor is deciding to buy or subscribe for the securities in question.

We welcome the consultation.