M&A Activity • Mar 1, 2016
M&A Activity
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the Proposals, the Transaction, the contents of this document, or as to the action you should take, you are recommended to seek your own independent advice immediately from your stockbroker, bank, solicitor, accountant, fund manager or other appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, from another appropriately authorised independent professional adviser in the relevant jurisdiction.
If you sell, have sold or otherwise transferred all of your ICAP Ordinary Shares you should send this document and the accompanying documents (but not the personalised Forms of Proxy) as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or the transferee. However, the distribution of this document and/or any accompanying documents into certain jurisdictions other than the United Kingdom may be restricted by law. Therefore, persons into whose possession this document and any accompanying documents come should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. If you have sold only part of your holding of ICAP Ordinary Shares you should retain these documents and consult the stockbroker, bank or other agent through whom the sale or transfer was effected.
recommended proposals for the sale by the ICAP Group of its global hybrid voice-broking and information business to Tullett Prebon plc, including a Scheme of Arrangement under Part 26 of the Companies Act 2006
Notices of Court Meeting and General Meeting
This document should be read as a whole. Your attention is drawn to the letter from the Chairman of ICAP plc (''ICAP'' or the ''Company'') which is set out in Part I ''Letter from the Chairman of ICAP'' of this document in which the ICAP Board unanimously recommends that you vote in favour of the Scheme at the Court Meeting and in favour of the Resolutions to be proposed at the General Meeting. A letter from J.P. Morgan Cazenove and Evercore explaining the Scheme in greater detail and which constitutes an Explanatory Statement in compliance with section 897 of the Companies Act is set out in Part II ''Explanatory Statement'' of this document.
Your attention is also drawn to Part III ''Risk Factors'' of this document, which sets out and describes certain risks that ICAP Shareholders should consider carefully when deciding whether or not to vote in favour of the Scheme at the Court Meeting and in favour of the Resolutions to be proposed at the General Meeting.
Notices of the Court Meeting and the General Meeting, both of which are to be held at the registered office of ICAP at 2 Broadgate, London EC2M 7UR on 24 March 2016, are set out on pages 155 to 156 and 157 to 164 respectively of this document. The Court Meeting will start at 11.30 a.m. and the General Meeting will start at 11.40 a.m. (or as soon thereafter as the Court Meeting has been concluded or adjourned).
The action to be taken by ICAP Shareholders in respect of the Court Meeting and the General Meeting is set out on pages 2 to 4 and in paragraph 21 of Part II ''Explanatory Statement'' of this document. Whether or not you intend to be present at the Court Meeting and/or the General Meeting, please complete and sign both Forms of Proxy accompanying this document, blue for the Court Meeting and pink for the General Meeting, in accordance with the instructions printed on them and return them to
ICAP's Registrars, Capita Asset Services, at the return address printed on the back of the Form of Proxy as soon as possible, and in any event so as to be received by Capita Asset Services at PXS-1, 34 Beckenham Road, Beckenham, BR3 4ZF no later than 11.30 a.m. in the case of the Court Meeting and 11.40 a.m. in the case of the General Meeting on 22 March 2016 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). Alternatively, blue Forms of Proxy for the Court Meeting (but not the pink Forms of Proxy for the General Meeting) may be handed to ICAP's Registrars, on behalf of the Chairman of the Court Meeting, at the Court Meeting before the taking of the poll.
If you hold ICAP Ordinary Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to ICAP's Registrars (CREST participant ID RA10). Alternatively, you may give proxy instructions by logging on to www.icap-shares.com and following the instructions. Proxies sent electronically must be sent as soon as possible and, in any event, so as to be received by not later than 11.30 a.m. in the case of the Court Meeting and 11.40 a.m. in the case of the General Meeting on 22 March 2016 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting).
The completion and return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting in person at the Court Meeting or General Meeting or any adjournment thereof, if you wish to do so and are so entitled.
This document is a circular relating to the Proposals and the Transaction which has been prepared in accordance with the Listing Rules. This document has been approved by the FCA.
Application will be made to the UK Listing Authority for the Newco Ordinary Shares to be admitted to the premium listing segment of the Official List, and to the London Stock Exchange for the Newco Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission of the Newco Ordinary Shares to the Official List and the London Stock Exchange will become effective, and that dealings in the Newco Ordinary Shares will commence, on the Business Day following the Scheme Effective Date. Application will also be made to the UK Listing Authority in connection with the Share Consolidation for the premium listing segment of the Official List to be amended to reflect the Newco Ordinary Shares resulting from the Share Consolidation. It is expected that trading in such Newco Ordinary Shares will commence on the Business Day following the Demerger Effective Date.
Evercore Partners International LLP, which is authorised and regulated in the United Kingdom by the FCA has been appointed as joint financial adviser and joint sponsor in connection with the Proposals and the Transaction. Evercore is acting exclusively for ICAP in connection with the Proposals and the Transaction and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Proposals and the Transaction and will not be responsible to anyone other than ICAP for providing the protections afforded to clients of Evercore or its affiliates, or for providing advice in relation to the Proposals, the Transaction, the contents of this document or any other matter or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on Evercore by FSMA, or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither Evercore nor any of its affiliates accepts any responsibility or liability whatsoever for the contents of this document, and no representation, express or implied, is made by it, or purported to be made on its behalf, in relation to the contents of this document, including its accuracy, completeness or verification of any other statement made or purported to be made by it, or on its behalf, in connection with ICAP or the matters described in this document. To the fullest extent permitted by applicable law, Evercore and its affiliates accordingly disclaim all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this document or any statement contained therein.
J. P. Morgan Limited, which conducts its investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the FCA, has been appointed as joint financial adviser and joint sponsor in connection with the Proposals and the Transaction. J.P. Morgan Cazenove is acting exclusively for ICAP in connection with the Proposals and the Transaction and will not regard any other person (whether or not a recipient of this document) as its client in relation to the Proposals and the Transaction and will not be responsible to anyone other than ICAP for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, or for providing advice in relation to the Proposals, the Transaction, the contents of this document or any other matter or arrangement referred to in this
document. Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove by FSMA, or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither J.P. Morgan Cazenove nor any of its affiliates accepts any responsibility or liability whatsoever for the contents of this document, and no representation, express or implied, is made by it, or purported to be made on its behalf, in relation to the contents of this document, including its accuracy, completeness or verification of any other statement made or purported to be made by it, or on its behalf, in connection with ICAP or the matters described in this document. To the fullest extent permitted by applicable law, J.P. Morgan Cazenove and its affiliates accordingly disclaim all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this document or any statement contained therein.
No Newco Ordinary Shares, New Tullett Prebon Shares or any other securities of Newco or Tullett Prebon have been marketed to, nor are any available for purchase, in whole or in part, by, the public in the United Kingdom or elsewhere in connection with the Admission or the Demerger. This document does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. This document does not constitute a prospectus or a prospectus equivalent document.
The distribution of this document and the allotment and issue of Newco Ordinary Shares or New Tullett Prebon Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by ICAP, Newco or Tullett Prebon to register or obtain any approval, authorisation or exemption to permit the allotment and issue of Newco Ordinary Shares or New Tullett Prebon Shares or the possession or distribution of this document (or any other publicity material relating to the Newco Ordinary Shares or New Tullett Prebon Shares) in any jurisdiction in which they are located in which such act would constitute a violation of the relevant laws in such jurisdiction or to or for the account or benefit of any national resident or citizen of any jurisdiction in which such act would constitute a violation of the relevant laws in such jurisdiction. Accordingly, the Newco Ordinary Shares and the New Tullett Prebon Shares may not be offered, sold, delivered or transferred, directly or indirectly, in, into, or from any jurisdiction in which such act would constitute a violation of the relevant laws of each jurisdiction.
Securities may not be offered or sold in the United States or to US persons outside the United States unless they are registered under the Securities Act or are exempt from such registration requirements. The Newco Ordinary Shares and the New Tullett Prebon Shares have not been, and will not be, registered under the Securities Act. The Newco Ordinary Shares and the New Tullett Prebon Shares are expected to be issued in reliance on the exemption from the registration requirements of the Securities Act provided by section 3(a)(10) thereof. ICAP Shareholders who are affiliates of Newco after the Scheme becomes effective or affiliates of Tullett Prebon after the Demerger becomes effective will be subject to certain US transfer restrictions relating to the Newco Ordinary Shares and the New Tullett Prebon Shares received in connection with the Scheme and the Demerger, respectively. Reference should also be made to paragraph 13 of Part II ''Explanatory Statement'' of this document. None of the Newco Ordinary Shares, the New Tullett Prebon Shares and this document have been approved, disapproved or otherwise recommended by any United States federal or state securities commission or any other US regulatory authority, nor have such authorities confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offence in the United States.
Overseas Shareholders may be affected by the laws of other jurisdictions in relation to the distribution of this document or the Proposals. Persons who are not resident in the United Kingdom and into whose possession this document comes should inform themselves about and observe any applicable restrictions and legal, exchange control or regulatory requirements in relation to the Proposals and the distribution of this document. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction.
The contents of this document should not be construed as legal, business or tax advice. This document is for information only and nothing in this document is intended to endorse or recommend a particular course of action. Each ICAP Shareholder should consult his, her or its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice.
Dated: 1 March 2016
This document (including the information incorporated by reference into this document) includes forward-looking statements. The words ''believe'', ''anticipate'', ''expect'', ''intend'', ''aim'', ''plan'', ''predict'', ''continue'', ''assume'', ''positioned'', ''may'', ''will'', ''should'', ''shall'', ''risk'' and other similar expressions that are predictions of or indicate future events and future trends or identify forward-looking statements. These forward-looking statements include all matters that are not current or historical facts. In particular, the statements regarding the ICAP Group's strategy, future financial position and other future events or prospects are forward-looking statements.
ICAP Shareholders should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are in many cases beyond the control of ICAP. By their nature, forward-looking statements involve risks and uncertainties because such statements relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not indicative of future performance and the actual results of operations and financial condition of the ICAP Group, and the development of the industry in which the ICAP Group operates, may differ materially from those made in or suggested by the forward-looking statements contained in this document. Important risk factors which may cause actual results to differ include, but are not limited to, those described in Part III ''Risk Factors'' of this document. The cautionary statements set out above should be considered in connection with any subsequent written or oral forward-looking statements that ICAP, or persons acting on its behalf, may issue.
