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  1. 1. J   U   N   E     2   0   0   8 K E Y   I N V E S T  A  B I L I T Y   I S S U E S   F O R   L S E   L I S T I N G S
  2. 2. JPMorgan Cazenove has unrivalled experience in bringing international companies to London… FTSE positioning JPMC roles Experience is essential for success Source: Datastream as of June 2008 ¹ Includes market capitalisation of UK and Australian listings ² Old Mutual Plc was the seventh non-UK company to redomicile to London <ul><ul><li>Jul-97—US$1.6bn LSE and JSE IPO </li></ul></ul><ul><ul><li>Jun-01—US$38bn merger of Billiton with BHP </li></ul></ul><ul><ul><li>Nov-04—AUS$2.3bn buyback </li></ul></ul><ul><ul><li>Sep-06—US$3bn buyback </li></ul></ul><ul><ul><li>Mar-99—US$561m LSE IPO </li></ul></ul><ul><ul><li>Sep-99—US$632m Share Buyback </li></ul></ul><ul><ul><li>Jul-01—US$600m Convertible Bond </li></ul></ul><ul><ul><li>Dec-01—US$410m Primary Placing </li></ul></ul><ul><ul><li>Merger of SAB and Miller </li></ul></ul><ul><ul><li>Acquisition of Bavaria </li></ul></ul><ul><ul><li>May-99—US$644m Intro. LSE </li></ul></ul><ul><ul><li>Apr-02—FA in the US$1.1bn convert </li></ul></ul><ul><ul><li>Feb-01—£12.5bn consortium offer for De Beers </li></ul></ul><ul><ul><li>Mar-02—US$1,400m LSE IPO </li></ul></ul><ul><ul><li>Apr-03—US$1,448m Rights issue </li></ul></ul><ul><ul><li>Aug-03—£373m Convertible </li></ul></ul><ul><ul><li>May-06—US$2.5bn Equity Placing </li></ul></ul><ul><ul><li>May-06—FA, US$15bn Falconbridge offer </li></ul></ul><ul><ul><li>Oct-06—US$5.6bn rights issue </li></ul></ul><ul><ul><li>US$875m IPO on LSE </li></ul></ul><ul><ul><li>US$50m Sterlite convert </li></ul></ul><ul><ul><li>Purchase of 51% of KCM (Zambia) </li></ul></ul><ul><ul><li>Corporate restruct. and consol. of ownership </li></ul></ul><ul><ul><li>Pre-IPO restructuring </li></ul></ul><ul><ul><li>US$1,369m IPO on LSE </li></ul></ul><ul><ul><li>Pre-IPO restructuring </li></ul></ul><ul><ul><li>US$2,178m IPO on LSE, Prague and Warsaw </li></ul></ul><ul><ul><li>Pre-IPO restructuring </li></ul></ul><ul><ul><li>US$1,770m IPO on LSE </li></ul></ul>South Africa Czech Republic South Africa Market cap.: US$3.4bn India Switzerland South Africa Kazakhstan Mexico KCC <ul><ul><li>Financial adviser </li></ul></ul><ul><ul><li>Sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Financial adviser </li></ul></ul><ul><ul><li>Sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Financial adviser </li></ul></ul><ul><ul><li>Sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Sole financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Sole financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Joint sponsor </li></ul></ul><ul><ul><li>Joint Global Coordinator </li></ul></ul><ul><ul><li>Joint Bookrunner </li></ul></ul><ul><ul><li>Corporate broker </li></ul></ul><ul><ul><li>Sole financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Sole bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul>Mkt cap.: US$90bn Mkt. cap.: US$9bn Mkt cap.: US$35bn Mkt cap.: US$13bn Mkt cap.: US$81bn Mkt cap.: US$225bn¹ Mkt. cap.: US$15bn Mkt. cap.: US$7bn No.8 FTSE 100 At IPO, equivalent to No.70 FTSE 100 No.24 FTSE 100 No.41 FTSE 100 No.11 FTSE 100 No.9 FTSE 100 No.36 FTSE 100 At IPO, theoretical No.66 FTSE 100 <ul><ul><li>1997 </li></ul></ul><ul><ul><li>1999 </li></ul></ul><ul><ul><li>2002 </li></ul></ul><ul><ul><li>2003 </li></ul></ul><ul><ul><li>2004/5 </li></ul></ul><ul><ul><li>IPO on LSE </li></ul></ul><ul><ul><li>US$450m raised in primary issue </li></ul></ul>Ukraine <ul><ul><li>Financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Joint bookrunner </li></ul></ul>Mkt. cap.: US$5bn No.82 FTSE 100 <ul><ul><li>2007 </li></ul></ul><ul><ul><li>We have helped to create six of the seven non-UK companies to join the FTSE 100² </li></ul></ul><ul><ul><li>In addition, Fresnillo is expected to enter the FTSE 100 in September 2008 </li></ul></ul><ul><ul><li>2008 </li></ul></ul>1
