UKLRs: Developing Trends in Significant Transaction Announcements

Overview

A central piece of the modernised UK Listing Rules, which came into effect in July 2024, is the revised significant transactions regime. By way of reminder, for significant transactions (25 per cent or above on the class tests), UKLR 7 introduces a new enhanced notification regime in lieu of a 'class 1' circular and shareholder vote. This streamlined, disclosure-based approach, which underpins the revised listing architecture, seeks to remove some of the frictions of the former premium listing regime and to create a level playing field with key competitor jurisdictions (see our previous UKLR briefings here). 

The FCA is monitoring UKLR 7 announcements and it is expected that it will update the market on its findings in due course. 

Timing of RNS announcements

The FCA opted for flexibility in terms of both the content and timing requirements for the enhanced notification regime, including the ability for issuers to bifurcate certain disclosures between an 'initial announcement' and a 'follow-on announcement'.

Interestingly, a large number of issuers have opted not to take advantage of this flexibility and have instead included all relevant information in a single announcement at the time the deal terms are agreed.

Content of RNS announcements

Detail

There has been a broad range in terms of the detail included in UKLR 7 announcements, from lighter-touch announcements through to lengthier, more comprehensive versions. Some of the earlier announcements following the implementation of the regime were particularly detailed, and this may have been because these disclosures were initially prepared under the former listing framework, with issuers shifting from a circular to an announcement on implementation of the revised regime.

Risk factors

A standardised set is emerging in the market, addressing (i) risks relating to the transaction; (ii) new material risks relating to the company (or group) as a result of the transaction; and (iii) existing material risks to the company (or group) that will be impacted by the transaction. 

Financial information – independent assurance

Where financial information is included in a disposal announcement, there is no regulatory requirement for this information to be independently assured. However, practice has been mixed as to the involvement of third-party accountants, and in some cases, issuers have taken advantage of the new freedom and have looked to their finance functions instead. 

Financial information - unavailability

Where the relevant financial information is not available or cannot be produced in accordance with the UKLR requirements, alternative forms of disclosure are permitted, which must include a statement by the board that it considers the consideration to be fair as far as the security holders of the company are concerned.

Some issuers have included a fairness statement from the board in their UKLR 7 announcements and varying formulations have been used, from very succinct confirmations through to more expanded explanations. However, the FCA has stressed that formulaic and highly caveated explanations are unlikely to satisfy market expectations or to meet its requirements.

Fairness opinions?

Whilst the FCA has confirmed that it does not consider it necessary for issuers to obtain third-party comfort in relation to the fairness statement from the board (for example, in the form of US style fairness opinions), the question remains as to whether practice will nevertheless evolve such that issuers will expect comfort to be delivered to support the statement.

Investor engagement

With the removal of the shareholder vote, increased reliance on alternative investor engagement processes is expected as the regime beds in. 

The FCA has responded to calls for greater clarity and provided revised guidance that an issuer contemplating a major transaction may, subject to confidentiality, selectively disclose details of the proposed transaction to major shareholders to ensure the viability of the transaction, irrespective of whether shareholder approval is required.