These forward-looking statements are not intended to provide any representations, assurances or guarantees as to future events or results. To the extent required by the Listing Rules, the Prospectus Rules, the Disclosure Rules and Transparency Rules and other applicable regulation, ICAP will update or revise the information in this document. Otherwise, ICAP undertakes no obligation to update or revise any forward-looking statements or other information, and will not publicly release any revisions it may make to any forward-looking statements or other information that may result from events or circumstances arising after the date of this document. ICAP Shareholders should note that this paragraph is not intended to qualify the statement as to working capital set out in paragraph 12 of Part VIII ''Additional Information—ICAP'' of this document.
No statement in this document is intended to constitute a profit forecast or profit estimate for any period, nor should any statement be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for ICAP.
| Page | |
|---|---|
| EXPECTED TIMETABLE OF PRINCIPAL EVENTS | vi |
| TO VOTE ON THE PROPOSALS |
1 |
| ACTION TO BE TAKEN | 2 |
| DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS |
5 |
| PART I: LETTER FROM THE CHAIRMAN OF ICAP | 6 |
| PART II: EXPLANATORY STATEMENT | 23 |
| PART III: RISK FACTORS | 41 |
| PART IV: SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE TRANSACTION AGREEMENTS |
46 |
| PART V: FINANCIAL INFORMATION OF IGBB | 53 |
| PART VI: INFORMATION ON NEWCO AND THE NEWCO SHARES | 57 |
| PART VII: UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE RETAINED GROUP | 67 |
| PART VIII: ADDITIONAL INFORMATION—ICAP . |
75 |
| PART IX: INFORMATION ON TULLETT PREBON AND THE ENLARGED TULLETT PREBON GROUP |
100 |
| PART X: TAXATION | 134 |
| PART XI: THE SCHEME OF ARRANGEMENT . |
139 |
| PART XII: DEFINITIONS | 145 |
| NOTICE OF COURT MEETING | 155 |
| NOTICE OF GENERAL MEETING | 157 |
References to a time of day are to London time.
| Event | Time and/or Date |
|---|---|
| Publication of Tullett Prebon Prospectus . |
1 March 2016 |
| Latest time and date for receipt of blue Form of Proxy and CREST Proxy Instruction for the Court Meeting |
11.30 a.m. on 22 March 2016(1) |
| Latest time and date for receipt of pink Form of Proxy and CREST Proxy Instruction for the General Meeting |
11.40 a.m. on 22 March 2016(2) |
| Voting record time in respect of the Court Meeting and General Meeting for the holders of ICAP Ordinary Shares |
6.00 p.m. on 22 March 2016(3) |
| Court Meeting | 11.30 a.m. on 24 March 2016 |
| General Meeting |
11.40 a.m. on 24 March 2016(4) |
The expected date of the Scheme Court Hearing and each of the other dates and times set out below will depend, among other things, on the date on which the conditions to the Scheme and the Demerger are satisfied or, if capable of waiver, waived. They are accordingly presented as indicative and referable to the date on which those conditions are satisfied or waived (as the case may be). Further details of the conditions are set out in paragraphs 3 and 5 of Part II ''Explanatory Statement'' of this document.
ICAP will give notice of each of the below dates and times, when known, by issuing an announcement through a Regulatory Information Service and by making such announcement available on ICAP's website at www.icap.com. Further updates or changes to other times or dates indicated below shall be notified in the same manner.
| D |
|---|
| 6.00 p.m. on D+9 Business Days |
| D+10 Business Days |
| D+10 Business Days(5) |
| D+10 Business Days(5) |
| 8.00 a.m. on D+11 Business Days(5) |
| D+15 Business Days(5) |
| 6.00 p.m. on D+15 Business Days(5) |
| D+16 Business Days(5) |
| D+16 Business Days(5)(6) |
| 8.00 a.m. on D+17 Business Days(5)(6) |
| 8.00 a.m. on D+17 Business Days(5)(6) |
Despatch of cheques, or settlement through CREST, in respect of any cash due in respect of the sale of fractional entitlements to New Tullett Prebon Shares and/or consolidated Newco Ordinary Shares, and share certificates in respect of New Tullett Prebon Shares and consolidated Newco Ordinary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . By D+26 Business Days
(This page has been left blank intentionally.)
Whether or not you plan to attend the Meetings:
As an alternative to completing and returning the Forms of Proxy, you may submit your Forms of Proxy electronically at www.icap-shares.com. For security purposes, you will need the Voting ID, Task ID and shareholder reference number which are given on your Forms of Proxy. Electronic proxies must be received no later than 48 hours before the time appointed for the relevant Meeting.
If you require assistance, please telephone Capita Asset Services on 0371 664 0565. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. and 5.30 p.m., Monday to Friday, excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice, and calls may be recorded and monitored for security and training purposes.
The completion and return of Forms of Proxy will not prevent you from attending and voting at the Court Meeting and/or the General Meeting, or any adjournments thereof, in person should you wish to do so.
If the blue Form of Proxy for use at the Court Meeting is not returned by 11.30 a.m. on 22 March 2016 (or, if the Court Meeting is adjourned, not less than 48 hours prior to the time and date set for the adjourned meeting), it may be handed to ICAP's Registrar, on behalf of the Chairman of the Court Meeting, at the Court Meeting before the taking of the poll. However, in the case of the General Meeting, unless the pink Form of Proxy is returned so as to be received by no later than 11.40 a.m. on 22 March 2016 (or, if the General Meeting is adjourned, not less than 48 hours prior to the time and date set for the adjourned meeting), it will be invalid.
IT IS IMPORTANT THAT, FOR THE COURT MEETING, AS MANY VOTES AS POSSIBLE ARE CAST SO THAT THE COURT MAY BE SATISFIED THAT THERE IS A FAIR REPRESENTATION OF SHAREHOLDER OPINION. YOU ARE THEREFORE STRONGLY URGED TO COMPLETE, SIGN AND RETURN YOUR FORMS OF PROXY AS SOON AS POSSIBLE.
This page should be read in conjunction with the ACTION TO BE TAKEN, set out on page 2 of this document, and the rest of this document.
Detailed instructions on the action to be taken are set out in paragraph 21 of Part II ''Explanatory Statement'' of this document and are summarised below.
The Court Meeting and the General Meeting will be held on 24 March 2016 at 11.30 a.m. and 11.40 a.m., respectively (or, in the case of the General Meeting, if later, as soon as the Court Meeting has concluded or been adjourned).
Please check that you have received the following with this document:
If you have not received all of these documents, please contact ICAP's Registrar, Capita Asset Services, on the helpline telephone number indicated below.
Whether or not you intend to attend the Meetings, please complete and sign both the blue and pink Forms of Proxy and return them to ICAP's Registrar at Capita Asset Services, PXS-1, 34 Beckenham Road, Beckenham, BR3 4ZF as soon as possible, but, in any event, to be received by no later than 11.30 a.m. on 22 March 2016 in the case of the Court Meeting (blue form) and by no later than 11.40 a.m. on 22 March 2016 in the case of the General Meeting (pink form) (or, in the case of an adjourned meeting, not less than 48 hours prior to the time and date set for the adjourned meeting). This will enable your votes to be counted at the Meetings in the event of your absence. If the blue Form of Proxy for use at the Court Meeting is not returned by 11.30 a.m. on 22 March 2016 (or, if the Court Meeting is adjourned, not less than 48 hours prior to the time and date set for the adjourned meeting), it may be handed to ICAP's Registrar, on behalf of the Chairman of the Court Meeting, at the Court Meeting before the taking of the poll. However, in the case of the General Meeting, unless the pink Form of Proxy is returned so as to be received by no later than 11.40 a.m. on 22 March 2016 (or, if the General Meeting is adjourned, not less than 48 hours prior to the time and date set for the adjourned meeting), it will be invalid.
As an alternative to completing and returning the Forms of Proxy, you may submit your Forms of Proxy electronically at www.icap-shares.com. For security purposes, you will need the Voting ID, Task ID and shareholder reference number which are given on your Forms of Proxy. Electronic proxies must be received no later than 48 hours before the time appointed for the relevant Meeting.
If you hold your ICAP Ordinary Shares in uncertificated form (that is, in CREST), you may vote using the CREST voting service in accordance with the procedures set out in the CREST Manual (please also refer to the notes for the Notices convening the Court Meeting and the General Meeting set out on pages 155 to 156 and 157 to 164, respectively, of this document and the notes to the Forms of Proxy).
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ''CREST Proxy Instruction'') must be properly authenticated in accordance with the specifications of Euroclear UK & Ireland Limited (''Euroclear'') and must contain the information required for such instructions, as described in the CREST Manual.
The message, regardless of whether it relates to the appointment of a proxy, the revocation of a proxy appointment or an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by ICAP's Registrar (CREST participant ID RA10) by no later than 11.30 a.m. on 22 March 2016 in the case of the Court Meeting and by no later than 11.40 a.m. on 22 March 2016 in the case of the General Meeting (or, in the case of an adjourned meeting, not less than 48 hours prior to the time and date set for the adjourned meeting).
For this purpose, the time of receipt will be taken as the time (as determined by the stamp applied to the message by the CREST Applications Host) from which ICAP's Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsor or voting service provider, should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by a particular time. In this connection, CREST members and, where applicable, their CREST sponsor or voting service provider are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).
The completion and return of the relevant Form of Proxy will not prevent you from attending and voting in person at the Court Meeting and/or the General Meeting, or any adjournments thereof, should you wish to do so.
If you are a participant in any of the ICAP Employee Share Plans, you will be sent a separate letter explaining the implications of the proposals for your options and awards.
You are entitled to appoint a proxy in respect of some or all of your ICAP Ordinary Shares. You are also entitled to appoint more than one proxy. A space has been included in the Forms of Proxy to allow you to specify the number of ICAP Ordinary Shares in respect of which that proxy is appointed.
If you wish to appoint more than one proxy in respect of your shareholding, you should contact ICAP's Registrar to obtain further Forms of Proxy, or photocopy the Forms of Proxy, as required. You may appoint more than one proxy in relation to each Meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by you. The following principles shall apply in relation to the appointment of multiple proxies:
(f) If a member appoints a proxy or proxies and then decides to attend the Court Meeting or the General Meeting in person and vote using their poll card (as applicable), then the vote in person will override the proxy vote(s). If the vote in person is in respect of the member's entire holding, then all proxy votes will be disregarded.