  3. 3. … and is now helping grow the next generation of market leaders <ul><ul><li>Pre-IPO private placement (US$205m) </li></ul></ul><ul><ul><li>Pre-IPO restructuring </li></ul></ul><ul><ul><li>US$653m IPO on LSE </li></ul></ul>Africa <ul><ul><li>US$158m Placing </li></ul></ul><ul><ul><li>US$556m Placing of shares and warrants </li></ul></ul>Mkt. cap.: US$146m¹ Russia <ul><ul><li>US$390m IPO on LSE </li></ul></ul><ul><ul><li>US$252m raised in issue </li></ul></ul>Dubai <ul><ul><li>US$1.1bn IPO on LSE </li></ul></ul><ul><ul><li>US$400m raised in primary issue </li></ul></ul>Finland <ul><ul><li>Sole bookrunner </li></ul></ul><ul><ul><li>Joint corporate broker </li></ul></ul><ul><ul><li>Sole bookrunner </li></ul></ul><ul><ul><li>Corporate broker since July 2005 </li></ul></ul><ul><ul><li>Sole bookrunner </li></ul></ul><ul><ul><li>Corporate broker since April 2006 </li></ul></ul><ul><ul><li>Sole financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Sole bookrunner </li></ul></ul><ul><ul><li>Nomad </li></ul></ul><ul><ul><li>Broker </li></ul></ul><ul><ul><li>Financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Bookrunner </li></ul></ul><ul><ul><li>Stabilisation manager </li></ul></ul><ul><ul><li>Sole Financial adviser </li></ul></ul><ul><ul><li>Sole sponsor </li></ul></ul><ul><ul><li>Sole bookrunner </li></ul></ul>No.73 FTSE 250 No.5 FTSE AIM No.58 FTSE 250 No.1 FTSE AIM No.4 FTSE AIM <ul><ul><li>Leading FTSE 250 and AIM clients, delivering high growth and supported by us </li></ul></ul><ul><ul><li>CB US$140m </li></ul></ul><ul><ul><li>c.US$80m placing </li></ul></ul>Mkt cap.: US$829m¹ Russia <ul><ul><li>Placing of US$542m of new shares </li></ul></ul>Mkt. cap.: US$1.6bn¹ Russia <ul><ul><li>Pre-IPO restructuring </li></ul></ul><ul><ul><li>US$594m IPO on LSE </li></ul></ul>Peru Mkt. cap.: US$5.2bn Mkt cap.: US$2.1bn Mkt. cap.: US$2.1bn Mkt. cap.: US$2.4bn Mkt cap.: US$2.2bn Mkt. cap.: US$1.3bn Mkt. cap.: US$1.7bn No. 146 FTSE 250 No. 97 FTSE 250 FTSE positioning JPMC roles Experience is essential for success <ul><ul><li>2005 </li></ul></ul><ul><ul><li>2006 </li></ul></ul><ul><ul><li>2007 </li></ul></ul>2 <ul><ul><li>Placing of $88m of new shares </li></ul></ul>Mongolia 2008 <ul><ul><li>Financial adviser </li></ul></ul><ul><ul><li>Corporate Broker </li></ul></ul><ul><ul><li>Sole bookrunner </li></ul></ul>No. 61 FTSE AIM Mkt. cap.: $483m Mkt cap.: $180m¹ Africa <ul><ul><li>Sole bookrunner to placing </li></ul></ul><ul><ul><li>Financial advisory </li></ul></ul><ul><ul><li>Joint corporate broker </li></ul></ul><ul><ul><li>$75m accelerated placing of new shares </li></ul></ul><ul><ul><li>Joint broker </li></ul></ul>No.110 FTSE AIM Mkt cap.: $295m Mkt cap.: $1.4bn¹ Canada <ul><ul><li>Joint bookrunner to placing </li></ul></ul><ul><ul><li>Sponsor to London introduction </li></ul></ul><ul><ul><li>C$387m accelerated placing of secondary shares </li></ul></ul><ul><ul><li>Introduction to the London Main Market </li></ul></ul>Theoretical No. 68 FTSE 250 Mkt cap.: $1.7bn <ul><ul><li>2007/2008 </li></ul></ul>
  4. 4. The Capital Markets Opportunity <ul><ul><li>A source of long term capital for </li></ul></ul><ul><ul><ul><li>Development capex </li></ul></ul></ul><ul><ul><ul><li>Expanding into new markets </li></ul></ul></ul><ul><ul><ul><li>Acquisitions </li></ul></ul></ul><ul><ul><ul><ul><li>To finance new cash projects </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Listed paper as currency </li></ul></ul></ul></ul><ul><ul><li>Reduce gearing </li></ul></ul><ul><ul><li>Investors can realise partial or full value on ownership investment </li></ul></ul><ul><ul><li>Public markets provide a potentially attractive valuation </li></ul></ul><ul><ul><li>Objectives of existing owners can be unclear </li></ul></ul><ul><ul><li>A listing can enhance credibility with customers and suppliers </li></ul></ul><ul><ul><li>Source of publicity </li></ul></ul><ul><ul><li>Prestige and kudos </li></ul></ul><ul><ul><li>Listing obligations can be useful for refining </li></ul></ul><ul><ul><ul><li>Financial reporting </li></ul></ul></ul><ul><ul><ul><li>Risk controls </li></ul></ul></ul><ul><ul><ul><li>Strategy </li></ul></ul></ul><ul><ul><ul><li>Capital requirements </li></ul></ul></ul><ul><ul><li>An IPO can typically take up to six to nine months </li></ul></ul><ul><ul><li>Significant requirement on senior management time </li></ul></ul><ul><ul><li>Considerable due diligence necessary </li></ul></ul><ul><ul><li>Likely to include some restructuring </li></ul></ul><ul><ul><li>Investors at any IPO will focus on potential concerns </li></ul></ul><ul><ul><ul><li>Some will be genuine, others will seek to reduce value </li></ul></ul></ul><ul><ul><li>Likely to include: </li></ul></ul><ul><ul><ul><li>Growth strategy </li></ul></ul></ul><ul><ul><ul><li>Independence </li></ul></ul></ul><ul><ul><ul><li>Directors </li></ul></ul></ul><ul><ul><li>Formal </li></ul></ul><ul><ul><ul><li>Financial reports </li></ul></ul></ul><ul><ul><ul><li>Dissemination of new price-sensitive information </li></ul></ul></ul><ul><ul><ul><li>Disclosure regarding M&A activity </li></ul></ul></ul><ul><ul><ul><li>Pre-emption rights of current shareholders over new equity issues </li></ul></ul></ul><ul><ul><li>Informal </li></ul></ul><ul><ul><ul><li>Pro-active communication between board and institutional shareholders </li></ul></ul></ul><ul><ul><ul><li>Independent non-executive representation on the board </li></ul></ul></ul>Process challenges Addressing investor concerns Ongoing obligations Access to capital Exit/liquidity Profile Discipline The opportunity Work required 3
  5. 5. Many “UK” companies are actually global businesses Top 10 FTSE 100 companies revenues by geographic region BP Total = $265,906m US 35.7% Europe 23.3% UK 20.5% Rest of World 20.5% Vodafone Total = £31,104m Germany 17.5% Europe 17.0% UK 16.5% Spain 14.5% Asia Pacific 4.5% Rest of World 16.4% Italy 13.6% Source: Bloomberg, January 2007 ¹ HSBC do not separate revenue by country, however they separate profits thus figure for UK/Rest of Europe indicate profit split of European revenue (69%) ² RDS do not separate revenue by country, however they separate oil sales by volume, showing the UK accounting for 15% of the total European volume ³ Does not separate revenue by country so Europe includes UK US Europe UK RoE RoW Germany Spain Italy Asia Pac Hong Kong LatAM OEH OWH Oz/NZ Japan S Africa Rest of Africa South Amer Afr/M East Medit Total = $116,008m HSBC 1 US 31.2% UK 25.3% Hong Kong 13.3% Rest of Asia Pacific 10.0% Latin America 8.9% Rest of Europe 11.4% Royal Dutch Shell² Total = $318,845m Europe 36.3% US 25.4% UK 6.4% Other Eastern Hemisphere 24.1% Other Western Hemisphere 7.7% GlaxoSmithKline Total = £20,078m US 51.6% Europe 23.7% Rest of World 20.8% UK 3.9% Total = £25,902m Rio Tinto ³ Asia 28.2% US 23.9% Japan 19.6% Europe 17.5% Australia and New Zealand 6.3% Rest of World 4.5% Royal Bank of Scotland Total = £44,286m UK 65.8% US 21.3% Europe 10.6% Rest of World 2.3% Anglo American³ Total = $33,072m Europe 44.3% Australia & Asia 20.7% South Africa 17.5% South America 8.6% US 7.1% Rest of Africa 1.8% British Gas Total = £7,136m Europe 43.5% US 22.2% Mediterranean 11.8% South America 11.8% Asia Pacific 11.2% BAT ³ Total = £9,762m Europe 36.3% Africa / Middle East 15.3% US 11.3% Asia Pacific 18.8% Latin America 18.3% 4
