Lessons Learned Late Night: Effective Management and Communication of Equity Awards in a Corporate Transaction

Transcription

1 Lessons Learned Late Night: Effective Management and Communication of Equity Awards in a Corporate Transaction Lynette Jacobs, Partner, Pinsent Masons LLP Barbara Onuonga, Solicitor, Pinsent Masons LLP

2 Introduction Acquisition of UK AIM listed company (Fusion) by fully listed London Stock Exchange company (IP Group) Lessons Learned Late Night Scheme of Arrangement Effective Employee Communication Impact on Share Plans Impact on equity incentives UK Takeover Code Considerations

3 In the beginning IP GROUP PLC FUSION IP Greater breadth of coverage Access to a wider pool of intellectual property Improved service offering to existing and potential research institutions in the UK and internationally Enhanced shareholder value Maximised portfolio value and pipeline Enhanced service to university partners

4 Fundraising and Acquisition Acquisition by way of a scheme of arrangement at a price of more than 85 million Simultaneous 75 million fundraising open offer of 45.5 million shares to raise up to 75m by way of a firm placing, open offer and placing

5 Scheme of Arrangement A scheme of arrangement is a formal arrangement between a company and its shareholders governed by the UK Companies Act 2006 Scheme of arrangement also constitutes an offer for the purposes of the UK Takeover Code and the relevant provisions on employee communications apply (to be discussed in more detail later)

6 The Acquisition - impact on share plans How to deal with existing Fusion share incentives In the money and underwater options Choice provided between rollover and exercise ROLL OPTION OVER

7 The Acquisition - impact on share plans UNAPPROVED OPTIONS LTIP EXEC OPTIONS VARIETY OF OPTION ARRANGEMENTS IN PLACE PRIOR TO THE ACQUISITION

8 Scheme of Arrangement A scheme of arrangement is a formal arrangement between a company and its shareholders The scheme must be approved by the target shareholders (Fusion IP) Binding on all relevant shareholders FIP IPG COURT

9 Scheme of Arrangement Co-operation of IP Group and Fusion IP Observance of strict Court constraints and timetable General point removal of stamp duty exemption for schemes of arrangement

10 UK Takeover Code and share plans Rule 15 UK Takeover Code compliance appropriate offer made to safeguard the interests of Fusion IP optionholders Optionholder proposals sent out at the same time as proposals to shareholders

11 UK Takeover Code and share plans Proposal must outline that optionholders are able to exercise during the offer period (if vested) and may accept offer of resultant shares Optionholder response must be received by Court sanction date

12 Employee communication Optionholder proposal letters sent during offer period Tricky points Individual option agreements In the money/underwater options Cashless exercise Transfer of employer NICs

13 Employee communication cont Type of employee communication Formal communication Open communication Sensitive communication Formal Open Sensitive

14 Options, options, options Different sources of option shares New issue shares Existing shares Rule 9 considerations Independence requirement

15 Late night lessons Top tips from this transaction? Open communication and acknowledgement of ongoing relationship Understand the corporate structure and how it impacts share plans i.e. scheme of arrangement and UK Takeover Code considerations

16 Late night lessons Top tips continued Dealing with legacy plans Appreciate the cost/impact to the employee Importance of team work

17 Post Acquisition the brave new (share plan) world IP Group went on to establish Sharesave Plan Deferred Bonus Share Plan Sought shareholder approval for extension of share plans to overseas employees

18 Questions?

19 Thank You Lynette Jacobs Pinsent Masons LLP Barbara Onuonga Pinsent Masons LLP