If you have any questions relating to this document or the completion and return of the Forms of Proxy, please write to ICAP's Registrar at Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by telephone on 0371 664 0565. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. and 5.30 p.m., Monday to Friday, excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
Deborah Abrehart 2 Broadgate
Charles Gregson Chairman Michael Spencer Group Chief Executive Officer Stuart Bridges Group Finance Director John Sievwright Senior Independent Director Ivan Ritossa Independent Non-Executive Director Robert Standing Independent Non-Executive Director
London EC2M 7UR
J.P. Morgan Limited Evercore Partners International LLP 25 Bank Street 15 Stanhope Gate London E14 5JP London W1K 1LN
Clifford Chance LLP 10 Upper Bank Street London E14 5JJ
Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS
Capita Asset Services Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Capita Asset Services Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT
PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
ICAP PLC
(Incorporated and registered in England and Wales with registered number 03611426)
Charles Gregson 2 Broadgate Michael Spencer London Stuart Bridges EC2M 7UR Ivan Ritossa John Sievwright Robert Standing
1 March 2016
To ICAP Shareholders
Dear Shareholder
On 11 November 2015, the ICAP Board agreed terms with Tullett Prebon plc (''Tullett Prebon'') for the disposal by the ICAP Group of its global hybrid voice-broking and information business to Tullett Prebon, including ICAP's associated technology and broking platforms (including iSwap and Fusion), certain of ICAP's joint ventures and associates (''IGBB''), and certain intellectual property rights including the ''ICAP'' name.
Tullett Prebon intends to acquire all of IGBB in return for the issue of new shares in Tullett Prebon (''New Tullett Prebon Shares'') to ICAP Newco plc, a new holding company of the ICAP group (''Newco''), and to ICAP Shareholders, such that following Completion, ICAP Shareholders and Newco will, together, own approximately 56 per cent. of the issued share capital in Tullett Prebon as enlarged following the Transaction (''Enlarged Tullett Prebon'').
Due to its size, the Transaction will constitute a class 1 transaction (as defined in the Listing Rules) for ICAP and requires the approval of ICAP Shareholders. The purpose of this document is to explain the Proposals which will allow ICAP to implement the Transaction and why the ICAP Board considers it to be in the best interests of ICAP and ICAP Shareholders as a whole.
If the Proposals are approved and the Transaction is implemented in full:
Following the issue of the New Tullett Prebon Shares to ICAP Shareholders, Newco intends to carry out a share consolidation in respect of the Newco Ordinary Shares in order to seek broad comparability, as far as possible, between the share price of a Newco Ordinary Share before and after the Demerger (the ''Share Consolidation'').
In order to approve the Proposals, ICAP Shareholders will need to vote in favour of the Scheme at the Court Meeting and the Resolutions (including approval of the Transaction) at the General Meeting.
Directors: Registered Office:
The Court Meeting to seek ICAP Shareholders' approval of the Scheme and the General Meeting to seek ICAP Shareholders' approval for the Resolutions will take place at 11.30 a.m. and 11.40 a.m. (or as soon thereafter as the Court Meeting has been concluded or adjourned), respectively, on 24 March 2016, at the registered offices of ICAP at 2 Broadgate, London EC2M 7UR. Notices convening the Court Meeting and the General Meeting are set out on pages 155 to 156 and 157 to 164 respectively. Explanations of the Scheme and the Resolutions are set out in the explanatory letter from J.P. Morgan Cazenove and Evercore contained in Part II ''Explanatory Statement'' of this document and paragraphs 2, 3 and 20 of this Chairman's Letter. The ICAP Board is unanimously recommending that you vote in favour of the Scheme at the Court Meeting and the Resolutions (including the resolution to approve the Transaction) at the General Meeting.
In addition to the approval of ICAP Shareholders, the Transaction is also conditional on a number of further matters which are set out in full in Part II ''Explanatory Statement'' of this document. Details of the actions that ICAP Shareholders should take, and the recommendation of the ICAP Board, are set out in paragraphs 19 and 21 of this Chairman's Letter respectively.
Over a number of years, Tullett Prebon and ICAP have successfully executed their respective strategies during a period of significant market change in demand for services from interdealer brokers.
Against a backdrop of structural changes within wholesale financial markets and increased regulatory oversight and disclosure, customers are seeking innovative products, greater liquidity and best in class platforms and services.
As such, the ICAP Board believes that the Transaction creates two strengthened and streamlined businesses. In particular, Newco will:
In addition, the Retained Group expects to benefit from the fact that, based on current assessments, it will not be subject to prudential consolidation requirements under the EU Capital Requirements Regulation or Directive.
The Transaction will combine the complementary strengths of two leading global hybrid voice-broking franchises under Enlarged Tullett Prebon. This establishes a stronger platform to deliver Tullett Prebon's objectives of becoming the world's best operator in global hybrid voice-broking and the most trusted source of liquidity in the OTC markets.
The Transaction involves an acquisition by Tullett Prebon of all of IGBB in return for the issue of New Tullett Prebon Shares to Newco and to ICAP Shareholders, representing in aggregate approximately 56 per cent. of the issued share capital of Enlarged Tullett Prebon. Existing Tullett Prebon Shareholders would own 44 per cent. of the issued share capital of Enlarged Tullett Prebon following Completion.
Under the terms of the Transaction, IGBB will be acquired by Tullett Prebon with gross intra-group debt of £330 million outstanding to the Newco Group. This will be repaid to the Newco Group on Completion. IGBB will also be acquired with sufficient regulatory capital, cash and working capital to meet all applicable regulatory requirements and ordinary course operational requirements. IGBB's cash balance at Completion is expected to be equivalent to its gross debt. ICAP's management intends to use the cash received by the Newco Group on repayment of the £330 million loan to repay any remaining borrowings on the ICAP Group existing revolving credit facility.
The Transaction has been structured as an acquisition by Tullett Prebon of ICAP Global Broking Holdings Limited (''IGBHL'') in consideration for the issue of New Tullett Prebon Shares. As a preliminary step, ICAP will undertake an intra-group reorganisation which will result in IGBHL becoming the holding company of IGBB (the ''Reorganisation''). The Transaction is conditional upon the completion of the Reorganisation.
It is expected that the Transaction will be implemented in full pursuant to a further four key connected stages:
Newco will be inserted as the new group holding company of ICAP pursuant to the Scheme, which is a court sanctioned cancellation scheme of arrangement. Pursuant to the Scheme, existing ICAP Shareholders will cease to be shareholders in ICAP and will instead become shareholders in Newco (''Newco Shareholders'').
A scheme of arrangement is a formal procedure under the Companies Act 2006. The Scheme requires, amongst other things, the approval of ICAP Shareholders and the sanction of the High Court of Justice in England and Wales.
If the Scheme becomes effective:
Further details of the Scheme are set out in Part II ''Explanatory Statement'' of this document.
Following the Scheme becoming effective, as part of a further intra-group reorganisation, IGBHL will become a direct subsidiary of Newco and Newco will capitalise an amount of the reserves created as a consequence of that intra-group reorganisation by issuing one Newco Reserve Share to the Newco Subscriber Shareholder.
Subject to the satisfaction of certain conditions, Tullett Prebon will first acquire approximately 64.5 per cent. of the issued share capital of IGBHL in consideration for the issue of New Tullett Prebon Shares comprising approximately 45.07 per cent. of Tullett Prebon's share capital (calculated on a fully diluted basis and immediately following such issuance) directly to the holders of Newco Ordinary Shares (referred to as ''Initial Completion''). It is expected that such 45.07 per cent. shareholding will subsequently be diluted to approximately 36.1 per cent. of the issued share capital of Enlarged Tullett Prebon, pursuant to the exercise of the Newco Put/Call Option described below.
Initial Completion will be effected by means of a Court-approved reduction and repayment of the share capital of Newco, which involves a proposed reduction of capital of Newco under sections 645 to 651 of the Companies Act, to be undertaken shortly after the Scheme Effective Date (the ''Newco Reduction of Capital'').
On the Newco Reduction of Capital becoming effective, the nominal value of each Newco Ordinary Share will be reduced in order first to repay capital to the holders of the Newco Ordinary Shares at the Newco Reduction of Capital Record Time and secondly to create distributable reserves for Newco. Such repayment of capital will be satisfied by the transfer to Tullett Prebon of approximately 64.5 per cent. of the issued share capital of IGBHL. In consideration for that transfer, Tullett Prebon will issue New Tullett Prebon Shares equal to, in aggregate, approximately 45.07 per cent. of the issued share capital of Tullett Prebon (calculated on a fully diluted basis and immediately following such issuance) to the holders of Newco Ordinary Shares.
The balance of the amount reduced will create distributable reserves for Newco. As part of the Newco Reduction of Capital, the Newco Reserve Share will also be cancelled, creating further distributable reserves for Newco. The distributable reserves created, in each case, are intended to be available at the discretion of Newco for any lawful purpose to which such reserves may be applied (including future dividends and share repurchases).
ICAP Shareholders should note that the Scheme cannot be conditional on the Demerger taking place. Consequently, if once the Scheme has become effective, the conditions to the Demerger cease to be capable of being satisfied (or, where permitted, are not waived), Newco will nevertheless have been inserted as the new holding company of the ICAP Group. In such circumstances, ICAP Shareholders would still have received Newco Ordinary Shares but, as the Demerger would not complete, ICAP Shareholders would not receive Tullett Prebon Ordinary Shares. Similarly, the Share Consolidation (as described below) would not be implemented but Newco would still expect to reduce its capital so as to create distributable reserves in Newco.
Further details of the Demerger are set out in Part II ''Explanatory Statement'' of this document.
The Share Consolidation, which is expected to take place immediately following the Demerger, is intended broadly to maintain comparability, as far as possible, between the share price of a Newco Ordinary Share before and after the Demerger.