  6. 6. Not only issuers internationalising so is capital <ul><ul><li>International investors </li></ul></ul><ul><ul><ul><li>Increasing international fund managers are amongst top 20 UK market investors </li></ul></ul></ul><ul><ul><ul><li>c.20% of “local” UK fund managers’ FUM is overseas investment </li></ul></ul></ul><ul><ul><li>Increased index tracking </li></ul></ul><ul><ul><ul><li>Pure trackers—up to 10% </li></ul></ul></ul><ul><ul><ul><ul><li>e.g. L&G, BGI </li></ul></ul></ul></ul><ul><ul><ul><li>“ Quasi” trackers & active quantitative funds—up to 15% </li></ul></ul></ul><ul><ul><ul><ul><li>e.g. Hermes, USS Ltd </li></ul></ul></ul></ul><ul><ul><li>Alternative investing </li></ul></ul>Mercury AM Prudential PM (UK) Schroder IM (UK) Standard Life (SC) Legal & General IM (UK) BZW IM (UK) PDFM (UK) Hermes IM (UK) Gartmore (UK) Threadneedle IM (UK) Source: JPMorgan Cazenove, analysis captures “long-only” institutions Names in yellow represent “new” institutions into the top 10 UK institutional investors Legal & General (UK) Barclays GI (UK/US) Capital (UK/US) M&G IM (UK) State Street (UK/US) Morley FM (UK) Scottish Widows (UK) Standard Life (UK) BlackRock (UK/US) Fidelity (UK/US) 1998 2008 Recent trends 5 Geographic ownership of the UK market FTSE 100 FTSE 250 FTSE Small Cap Source: JPMorgan Cazenove shareholder analysis
  7. 7. Areas of focus for UK investors regarding overseas issuers Key issues that investors will focus on Key issues that companies should focus on <ul><ul><li>PLC structure </li></ul></ul><ul><ul><li>Index inclusion—nationality </li></ul></ul><ul><ul><li>Corporate governance </li></ul></ul><ul><ul><ul><li>Relationship with significant shareholders </li></ul></ul></ul><ul><ul><ul><li>Board structure/Combined Code </li></ul></ul></ul><ul><ul><li>Control of assets </li></ul></ul><ul><ul><li>Access to cash flows at PLC level </li></ul></ul><ul><ul><li>Reserves/cash for dividends </li></ul></ul><ul><ul><li>Accounting matters </li></ul></ul><ul><ul><ul><li>IFRS three year financials with clean opinion if aiming for Main Market </li></ul></ul></ul><ul><ul><ul><li>Working capital </li></ul></ul></ul><ul><ul><ul><li>Financial reporting procedures </li></ul></ul></ul><ul><ul><li>No significant tax disadvantages </li></ul></ul><ul><ul><ul><li>UK domicile no longer relevant </li></ul></ul></ul><ul><ul><li>Equity story and positioning </li></ul></ul><ul><ul><ul><li>Investor cynicism on top-line/margin growth post-IPO </li></ul></ul></ul><ul><ul><ul><li>Have the selling shareholder’s left “juice” in the business? </li></ul></ul></ul><ul><ul><ul><li>IPO pricing vs long term value </li></ul></ul></ul><ul><ul><ul><li>Valuation methodology depends on sector/business </li></ul></ul></ul><ul><ul><li>Offer size/structure </li></ul></ul><ul><ul><ul><li>Use of proceeds </li></ul></ul></ul><ul><ul><ul><li>Free float and strategic shareholders’ approach to exit </li></ul></ul></ul><ul><ul><ul><li>Consideration to investor base and aftermarket </li></ul></ul></ul><ul><ul><li>Capital structure to support equity story </li></ul></ul><ul><ul><ul><li>Dividend yield, gearing, interest cover </li></ul></ul></ul><ul><ul><ul><li>Growth vs yield, acquisitions and organic growth </li></ul></ul></ul>6
  8. 8. Plc / “Plc look-alike” issues <ul><ul><li>Poison pill </li></ul></ul>Key issues Description <ul><ul><li>Minority shareholder protection </li></ul></ul><ul><ul><li>Split and partial voting </li></ul></ul><ul><ul><li>Share capital </li></ul></ul><ul><ul><li>Disclosure of interests </li></ul></ul>Takeover Code prohibits use of a poison pill where a takeover is in contemplation Section 80/89 of the UK Companies Act 1985 restricts the amount of equity a company can issue on a non-pre emptive basis Market preference for one line of stock with equal voting rights A UK plc requires shareholder approval to increase its share capital Rule 3 and 5 of the Disclosure and Transparency Rules outline the requirements surrounding disclosure of shareholder’s positions 7
