Tate & Lyle is the latest company that has taken advantage of recent reforms to listing rules. It announced it had dropped plans to submit a proposed £1.4billion acquisition to a vote by shareholders.
According to the old rules, the purchase by the food company of US ingredients manufacturer CP Kelco, would have been classified as a Class 1 transaction. This would have meant that the deal would have amounted to more than 25% of the company and would have therefore had to be put before shareholders.
The Financial Conduct Authority (FCA) has diluted the rules since the initial Tate announcement, which was made in June. This is part of an effort to make London more attractive as a listing destination for entrepreneurs. It also aims to prevent London-listed companies leaving the exchange to list on other exchanges.
Tate stated that “Accordingly Tate & Lyle and Huber (the seller of CP Kelco) have agreed to the removal of the condition in the sale and purchase contract requiring approval from Tate & Lyle shareholders for the proposed deal.”
London Stock Exchange, lawyers and brokers who make money from flotations were all in favor of the reforms to listing rules that took place July. Pension fund investors worried that lower standards could attract problematic companies to London, and that founders would be able to make deals that disadvantaged outside investors.
No longer must large deals exceeding the threshold of 25 percent or so-called “related parties deals” where directors may have conflicts of interest be presented to shareholders. Companies without a track record face less obstacles when it comes to flotation.
Hammerson was one of the first listed firms to benefit from the new regime. It announced that it would not put a £600m property sale to its shareholders. Vodafone announced this week that it will no longer submit the €8 billion sale to Swisscom of its Italian subsidiary, nor the proposed merger between Vodafone UK and Three UK to shareholders.
Tate will pay Huber £905 millions in cash, and Tate will issue it £510 million worth of new Tate shares as payment for CP Kelco. Huber will receive 16 percent of the expanded share capital. The Tate Board has given it the right to nominate two non-executive members.
CP Kelco produces ingredients that make processed foods like yoghurts or sauces taste more creamy and velvety. They also improve the crunchiness of cereals and biscuits.
Analysts cited CP Kelco’s recent financial performance as a reason for the initial poor reception of the proposed deal. Tate shares dropped initially from 677p down to 600p days after the announcement. However, they have since recovered. Yesterday, they closed at 669p, up 1/2p or 0.1 percent.
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