The Share Consolidation ratio cannot be fixed at this time as it will depend on a number of factors including fluctuations in the price of ICAP Ordinary Shares or Newco Ordinary Shares (as the case may be) and Tullett Prebon Ordinary Shares. Accordingly, the number of Newco Ordinary Shares resulting from the Share Consolidation will be announced by the Newco Directors prior to the Reduction Court Hearing with the consolidation ratio obtained by dividing (a) the implied value of Newco (calculated by deducting the value attributed to IGBB by the transaction terms from ICAP's market capitalisation and adding the implied value of the 19.9% stake in Enlarged Tullett Prebon to be held by Newco (all based on the Closing Prices of ICAP Ordinary Shares and Tullett Prebon Ordinary Shares)) by (b) ICAP's market capitalisation (based on the Closing Price of ICAP Ordinary Shares on the same day), subject to such amendments as the Newco Directors may agree to deal with fractions, rounding or other practical problems or matters which may result from such division and/or to achieve a ratio which in their judgment is the most appropriate to seek to maintain comparability of the share price of a Newco Ordinary Share before and after the Demerger.
By way of example, on the basis of the Closing Price per ICAP Ordinary Share of 433 pence as at 26 February 2016 (the latest practicable date prior to publication of this document), and on the basis of the Closing Price per Tullett Prebon Ordinary Share of 347 pence on the same date, the consolidation ratio would be 3 new Newco Ordinary Shares for every 4 Newco Ordinary Shares held prior to the Share Consolidation.
Immediately following the Share Consolidation, holders of Newco Ordinary Shares will own the same proportion of issued share capital in Newco as they did previously (subject to fractional entitlements) but will hold fewer Newco Ordinary Shares than the number of ICAP Ordinary Shares currently held (or Newco Ordinary Shares held immediately following the Scheme). Further information on the Share Consolidation is set out in Part II ''Explanatory Statement'' of this document.
Tullett Prebon has granted ICAP a put option and ICAP has granted Tullett Prebon a call option which will become exercisable following Initial Completion (together, the ''Newco Put/Call Option''). If either option is exercised (as expected), Tullett Prebon will acquire the remaining approximately 35.5 per cent. of the issued share capital of IGBHL in consideration for further New Tullett Prebon Shares comprising approximately 19.9 per cent. of Tullett Prebon's issued share capital (calculated on a fully diluted basis and immediately following such issuance) being issued to Newco (referred to as ''Option Completion'').
The Newco Put/Call Option can be exercised by the service of a notice by Tullett Prebon or ICAP at any time during the ten Business Days following Initial Completion. Subject to the exercise of either option, Option Completion is unconditional and is to take place on the Business Day after the service of the relevant notice. Tullett Prebon intends, if ICAP does not exercise its put option, to exercise its call option.
Assuming one of the options is exercised, following Completion, the enlarged issued share capital of Tullett Prebon will be owned approximately 44 per cent. by existing Tullett Prebon Shareholders, approximately 36.1 per cent. by ICAP Shareholders and approximately 19.9 per cent. by Newco.
Operating across 35 locations in 22 countries, IGBB provides hybrid voice interdealer broking services and complementary information services products across a wide range of asset classes including rates, emerging markets, commodities, equities, FX and money markets and credit.
IGBB includes the following constituent parts of ICAP:
The following table contains a list of IGBB's principal trading subsidiaries:
| Name | Country of Incorporation |
|---|---|
| ICAP Global Derivatives Limited | England |
| ICAP Energy Limited | England |
| ICAP Europe Limited | England |
| ICAP Securities Limited | England |
| ICAP Capital Markets LLC | USA |
| ICAP Corporates LLC . |
USA |
| ICAP Energy LLC | USA |
| ICAP Securities USA LLC . |
USA |
IGBB offers its customers a choice of trading venues and services, allowing them to select the execution method (matched principal, agency/name give-up or execution on-exchange) appropriate for the liquidity of the product and their specific needs. Market participants use IGBB's hybrid voice-broking services to assess trading availability and successfully execute trades. Customers range from investment banks for fixed income products to end-user corporates and industrials for commodities.
IGBB's 1,472 voice brokers (as at 30 June 2015) draw on their deep customer relationships, market expertise and IGBB's suite of pre-trade price discovery screens to identify potential trading interest, and in doing so create transparency, liquidity and facilitate the price discovery process. This is particularly
1 Fusion is an e-Commerce portal for trading venues, which acts as a front-end service to distribute an increasing number of broker-assisted matching sessions in products with more episodic liquidity.
important in markets where there is a wide range of potential transaction types and the number of parties willing to enter into certain transactions at any moment may be limited.
IGBB is separately managed from ICAP's other businesses by a dedicated management team and is supported by 1,269 support staff.
iSwap is a global electronic trading platform for EUR, USD and GBP interest rate swaps. Since its creation in 2010, iSwap has continued to build on its market position and has brought increased transparency, greater efficiency and lower transaction costs to the world's largest OTC derivative market. iSwap operates as a regulated multilateral trading facility in Europe and within the IGBB SEF in the United States.
IGBB Information Services delivers independent data solutions to financial market participants, generating subscription-based fees from a suite of products and services directly attributable to IGBB Global Broking and iSwap. IGBB Information Services charges licence fees based on financial instruments linked to proprietary indices as well as licensing other index administrators for the use of IGBB data in their indices.
Apart from its global broking business, which is described in paragraph 4 of this Chairman's letter, ICAP is a leading markets operator and provider of post-trade risk mitigation services. Following Completion, the Newco Group will comprise the Electronic Markets and Post Trade Risk and Information businesses.
The Electronic Markets division includes BrokerTec and EBS, which are electronic trading platforms in fixed income and FX. These platforms offer efficient and effective trading solutions to customers in more than 50 countries, across a range of instruments including spot FX, US Treasuries, European government bonds and European Union and US repo. These electronic platforms are built on the ICAP Group's bespoke networks connecting participants in financial markets. In December 2014, the ICAP Group announced plans to combine its electronic businesses to create EBS-BrokerTec. The combined business allows the ICAP Group to leverage BrokerTec's market leading platform, client relationships and strong team, as well as EBS's technology and innovation pipeline, to deliver unique products and services to the industry and expand the addressable market of both platforms. The ICAP Group also owns a small cap equities exchange in the UK known as ISDX.
BrokerTec is the leading electronic trading platform for US Treasuries, European Union and US repo. It also has a trading platform in other government fixed income securities such as European government bonds. BrokerTec facilitates trading for institutions, banks and non-bank professional trading firms.
EBS, the ICAP Group's electronic FX business, is a reliable and trusted source of orderly, executable and genuine liquidity across major and emerging market currencies. It has responded to changing market dynamics by transitioning from a business with a single offering to one that can support multiple execution methods and multiple ways of trading through a common distribution network. The core of this strategy has been the launch of EBS Direct in November 2013. This is a fully disclosed and relationship-based platform that allows liquidity providers to stream tailored prices directly to liquidity consumers.
The Post Trade Risk and Information division operates market infrastructure for post trade processing and risk management across asset classes and enables users of financial products to reduce operational, second order financial and system-wide risks. The services offered by the Post Trade Risk and Information division enable customers to increase the efficiency of trading, clearing and settlement and facilitate the effective management of capital and risk weighted assets and the associated cost. The portfolio risk services businesses comprise: TriOptima and Reset, which identify, neutralise, remove and reconcile risk within portfolios of derivative transactions; Traiana, which provides pre-trade risk and post-trade processing solutions; and the information and data sales business.
TriOptima, through triReduce and triResolve, is a leader in risk mitigation solutions for over-the-counter (''OTC'') derivatives, primarily through the elimination and reconciliation of outstanding transactions. It continues to benefit from the strategic alignment of its offerings with the G20 policy objectives of transparency and risk reduction in the financial system.
Traiana operates the leading market infrastructure for pre and post trade risk management and post trade processing across multiple asset classes. Its robust and proven product suite automates trade processing across the life cycle for FX, cash equities, equity swaps, futures, OTC derivatives and fixed income. Traiana's Harmony network connects more than 750 global banks, broker/dealers, buy side firms and trading platforms.
Reset is a provider of services that reduces the basis risk within portfolios from fixings in the interest rate, FX and inflation derivatives and bonds markets. Basis risk results from the structure of the instruments traded and unintended mismatches of exposure over time.
The ICAP Group's Post Trade Risk and Information division invests in new companies developing innovative technology-led offerings via Euclid Opportunities. Euclid identifies and provides investment to emerging financial technology firms providing new platforms, business models and technologies that have the potential to drive efficiency, transparency and scale across the post transaction lifecycle. Examples of investments include: Duco, a rapidly growing reconciliation on-demand provider; OpenGamma, an award winning risk analytics provider; and Enso Financial, a portfolio analytics provider to asset managers and hedge funds.
Following Completion, the key components of Newco will be EBS-Brokertec, TriOptima, Traiana, Reset and Euclid. Newco will be positioned as a leader in Electronic Markets and Post Trade services.
As a focused electronic and post trade group with a leading portfolio of financial market infrastructure businesses and products, the Newco Group will benefit from ICAP's significant investment in technology and strong track record of innovation and will be well positioned to capitalise on the many growth opportunities in its markets.
Newco's businesses will include:
Further details of these businesses are set out under ''ICAP's businesses'' above.
The Newco Group will operate globally with offices in Europe, the Americas and Asia Pacific. Its principal offices are in London, New York, Stockholm, Tel Aviv and Singapore.
The ICAP Group has a leading portfolio of financial market infrastructure, in which its major businesses are leading providers in their respective niches. It has consistently high cash conversion and operating margins, and benefits from regulatory-driven increased demand for post trade and risk mitigation solutions and electronic trading infrastructure. The ICAP Group is well positioned for capital markets growth in emerging markets and has a management team with a strong track record of value creation, as businesses have been acquired for a total of approximately £1 billion over the last 14 years, and these have grown significantly generating approximately £147 million of trading operating profit for the year ended 31 March 2015.
It is expected that the Retained Group will not be subject to consolidated regulatory capital requirements. The ICAP Group currently operates under a waiver from those requirements, but absent the Transaction it is expected that the FCA would require significant capital to be retained or raised over a period of years to eliminate the consolidated capital deficit that otherwise exists. Based on an assessment of the information (including our legal advice) provided to the FCA by ICAP in relation to the projected balance of financial and non-financial business in the Retained Group, the FCA has indicated that, following the Transaction, the Retained Group will not be subject to prudential consolidation requirements under the EU Capital Requirements Regulation (''CRR'') or Directive (''CRD'').