  9. 9. FTSE inclusion is determined by the Nationality review committee Considerations <ul><ul><li>Nationality </li></ul></ul><ul><ul><ul><li>Each company is allocated to a single country. FTSE initially looks at the country of incorporation. Where incorporation and listing are different the company is allocated to the country of primary listing </li></ul></ul></ul><ul><ul><ul><li>Company must publicly acknowledge adherence to the principles of the UK Combined Code, Pre-emption Rights and the UK Takeover Code as far as practical </li></ul></ul></ul><ul><ul><li>Majority shareholder </li></ul></ul><ul><ul><ul><li>A non-UK incorporated company with a majority shareholder is unlikely to gain inclusion </li></ul></ul></ul><ul><ul><li>Each case is evaluated on its own merits </li></ul></ul><ul><ul><li>FTSE index revisions take place four times a year, in mid-March, mid-June, mid-September and mid-December </li></ul></ul><ul><ul><li>FTSE index inclusion </li></ul></ul><ul><ul><ul><li>Is a function of full market capitalisation (not free float adjusted) </li></ul></ul></ul><ul><ul><ul><li>Index weightings are free float adjusted—Market cap determines index inclusion, free floats determine weightings within the index </li></ul></ul></ul><ul><ul><li>To be included in the FTSE 100, a company needs to rise above rank 90 (by full market cap) </li></ul></ul><ul><ul><li>Following adjustment of index position, index led demand may be expected from two key groups of investors: </li></ul></ul><ul><ul><ul><li>“ Pure” or hard tracker funds (e.g. Legal & General, BGI,) </li></ul></ul></ul><ul><ul><ul><li>Active quantitative funds, seeking to replicate indices within given tolerance levels (e.g. Hermès, USS Ltd) </li></ul></ul></ul><ul><ul><li>Exact timing of index led demand can be hard to predict </li></ul></ul>Considerations <ul><ul><li>Once a company has been included in the FTSE index (based on its market cap), FTSE index weightings are determined based on free float, using the following banding system: </li></ul></ul>The FTSE family of indices FTSE 350 Sector Indices UK Market 100% FTSE All Share 98% FTSE Fledgling 1% AIM 1% FTSE 350 94% FTSE All-Small 5% AIM 1% Now eligible for FTSE AIM indices FTSE 100 80% FTSE 250 14% FTSE Small Cap 4% FTSE Fledgling 1% AIM 1% 8
  10. 10. London hosts both UK domiciled and non-UK domiciled companies Many non UK domiciled companies are included in the FTSE indices… … and some are not 9
  11. 11. Independence from controlling shareholders Controlling shareholder Examples of relationship agreements <ul><ul><li>The Listing Rules require full disclosure in the Listing Particulars of a person or persons </li></ul></ul><ul><ul><ul><li>Entitled to exercise 30% or more of the voting rights at general meetings </li></ul></ul></ul><ul><ul><ul><li>Able to control the appointment of directors able to exercise a majority of the votes at board meetings </li></ul></ul></ul><ul><ul><li>Full disclosure is required in the Listing Particulars of how the company is satisfied it is capable of carrying on its business independently </li></ul></ul><ul><ul><ul><li>In practice use of a ‘relationship agreement’ used to satisfy independence requirement </li></ul></ul></ul><ul><ul><ul><li>For Brakes Bros as a listed company this would not be onerous—key issue is a >30% ownership stake by a venture capital firm—rather than any commercial or non-compete terms </li></ul></ul></ul><ul><li>Halfords (45% held by sponsors post IPO) </li></ul><ul><ul><li>Sponsors may appoint one NED to the board and to any board committee as long as they hold greater than 15% of the issued share capital of the company </li></ul></ul><ul><ul><li>Only directors independent of the sponsors may vote on matters that are in conflict with the interests of the sponsors </li></ul></ul><ul><ul><li>Sponsors