No changes are anticipated as a result of the Transaction to the ICAP Board, each of whom is expected to become a director of Newco.
Newco's dividend policy will be to maintain a progressive dividend in line with its view of the underlying earnings and cash flow of the Newco Group.
Tullett Prebon Group's business involves the provision of broking services to counterparties operating in the world's major wholesale OTC and exchange traded financial and commodity markets. As an intermediary, the Tullett Prebon Group provides a valuable service to its clients through its ability to create liquidity through price and volume discovery to facilitate trading, and to provide anonymity and confidentiality for counterparties. The business offers broking services in five major product groups: fixed income securities and their derivatives, interest rate derivatives, treasury products, equities and energy. The Tullett Prebon Group also has an established information sales business, which collects, cleanses, collates and distributes real-time information to data providers, and a risk management services business, which provides clients with post-trade, multi-product matching services.
The Tullett Prebon Group operates in Europe, the Middle East, Africa, North and South America and Asia Pacific. Its principal offices are in London, New York, New Jersey, Singapore, Hong Kong and Tokyo.
The acquisition of IGBB will position the Enlarged Tullett Prebon Group as the leading inter-institutional liquidity provider in OTC products and as a nexus of product knowledge, broking experience and client relationships. The Enlarged Tullett Prebon Group will play a pivotal role in the facilitation of OTC trading as a partner of choice to institutions, corporates and governments, supported by a best-in-class risk management and compliance infrastructure.
The terms of the Transaction are such that, following Completion, and assuming the Transaction is implemented in full as expected, the share ownership of Enlarged Tullett Prebon will be approximately 56 per cent. held by ICAP Shareholders and Newco and approximately 44 per cent. held by existing Tullett Prebon Shareholders.
As the Transaction is classified as a reverse takeover in respect of Tullett Prebon for the purpose of the Listing Rules, upon Initial Completion, the listing of the existing Tullett Prebon Ordinary Shares to the premium listing segment of the Official List will be cancelled. Simultaneously, application will also be made to the UK Listing Authority for the re-admission of the existing Tullett Prebon Ordinary Shares and the admission of the New Tullett Prebon Shares which will be issued at Initial Completion to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. On Option Completion, application will be made to the UK Listing Authority for the admission of the New Tullett Prebon Shares which will be issued at Option Completion to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities.
The Transaction is expected to generate significant cost synergies of at least £60 million, driven by the elimination of duplicated management and support costs. Approximately 40 per cent. of these synergies are expected to be delivered from the Tullett Prebon Group and IGBB consolidating onto common technology platforms. The remaining synergies are expected to be achieved from de-duplication across functions including regional management, operations, finance, facilities and legal/compliance/risk/ internal audit. The management and support cost synergies represent approximately one-sixth of the combined management and support cost base which amounts to approximately £360 million and are expected to be largely realised by the second full year following Completion and fully realised by the third full year following Completion. The identified cost synergies will accrue as a direct result of the proposed Transaction and could not be achieved on a standalone basis. In addition to the management and support cost synergies, Tullett Prebon expects to derive, over time, additional efficiencies in front office activities from the combination of the two businesses. Cash integration spend to achieve the cost synergies is expected to be approximately £60 million and is expected to be incurred in the first two
years following Completion. The estimated synergies reflect both the beneficial elements and the relevant costs.
On the assumption that no Tullett Prebon Ordinary Shares are issued by Tullett Prebon between 26 February 2016 (the latest practicable date prior to publication of this document) and admission of the New Tullett Prebon Shares (other than the New Tullett Prebon Shares and 302,148 Tullett Prebon Ordinary Shares that may be issued as a result of the exercise of a vested share option award under Tullett Prebon's long term incentive plan), it is expected that, in aggregate, 310,314,296 New Tullett Prebon Shares will be issued on Completion in connection with the Transaction. This will result in Tullett Prebon's issued ordinary share capital increasing by approximately 127 per cent. Existing Tullett Prebon Shareholders will suffer an immediate dilution as a result of the Transaction, following which they will hold approximately 44 per cent. of the issued share capital of Enlarged Tullett Prebon, with the remaining approximately 56 per cent. held by ICAP Shareholders and Newco.
The New Tullett Prebon Shares will be issued as fully paid and will rank pari passu in all respects with the existing Tullett Prebon Ordinary Shares in issue at the time the New Tullett Prebon Shares are issued pursuant to the Transaction, including in relation to any dividends or other distributions with a record date falling after the issue of the New Tullett Prebon Shares. Tullett Prebon has confirmed that it intends to maintain its annual dividend of 16.85 pence per share during the integration period, with an ambition to grow the dividend over time.
Application will be made to the UK Listing Authority for the New Tullett Prebon Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Tullett Prebon Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Completion of the Transaction (including admission of the New Tullett Prebon Shares) will take place in 2016.
Further information on Tullett Prebon, the Enlarged Tullett Prebon Group and the New Tullett Prebon Shares will be published in the Tullett Prebon Prospectus, which is expected to be made available on or around 1 March 2016 on Tullett Prebon's website at www.tullettprebon.com and for information purposes via ICAP's website at www.icap.com.
Following the Transaction, ICAP and Tullett Prebon will each operate as independent separately listed companies with their own management teams and boards of directors. On Completion it is intended that Ken Pigaga, currently Group Chief Operating Officer of ICAP, will resign his current position and be appointed to the board of Enlarged Tullett Prebon as a director (subject to FCA approval) and Chief Operating Officer. Newco will also appoint a non-executive director to the board of the Enlarged Tullett Prebon. In addition, Tullett Prebon has entered into a heads of terms to appoint Michael Spencer, currently Group Chief Executive Officer, as a consultant to Tullett Prebon following Completion in connection with the integration of IGBHL into Tullett Prebon's business and Michael Spencer will have the honorary title of President of the Enlarged Tullett Prebon Group. He will be available to advise the board of Enlarged Tullett Prebon but will not be a member of the board.
A relationship agreement (the ''Relationship Agreement''), which will be effective from the admission of the New Tullett Prebon Shares, will be entered into between Tullett Prebon and Newco to govern the relationship between Tullett Prebon and Newco as a shareholder of Enlarged Tullett Prebon following Completion. The principal purpose of the Relationship Agreement is to ensure that Enlarged Tullett Prebon is capable of carrying on its business independently of Newco and its associates. The Relationship Agreement contains customary terms and conditions, as well as a right for Newco to nominate one non-executive director for appointment to the board of Enlarged Tullett Prebon for so long as Newco's shareholding (together with its associates) in Enlarged Tullett Prebon remains at, or above, 10 per cent. An overview of the key provisions of the Relationship Agreement is set out in paragraph 2 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements''.
On or before Initial Completion, it is expected that a limited number of intra-group commercial arrangements that currently exist between IGBB and the rest of the ICAP Group will be formalised and/or amended to ensure that following Completion, such arrangements are on appropriately documented, arm's length terms. IGBB and ICAP will also enter into two Transitional Services Agreements pursuant to which (i) ICAP will provide IGBB with the use of or access to certain resources that will be retained by the Retained Group as at Initial Completion (the ''Transitional Services Agreement'' or ''TSA''), and (ii) IGBB will provide the Retained Group with the use of or access to certain resources that will be owned or controlled by IGBB as at Initial Completion (the ''Reverse Transitional Services Agreement'' or ''RTSA''). An overview of the key provisions of each of the TSA and RTSA is set out in paragraph 3 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements''.
ICAP Shareholders will own the same proportion of ordinary share capital in Newco immediately after the implementation of the Scheme as they did previously in ICAP.
Following implementation of the remainder of the Transaction (including the Demerger and the anticipated exercise of the Newco Put/Call Option), ICAP Shareholders will also receive New Tullett Prebon Shares and Tullett Prebon will own all of the shares in IGBB.
As explained in further detail above, following the issue of the New Tullett Prebon Shares to ICAP Shareholders, Newco intends to carry out the Share Consolidation in order to seek broad comparability, as far as possible, between the share price of a Newco Ordinary Share before and after the Demerger.
Separate communications are being sent to participants in the ICAP Employee Share Plans in respect of the Transaction and the Proposals.
The Share Consolidation is intended to preserve the prevailing value immediately before the Demerger Effective Date of each Newco Ordinary Share under option or award, subject to any market fluctuations. As a result, the value of each option and award under the ICAP Employee Share Plans both after the Scheme and after the Demerger and the Share Consolidation is intended to remain approximately the same. No adjustments, therefore, are proposed to be made to options or awards that have been made under the ICAP Employee Share Plans. The number of Newco Ordinary Shares over which participants have options or awards, the exercise price and the other terms of the relevant options or awards will remain unchanged.
As at 30 September 2015, the ICAP Group had consolidated net assets of £990 million (extracted without material adjustment from the 30 September 2015 unaudited financial statements of the ICAP Group). An unaudited pro forma statement of the net assets of the ICAP Group as at 30 September 2015 is set out, for illustrative purposes only, in Part VII ''Unaudited Pro Forma Financial Information on the Retained Group'' of this document. As shown in that statement, the illustrative unaudited consolidated net assets of the Retained Group as at 30 September 2015 and under IFRS, on a pro forma basis and adjusted to reflect the Transaction as if Completion had occurred at that date, would have been £1,167 million and the Retained Group would have had a net debt position of approximately £156 million (calculated on the same basis).
The one-off costs associated with the Transaction will have one-off dilutive effects on the ICAP Group's earnings. With effect from Completion, IGBB will cease to be part of the ICAP Group and therefore IGBB's results will not be reflected in the continuing operations of the Retained Group. The Retained Group in its income statement will record dividend income received on its equity stake in Enlarged Tullett Prebon.
For the financial year ended 31 March 2015, the ICAP Group made a trading operating profit of £252 million (extracted without material adjustment from the 2015 audited financial statements of the ICAP Group). An unaudited pro forma income statement is set out, for illustrative purposes only, in Part VII ''Unaudited Pro Forma Financial Information on the Retained Group'' of this document. As shown in that statement, the illustrative unaudited trading operating profit of the ICAP Group for the financial year ended 31 March 2015, on a pro forma basis and adjusted to reflect the Transaction as if it had occurred on 1 April 2014, would have been £147 million.
Investors should read the whole of this document and not rely solely on summarised financial information in this section. Further financial information of the Retained Group is contained in Part VII ''Unaudited Pro Forma Financial Information on the Retained Group'' of this document.
On 11 November 2015, ICAP announced its half-yearly results for the six-month period ended 30 September 2015. On 9 February 2016, ICAP issued its Q3 trading statement. The following update on the current trading and prospects of the ICAP Group has been extracted from those announcements.
''For the six months ended 30 September 2015, the Group reported revenue of £595 million, 4% below the prior half year. On a constant currency basis, revenue from Post Trade Risk and Information increased by 8% and Electronic Markets by 1% which was offset by a decrease of 14% in Global Broking. On a continuing basis, Global Broking revenue was down 1% on the prior half year.
Ongoing challenging market conditions for the six months ended 30 September 2015 impacted the trading performance of the Group. A combination of structural and cyclical factors including historically low interest rates, flat yield curves and bank deleveraging continued to constrain trading activity in Global Broking. Some of the revenue loss within Global Broking was as a result of closed businesses as the Group successfully completed its restructuring programme.
In Electronic Markets, volumes in G7 currencies were relatively mixed due to the lack of central bank policy changes. In contrast volatility in emerging markets currencies benefited from macro instability over the period. Demand for Post Trade Risk and Information products was driven by increased participation in triReduce portfolio compression cycles and the uptake of the portfolio reconciliation service, triResolve. The division's performance continues to be held back by Reset as flat short-term yield curves continued to restrain activity levels.
Consistent with the Group's growth strategy, significant investment was made during the period in the Electronic Markets and Post Trade Risk and Information divisions. The cash investment made during the period in new products and services, principally the development of new products on the EBS Direct platform, the BrokerTec Direct platform and the expansion of TriOptima's and Traiana's product portfolio amounted to £39 million (H1 2014/15—£29m).
The Group reported a trading operating profit of £110 million, a 10% increase on the same period last year. The Group's trading operating profit margin increased to 19% (H1 2014/15—16%). The proportion of the Group's trading operating profit generated from the Electronic Markets and Post Trade Risk and Information divisions was 77%.
Group trading profit before tax of £101 million and trading EPS (basic) of 13.0p increased by 17% and 29% on the prior half year respectively reflecting an increase in the trading operating profit across Post Trade Risk and Information and Global Broking and a positive movement in the US dollar rate. In addition, net finance expense for the period decreased by £5 million largely due to prior period impact of double running interest expense on the f350 million senior notes issued in March 2014 and the f300 million senior notes up to their maturity in July 2014.
Profit before tax for the period was £83 million (H1 2014/15—£36 million), reflecting a £10 million decrease in acquisition and disposal costs and £22 million of exceptional items recognised in the prior year. Basic EPS increased by 167% to 12.0p.''
''Group revenue from continuing businesses for the third quarter to 31 December 2015 was 5% lower than the same period last year on a constant currency and on a reported basis.
Overall market conditions have remained challenging. Risk appetite remains subdued amongst our clients as they continue to deleverage their balance sheets. The first step in the normalisation of the US interest rate environment was taken as the US Federal Reserve raised interest rates by a quarter percentage point. However, volatility remained relatively benign through the quarter before picking up at the start of the new calendar year.
Michael Spencer, Group Chief Executive Officer of ICAP, said: ''Against the backdrop of a difficult market, our business continues to perform well, particularly the Post Trade division which goes from strength to strength. The decision by the Fed to raise interest rates was very welcome, but we are still operating in an environment of ultra-low interest rates and we have some way to go before we return to more normal market conditions. Risk appetite remains subdued and I see few signs that this will pick up any time soon, even after markets began the year with a short burst of extreme volatility.
''The transaction to combine our global hybrid voice broking business with Tullett Prebon is proceeding well, and marks a defining moment in the transformation of the Group into a financial technology business. We have laid the foundations for our electronic and post trade businesses to deliver strong, cash generative returns for the future. I remain confident and excited about the range of opportunities ahead of us and our ability to execute our strategy successfully and provide long-term profitable growth.''
Revenue decreased by 10% on a constant currency basis (7% on a reported basis) during the third quarter compared to the same period last year. Despite maintaining its leading market position average daily volumes in US Treasuries on the BrokerTec platform were down 11% to US\$147 billion. This was against demanding comparables in the previous year, which saw an unusually high level of volatility and one of the biggest intraday moves ever. In US repo average daily volumes decreased by 1% to US\$219 billion and decreased in European repo by 3% to f168 billion.
A tough comparable period for EBS resulted in average daily volume decreasing by 35% to US\$78 billion for the third quarter as FX volatility did not have the same central bank interventions from the ECB and Bank of Japan witnessed in the same period last year. Since the start of the calendar year, FX volatility has increased as Chinese equity markets sparked a global market sell off. The inauspicious start for global equity markets led to somewhat increased volatility especially in emerging market currencies such as CNH and Asian NDFs albeit comparables for the final quarter of the year remain challenging as they benefitted from the Swiss National Bank action. Strong demand for e-Fix Matching, an electronic FX Benchmark Service, resulted in an increase of more than 300% in average daily volumes in the period compared to the same period last year.
During the period there was ongoing investment in EBS Direct which continues to expand its customer base and product offering. In December, it beta launched FX outrights and swaps, a significant part of the FX market in which EBS has never previously participated. Demand for EBS Direct continues to grow with a record month in January with average daily volumes more than US\$20 billion.
Revenues increased 8% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year, driven by continued demand for TriOptima's compression and reconciliation services. In October, TriOptima launched the triReduce CLS Forward FX Compression Service completing the first successful compression cycle for FX forwards and swaps transactions. Following the introduction of new margining rules for uncleared swaps, TriOptima has integrated with AcadiaSoft to deliver an end-to-end solution fulfilling all related regulatory requirements.
As part of Traiana's strategy to innovate, grow and diversify its business into other asset classes, it recently announced that it has entered into an alliance to offer a repo matching service to deliver efficient, automated processes ahead of significant regulatory change. Activity at Reset remains challenged as revenue is largely correlated to the movement in both actual and forecast short-term interest rates. However, the recent change in the US interest rate has had a positive impact, offsetting the ongoing negative trend.
Euclid Opportunities, ICAP's early stage fintech investment incubator, recently invested in Digital Asset Holdings LLC, a developer of Distributed Ledger Technology (''DLT''). Digital Asset Holdings is at the forefront of developments in this field and ICAP will continue to explore options to use DLT to build next generation products and identify further opportunities for innovation.
Revenue from continuing businesses decreased by 7% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year. Year-on-year revenue performance in November and December was much improved on October. The ongoing structural and cyclical factors affecting the division persist, including further deleveraging by the investment banks. Strong revenue growth from electronic matching sessions continues to develop especially in the Asia Pacific region and the Americas.
The transaction to merge the global hybrid voice broking business with Tullet Prebon is proceeding as expected and it is anticipated that will take place during 2016. Currently both companies are in the process of obtaining regulatory and competition approval from various authorities. Revenue from IGBB decreased by 5% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year, in line with the decline in revenue in IGBB partly offset by an increase in information revenue.''
IGBB's revenue, trading operating profit and share of post-tax profit of joint ventures and associates for the three financial years ended 31 March 2015 and two six month periods ended 30 September 2015 and 30 September 2014 are set out in the table below. The financial information has been prepared on the basis set out in Part V ''Financial Information of IGBB'' of this document. The IGBB Group has not in the past constituted a separate legal group within the ICAP Group and has not previously prepared or reported any combined or consolidated financial information. The results of IGBB as presented might have been different had the entities operated as a separate group from 1 April 2012.
| Six months ended 30 September |
Year ended 31 March | |||||
|---|---|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | 2013 | ||
| (£ in millions) | ||||||
| Revenue | ||||||
| IGBB Global Broking and iSwap: | ||||||
| EMEA . |
164 | 193 | 374 | 411 | 452 | |
| Americas | 128 | 145 | 297 | 362 | 394 | |
| APAC | 50 | 44 | 96 | 102 | 110 | |
| IGBB Information Services . |
24 | 20 | 41 | 38 | 36 | |
| Total | 366 | 402 | 808 | 913 | 992 | |
| Trading operating profit . |
37 | 24 | 84 | 115 | 128 | |
| Share of profit of associates and joint ventures after | ||||||
| tax | 3 | 4 | 8 | 6 | 6 | |
| Profit before tax | 40 | 9 | 20 | 40 | 15 | |
| Gross assets |
18,151 | 24,961 | 23,499 | 17,614 |
Notes:
(1) The financial information presented above is unaudited.
The historical financial information of the IGBB Group for the three years ended 31 March 2013, 31 March 2014 and 31 March 2015 and for the six months ended 30 September 2015 is set out in Part V ''Financial Information of IGBB'' of this document.
Investors should read the whole of this document and not rely solely on summarised financial information in this section. Further financial information of the IGBB Group is contained in Part V ''Financial Information of IGBB'' of this document.
As detailed in paragraph 3 of this Chairman's Letter, Tullett Prebon intends to acquire all of IGBB in return for the issue of New Tullett Prebon Shares to Newco and ICAP Shareholders representing in aggregate approximately 56 per cent. of the issued share capital of Enlarged Tullett Prebon as at Completion. On the basis of a Closing Price of 323 pence per Tullett Prebon Ordinary Share on 11 November 2015 (being the date of the announcement of the Transaction), this would have equated to an aggregate consideration of approximately £1.0 billion.
None of Newco or its shareholders will be restricted in dealing in the New Tullett Prebon Shares received as consideration for the Transaction. However, it is Newco's intention to retain its New Tullett Prebon Shares for the foreseeable future following Completion.
The Transaction is conditional, amongst other things, on competition and regulatory clearances (approvals, expiries of relevant waiting periods and non-referrals, as appropriate) having been obtained from the Central Bank of Bahrain, the Central Bank of Brazil, the Ontario Securities Commission, the Danish Financial Services Authority, the BaFin, Deutsche Bundesbank, the Hong Kong Monetary Authority, the Securities & Futures Commission, the Securities and Exchange Board of India, the National Stock Exchange of India, the Multi Commodity Exchange of India, the BSE Limited, the Foreign Exchange Dealers Association of India, the Norwegian Financial Supervisory Authority, the Philippines Securities & Exchange Commission, the Komisja Nadzoru Finansowego, the Monetary Authority of Singapore, the International Enterprise Singapore Board, the Comision Nacional del Mercado de ´ Valores, FINMA, the Financial Conduct Authority in the United Kingdom and the Financial Industry Regulatory Authority in the United States, the Competition and Markets Authority, the United States Department of Justice, the Australian Competition and Consumer Commission and the Competition Commission of Singapore, as appropriate.