and sponsor appointed directors may not vote so as to prevent the company being capable of carrying on its business independently for the purpose of the Listing Rules </li></ul></ul><ul><li>Xstrata (35% held by Glencore post IPO) </li></ul><ul><ul><li>Glencore may appoint three directors to the board who may not vote on resolutions to approve involvement in agreement with Glencore </li></ul></ul><ul><ul><li>Xstrata and Glencore have entered into mutual confidentiality restrictions </li></ul></ul><ul><li>Yell (30% held by sponsors post IPO) </li></ul><ul><ul><li>Sponsors may appoint one NED each and receive certain tax-related information (unless considered confidential) as long as they hold greater than 10% of the issued share capital of the company </li></ul></ul><ul><ul><li>No transaction in conflict with the sponsors can occur without majority votes of directors who are independent of the sponsors </li></ul></ul><ul><li>Agreements common to both </li></ul><ul><ul><li>Any sponsor and group arrangement is to be made at arms length and on a normal commercial basis </li></ul></ul>10
  12. 12. Board composition is also an important facet of a UK listed plc General principles <ul><ul><li>Increase independent non-exec representation </li></ul></ul><ul><ul><li>Formalise appointment and roles of directors </li></ul></ul><ul><ul><li>Institute formal evaluations of board performance </li></ul></ul><ul><ul><li>Align executive remuneration with the interests of shareholders </li></ul></ul><ul><ul><li>Enhance focus on internal controls and audit responsibility </li></ul></ul><ul><ul><li>Define membership and functions of board committees </li></ul></ul><ul><ul><li>Greater disclosure of the workings of the board to shareholders </li></ul></ul><ul><ul><li>Pro-active communication between board and institutional shareholders </li></ul></ul>¹ Defined (in part) as not an employee over previous 5 years, nor had material business interest in the company over previous 3 years. Has not received additional fee from the company, has no close family ties, has no cross directorship links with other directors. Does not represent a significant shareholder Best practice shape and structure of board 11
  13. 13. Preparation for companies considering an IPO <ul><ul><li>Institutional investors will expect compliance with recommended corporate governance guidelines </li></ul></ul><ul><ul><li>Board structure is often a critical path issue and good non-executives can significantly aid the marketing process </li></ul></ul><ul><ul><li>Negatives on the financials concern investors, heighten risk and reduce valuation </li></ul></ul><ul><ul><li>Clear explanation of any flat or negative movement, and one off items </li></ul></ul><ul><ul><li>Present clear strategy and pinpoint prior success </li></ul></ul><ul><ul><li>Demonstrate achievement against milestones </li></ul></ul><ul><ul><li>Increase the visibility of the company—will aid marketing during the IPO process </li></ul></ul><ul><ul><li>Consider appointing financial PR at an early stage </li></ul></ul><ul><ul><li>Relationships should be built with advisers at an early stage </li></ul></ul><ul><ul><li>Helps to create confidence at the time of IPO </li></ul></ul>In the lead up to IPO, prior to detailed preparation, the following areas should be focussed upon 12 Evidence clear strategy Unblemished financial track record Enhance the profile of the company Appoint suitable Non-Executive Directors Build advisory team early