In connection with the cancellation of the ICAP Ordinary Shares, the ADR facility that is currently in place in the United States in respect of the ICAP Ordinary Shares will be terminated. Newco intends to establish a new ADR facility in respect of the Newco Ordinary Shares issued pursuant to the Scheme.
Upon the Scheme becoming effective, the existing ICAP Ordinary Shares underlying each ICAP ADR will be cancelled and the Depositary (or its nominee) will be issued one Newco Ordinary Share for every ICAP Ordinary Share it holds at the Scheme Record Time. It is expected that Newco ADRs will be issued by the Depositary in respect of the Newco Ordinary Shares that have been issued to the Depositary (or its nominee).
Each Newco ADR will represent two Newco Ordinary Shares. Persons registered as holding ICAP ADRs at a record date and time to be established by the Depositary will be entitled to receive Newco ADRs when they have surrendered their ICAP ADRs to the Depositary for cancellation in accordance with the terms of the existing ICAP ADR deposit agreement. Holders of ICAP ADRs may have to pay fees to the Depositary under the terms of the ICAP ADR deposit agreement.
Holders of ICAP ADRs at the record date and time set by the Depositary will, assuming the surrender of their ICAP ADRs to the Depositary as noted above, own the same proportion of ordinary share capital of Newco, in the form of Newco ADRs, immediately after the Scheme Effective Date, as they held in the ordinary share capital of ICAP by virtue of their ICAP ADRs immediately prior to the Scheme Effective Date.
The Depositary will send a notice to the registered holders of ICAP ADRs in due course regarding the mechanics of surrendering ICAP ADRs for cancellation against issuance of Newco ADRs.
The Share Consolidation shall apply to each Newco Ordinary Share underlying a Newco ADR in the same manner as it will apply to any other Newco Ordinary Share. As a result, the Newco ADRs will be consolidated at the same time and in the same ratio as the Newco Ordinary Shares, and each holder of Newco ADRs will hold a proportionally smaller number of Newco ADRs than before. The Depositary will send a notice to the registered holders of ICAP ADRs or Newco ADRs in due course regarding the mechanics of how the Share Consolidation will affect their holding of Newco ADRs. In connection with the Share Consolidation, holders of the Newco ADRs may have to pay fees to the Depositary under the terms of the Newco ADR deposit agreement.
ICAP understands that Tullett Prebon does not currently have a sponsored ADR programme in the United States for Tullett Prebon Ordinary Shares. In the absence of Tullett Prebon establishing a sponsored ADR programme, it is anticipated that the Depositary will sell the New Tullett Prebon Shares received by it pursuant to the Demerger and will account to the holders of Newco ADRs for the proceeds received, net of any Depositary fees and applicable expenses and taxes.
Your attention is drawn to the risk factors set out in Part III ''Risk Factors'' of this document. ICAP Shareholders should consider fully and carefully the risk factors when considering whether or not to vote in favour of the Scheme and the Resolutions.
ICAP is required to convene a shareholder meeting by an order of the Court to consider the Scheme and will therefore be holding the Court Meeting, at which ICAP Shareholders will be asked to approve the Scheme. The statutory majority required to approve the Scheme at the Court Meeting is a majority in number of those ICAP Shareholders who are present and vote in person or by proxy, representing 75 per cent. or more in value of the ICAP Ordinary Shares voted by such ICAP Shareholders.
The Scheme will insert Newco as the new holding company of the ICAP Group.
It is important that, for the Court Meeting, as many votes as possible are cast so that the Court may be satisfied that there is a fair representation of ICAP Shareholder opinion. You are therefore strongly urged to complete and return your blue Form of Proxy for use at the Court Meeting as soon as possible and in any event so as to be received by no later than 11.30 a.m. on 22 March 2016 (or, in the event that the meeting is adjourned, not less than 48 hours prior to the time and date set for the adjourned meeting).
As an alternative to completing and returning the blue Form of Proxy, you may submit your blue Form of Proxy electronically at www.icap-shares.com. For security purposes, you will need the Voting ID, Task ID and shareholder reference number which are given on your blue Form of Proxy. Electronic proxies must be received no later than 48 hours before the time appointed for the relevant Meeting.
Blue Forms of Proxy not returned by this time may be handed to ICAP's Registrars, on behalf of the Chairman of the Court Meeting, at the Court Meeting before the taking of the poll.
Detailed instructions on the action to be taken are set out in paragraph 21 of Part II ''Explanatory Statement'' of this document.
ICAP is also required to hold a General Meeting in order to consider the Proposals and approve the Transaction. At the General Meeting, ICAP Shareholders will be asked to consider and, if thought fit, pass the following Resolutions:
as further described in paragraphs 2 and 3 of Part II ''Explanatory Statement'' of this document;
Resolutions 2 to 12 are conditional on the Scheme of Arrangement Resolution (Resolution 1) being approved. The Scheme of Arrangement Resolution (Resolution 1) is in turn conditional on the Articles of Association Resolution (Resolution 2) and the Authority to Allot ICAP R Share Resolution (Resolution 3) being approved. In addition, the Authority to Allot ICAP R Share Resolution (Resolution 3) is conditional upon the Articles of Association Resolution (Resolution 2) being approved, and the Newco Reduction of Capital, Demerger and Share Consolidation Resolution (Resolution 5) is conditional upon the Approval of Transaction Resolution (Resolution 4) being approved. None of the Scheme of Arrangement Resolution (Resolution 1), Articles of Association Resolution (Resolution 2), Authority to Allot ICAP R Share Resolution (Resolution 3), the Approval of Transaction Resolution (Resolution 4) and the Newco Reduction of Capital, Demerger and Share Consolidation Resolution (Resolution 5) are conditional on the Employee Share Plans Resolutions (Resolutions 6 to 12) being approved.
ICAP Shareholders should note that the Scheme cannot be conditional on the Demerger taking place. Consequently, if once the Scheme has become effective, the conditions to the Demerger cease to be capable of being satisfied (or, where permitted, are not waived), Newco will nevertheless have been inserted as the new holding company of the ICAP Group. In such circumstances, ICAP Shareholders would still have received Newco Ordinary Shares but, as the Demerger would not complete, ICAP Shareholders would not receive Tullett Prebon Ordinary Shares. Similarly, the Share Consolidation (as described below) would not be implemented but Newco would still expect to reduce its capital so as to create distributable reserves in Newco.
The Scheme of Arrangement Resolution (Resolution 1), the Articles of Association Resolution (Resolution 2), the Authority to Allot ICAP R Share Resolution (Resolution 3) and the Newco Reduction of Capital, Demerger and Share Consolidation Resolution (Resolution 5) will each be proposed as special resolutions and require votes in favour representing a 75 per cent. or more of the votes cast at the General Meeting to be passed. The Approval of Transaction Resolution (Resolution 4) and the Employee Share Plans Resolutions (Resolutions 6 to 12) will each be proposed as ordinary resolutions and each require votes in favour representing a simple majority of the votes cast at the General Meeting in order to be passed.
Please see the Notice of General Meeting set out on pages 157 to 164 of this document for the full text of the Resolutions to be proposed at the General Meeting.
All Resolutions at the General Meetings will be voted on a poll.
You are strongly urged to complete and return your pink Form of Proxy for use at the General Meeting as soon as possible and in any event so as to be returned by no later than 11.40 a.m. on 22 March 2016 (or, in the event that the meeting is adjourned, not less than 48 hours prior to the time and date set for the adjournment meeting).
As an alternative to completing and returning the pink Form of Proxy, you may submit your pink Form of Proxy electronically at www.icap-shares.com. For security purposes, you will need the Voting ID, Task ID and shareholder reference number which are given on your pink Form of Proxy. Electronic proxies must be received no later than 48 hours before the time appointed for the relevant Meeting.
Detailed instructions on the action to be taken are set out in paragraph 21 of Part II ''Explanatory Statement'' of this document.
The Proposals and implementation of the Transaction in full are conditional upon a number of matters which are set out in full in the explanatory letter from J.P. Morgan Cazenove and Evercore contained in Part II ''Explanatory Statement'' of this document, including (amongst others) approval by the ICAP Shareholders of the Resolutions at the General Meeting and of the Scheme at the Court Meeting; various regulatory and competition authority approvals; and the sanctioning of the Scheme and approval of the ICAP Reduction of Capital and the Newco Reduction of Capital by the Court. Further details of the Court Meeting and the General Meeting are contained in Part II ''Explanatory Statement'' of this document, including the action to be taken by ICAP Shareholders.
Notices convening the Court Meeting and the General Meeting are set out, respectively, on pages 155 to 156 and pages 157 to 164 of this document. In order that the Court can be satisfied that the votes cast fairly represent the views of ICAP Shareholders, it is important that as many votes as possible are cast at the Court Meeting. ICAP Shareholders are therefore urged to attend the Court Meeting in person or by proxy. Separate Forms of Proxy for use at the Court Meeting and the General Meeting are enclosed.
If you have any questions about this document, the Court Meeting, the General Meeting, the Proposals or the Transaction, or are in any doubt as to how to complete the Forms of Proxy or to appoint a proxy electronically, please call Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. and 5.30 p.m., Monday to Friday, excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
Your attention is drawn to the explanatory letter from J.P. Morgan Cazenove and Evercore set out in Part II ''Explanatory Statement'' of this document, which gives further details about the Proposals and the Transaction, the terms of the Scheme which are set out in Part XI ''The Scheme of Arrangement'' of this document, the additional information set out in Part VIII ''Additional Information—ICAP'' of this document and the definitions in Part XII ''Definitions'' of this document. Please note that the information contained in this Chairman's Letter is not a substitute for reading the remainder of this document and the information incorporated by reference.
The ICAP Board, which has received financial advice from J.P. Morgan Cazenove and Evercore, considers the terms of the Transaction to be fair and reasonable. In providing financial advice to the ICAP Board, J.P. Morgan Cazenove and Evercore have relied upon the ICAP Board's commercial assessment of the Transaction.