  14. 14. JPMorgan Cazenove raised US$60 million for Lubel Coal Company in an equity private placement US$60m December 2007 Private Placement Sole placement agent and financial adviser Transaction summary <ul><ul><li>Extensive legal and accounting due diligence process together with a business plan review culminated in the production of a private placement memorandum </li></ul></ul><ul><ul><li>Two week management roadshow covered London, Canada, US and Eastern Europe </li></ul></ul><ul><ul><li>Valuation driven by DCF analysis of the project, based on indicative cashflows </li></ul></ul><ul><ul><li>Demand came from three key constituencies: </li></ul></ul><ul><ul><ul><li>Specialist resource sector investors </li></ul></ul></ul><ul><ul><ul><li>Ukraine/FSU focused investors </li></ul></ul></ul><ul><ul><ul><li>Pre-IPO private placement investors </li></ul></ul></ul>Transaction highlights Company overview <ul><ul><li>Lubel Coal Company owns the development licence for the Lubel project, a potential long life high quality coking coal mine in the Western Ukraine </li></ul></ul><ul><ul><li>Development plans currently include construction of a modern, underground mine and coal processing plant capable of mining and processing 5.2 million tonnes of run-of-mine coal into 4.15 million tonnes of high quality, washed coking coal annually </li></ul></ul><ul><ul><li>With mineable resources/reserves of 162 mt in the Lubelska 1—2 licence area, the Company expects continual production of 5.2mtpa for at least 25 years </li></ul></ul><ul><ul><li>The new mine, once constructed, is expected to benefit from close proximity to existing infrastructure, local skilled workforce and favourable location in Western Ukraine, 30km from the Poland and the EU border </li></ul></ul><ul><ul><li>Key strengths include the following </li></ul></ul><ul><ul><ul><li>A large, long life high quality coking coal resource and reserve base in Ukraine </li></ul></ul></ul><ul><ul><ul><li>Potential for increased coal resources and platform for expansion </li></ul></ul></ul><ul><ul><ul><li>Location </li></ul></ul></ul><ul><ul><ul><li>Strong competitive costs and robust economics </li></ul></ul></ul><ul><ul><ul><li>Attractive commodity price outlook </li></ul></ul></ul><ul><ul><ul><li>Strong management team </li></ul></ul></ul><ul><ul><ul><li>Near term liquidity—AIM admission by end of 3Q 2008 </li></ul></ul></ul><ul><ul><li>Private placement allowed Lubel Coal to commence its Bankable Feasibility Study with the stated intention of seeking an AIM listing by 3Q 2008 in order to fund the equity component of the mine construction phase </li></ul></ul>13
  15. 15. The £228m IPO of Ferrexpo was the first IPO of a Ukrainian company on the London Stock Exchange £228m ($450m) June 2007 Sole Financial Advisor, Sponsor, Global Coordinator and Joint Bookrunner Transaction summary Transaction highlights Company overview <ul><ul><li>Ferrexpo’s Poltava mine is one of the world's largest producing iron ore resources </li></ul></ul><ul><ul><li>Ferrexpo’s primary focus is the mining, processing and sale of iron ore in the form of pellets for use in the production of steel </li></ul></ul><ul><ul><li>Unique story attracted interest from a wide pool of investors </li></ul></ul><ul><ul><li>Substantial under-exploited iron ore reserves and ready access to additional resources requiring commercialisation </li></ul></ul><ul><ul><li>Under-utilised capacity and brownfield expansion capability </li></ul></ul><ul><ul><li>Favourable geographic location and logistics enabling competitive cost of delivery </li></ul></ul><ul><ul><li>Experienced management team capable of delivering Western ‘best practice’ </li></ul></ul><ul><ul><li>The deal was de-coupled with the price range set after meeting key investors in London, three days into the roadshow </li></ul></ul><ul><ul><li>The book witnessed heavy orders towards last few days of the bookbuilding period </li></ul></ul><ul><ul><li>The book was comprised of good demand from CIS, Emerging Markets, European and UK accounts </li></ul></ul>UK 28% Russia/Ukraine 23% Continental Europe 34% USA 11% Other 4% 14
  16. 16. 15