In addition, the ICAP Board considers the Transaction, the Proposals and the Resolutions to be in the best interests of ICAP and ICAP Shareholders as a whole. Accordingly the ICAP Board recommends that ICAP Shareholders vote in favour of the Scheme at the Court Meeting and each of the Resolutions to be put to the General Meeting, as each of the Directors intends to do in respect of their own entire legal and beneficial holdings.
Yours faithfully, Charles Gregson Chairman
(in compliance with section 897 of the Companies Act 2006)
J.P. Morgan Limited Evercore Partners International LLP 25 Bank Street 15 Stanhope Gate London E14 5JP London W1K 1LN
To all ICAP Shareholders and, for information only, to participants in the ICAP Employee Share Plans
1 March 2016
Dear Sir/Madam,
On 11 November 2015, ICAP announced that it had reached an agreement with Tullett Prebon to dispose of its global voice-broking business, IGBB, in exchange for shares in Tullett Prebon. We are writing to you on behalf of ICAP to explain the Proposals for the disposal of IGBB to Tullett Prebon by means of a demerger, which is being effected, in part, by means of a scheme of arrangement.
If the Proposals are approved and the Transaction is implemented in full, ICAP Shareholders will hold shares in a new listed company, Newco, which will be the new holding company of the ICAP Group. The ICAP Shareholders will also hold shares in the existing listed company, Tullett Prebon, which will combine ICAP's global voice-broking business, IGBB, with its own existing business.
The Newco Ordinary Shares and the New Tullett Prebon Shares are expected to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities.
As a preliminary step, the ICAP Group will undergo the Reorganisation. The Reorganisation will involve, amongst other things, the transfer of the various ICAP Group subsidiaries which hold IGBB to a single holding company, IGBHL, and the transfer of any parts of the ICAP Group's business that are unrelated to IGBB from the ownership of IGBHL to other members of the ICAP Group.
It is expected that the Transaction will be implemented in full pursuant to a further four key connected stages:
As a necessary step to effect the Transaction it is proposed that a newly incorporated company, Newco, will be interposed as the new group holding company of ICAP pursuant to a court sanctioned scheme of arrangement under Part 26 of the Companies Act involving a reduction of capital under sections 645 to 651 of the Companies Act (the ''ICAP Reduction of Capital'').
Pursuant to the Scheme, ICAP Shareholders will receive Newco Ordinary Shares in exchange for their existing shares in ICAP. ICAP Shareholders' existing ICAP Ordinary Shares will be cancelled.
The Scheme is subject to various conditions, including competition and regulatory clearances, the sanction of the Court, the approval of ICAP Shareholders and the approval of Tullett Prebon Shareholders to the Transaction. Further details in relation to the conditions are set out in paragraph 3 of this Part II.
It is intended that IGBHL will be transferred to the ownership of Newco following the Scheme Effective Date and prior to the Demerger Effective Time. It is intended that the transfer will be by means of a dividend in specie made out of available distributable profits of the relevant ICAP Group company, unless the ICAP Directors determine an alternative means of transfer. Newco will capitalise an amount of the reserves created as a consequence of that proposed dividend by issuing one Newco Reserve Share to the Newco Subscriber Shareholder following the Scheme Effective Date and prior to the Demerger Reduction Court Hearing.
Shortly after the Scheme becomes effective, it is proposed to seek a further sanction of the Court to reduce the capital of Newco (the ''Newco Reduction of Capital'') for two main purposes:
Under the proposed Share Consolidation, the Newco Ordinary Shares will be consolidated to ensure, to the extent possible, that, subject to market flunctuations, the market price of one Newco Ordinary Share immediately after the Demerger Effective Date should be approximately equal to the market price of one Newco Ordinary Share immediately beforehand. The ratio for the Share Consolidation will be determined prior to the Reduction Court Hearing.
Immediately following the Demerger, a put/call option in respect of the remaining approximately 35.5 per cent. of shares in IGBHL will become exercisable. If it is exercised as expected, then approximately 35.5 per cent. of the shares in IGBHL will be transferred to Tullett Prebon. In consideration, Tullett Prebon will issue New Tullett Prebon Shares to Newco equal to approximately 19.9% of the issued share capital of Enlarged Tullett Prebon.
Assuming one of the options is exercised, following Completion, the enlarged issued share capital of Tullett Prebon will be owned approximately 44 per cent. by existing Tullett Prebon Shareholders, approximately 36.1 per cent. by ICAP Shareholders and approximately 19.9 per cent. by Newco.
Further details of the Scheme, the Demerger, the Share Consolidation and the Newco Put/Call Option are set out below.
Your attention is drawn to the Chairman's letter in Part I ''Letter from the Chairman of ICAP'' of this document, which outlines the reasons for the Proposals, the background to the Transaction and contains the unanimous recommendation of the ICAP Board to vote in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting. The Chairman's letter forms part of this explanatory statement.
We, the joint financial advisers, have been authorised by the ICAP Directors to write to you to explain the terms of the Proposals and the Transaction and to provide you with other relevant information. The full text of the Scheme is set out in Part XI ''The Scheme of Arrangement'' of this document. The Notice of Court Meeting at which approval for the Scheme will be sought and the Notice of General Meeting at which the Resolutions relating to the Proposals and the Transaction, including approval of the Transaction for the purposes of the Listing Rules, will be proposed are set out on pages 155 to 156 and pages 157 to 164 of this document, respectively. A description of the action recommended to be taken by ICAP Shareholders in relation to the Court Meeting and the General Meeting is set out in paragraph 21 of this Part II ''Explanatory Statement'' below.
Under the Scheme, all of the Scheme Shares will be cancelled on the Scheme Effective Date. In consideration for the cancellation of the Scheme Shares, Scheme Shareholders will receive:
The Scheme Record Time is expected to be at 6.00 p.m. on the ninth Business Day following the date on which the last of the conditions to the Scheme is satisfied or, if capable of waiver, waived.
The rights attaching to the Newco Ordinary Shares will be substantially the same as those attaching to the ICAP Ordinary Shares. A summary of the rights attaching to the Newco Ordinary Shares is set out in paragraph 4 of Part VI ''Information on Newco and the Newco Shares'' of this document. A summary of the principal differences between the Newco Articles (as they will be with effect from the Scheme Effective Date) and the ICAP Articles is set out in paragraph 3 of Part VI ''Information on Newco and the Newco Shares'' of this document.
The nominal value of the Newco Ordinary Shares will be determined by the Newco Directors prior to the Scheme Court Hearing at which the Scheme will be considered by the Court. Without prejudice to that determination, it is expected that the aggregate nominal value of all of the Newco Ordinary Shares will be equal to the net asset value of ICAP (as derived from the ICAP balance sheet) shortly prior to the Scheme Effective Date.
Following the cancellation of the Scheme Shares, the share capital of ICAP will be restored to its former amount and the credit arising in the books of ICAP as a result of the cancellation will be applied in paying up in full at par new shares in ICAP (''New ICAP Ordinary Shares'') such that the aggregate nominal value of those shares equals the aggregate nominal value of the ICAP Ordinary Shares cancelled. The New ICAP Ordinary Shares will be issued to Newco which will, as a result, become the holding company of ICAP and the ICAP Group.
At the General Meeting, ICAP Shareholders will also be asked to approve the amendment of the ICAP Articles to authorise the issue and allotment to Newco of the ICAP R Share, a redeemable preference share in ICAP of 10 pence. The ICAP R Share will be subscribed for by Newco for a subscription price of 10 pence payable in cash. By acquiring the ICAP R Share prior to the Scheme Effective Date, there will be no requirement under section 593 of the Companies Act for an independent valuation of the New ICAP Ordinary Shares to be allotted to Newco under the Scheme.
Further ICAP Ordinary Shares may have to be allotted before the Scheme comes into effect as well as after the Scheme Effective Date (for example, because of the exercise of rights granted by ICAP under the ICAP Employee Share Plans). In some cases, the precise timing of their allotment could leave them outside the scope of the Scheme. In order to ensure that this does not occur, it is proposed that the ICAP Articles should be amended in such a way as to ensure that: (i) any ICAP Ordinary Shares which are allotted and issued prior to the Scheme Court Hearing will be allotted and issued subject to the terms of the Scheme and the holders of such shares will be bound by the terms of the Scheme accordingly; and (ii) any ICAP Ordinary Shares which are allotted and issued otherwise than to Newco (or to a nominee of Newco) after such time will, subject to the Scheme becoming effective, be compulsorily acquired by Newco.
Save for the issue of the New ICAP Ordinary Shares to Newco pursuant to the Scheme, ICAP will not issue any shares on or after the Scheme Court Hearing until after the Scheme Effective Date.
The implementation of the Scheme is conditional upon the following having been satisfied or, if capable of waiver, waived:
(b) the Resolutions, as set out in the Notice of General Meeting, having been passed by the requisite majority at the General Meeting;
(c) the passing by the requisite majorities at a general meeting of Newco of the resolutions required to be passed to approve and implement the Transaction;
(n) all necessary consents and approvals with or notifications to, or filings and applications with any regulator in a jurisdiction where a company within the ICAP Group (or minority owned undertakings thereof) or the Tullett Prebon Group is established or undertaking business operating by way of a branch or otherwise on a provision of services basis that, pursuant to applicable law and regulation in that jurisdiction, are necessary to be made before Completion by any such company in respect of any direct or indirect change in the shareholding and/or voting rights and/or other control of such ICAP Group company resulting from the Transaction, have been obtained or made (as applicable);
(o) the irrevocable and unconditional approval and/or consent to the disposal by ICAP of the Sale Shares and (if applicable) the Option Shares, from the holders of the ICAP Group Bonds;
The ICAP Directors will not take the necessary steps to implement the Scheme unless the above conditions have been satisfied or, if capable of waiver, waived.
In order for the Scheme to become effective, there will be a Court hearing to sanction the Scheme and confirm the ICAP Reduction of Capital. The Scheme Court Hearing is expected to be held on the tenth Business Day following the date on which the last of the conditions to the Scheme is satisfied or, if capable of waiver, waived. Newco will agree to appear by counsel at the Scheme Court Hearing and to undertake to be bound by the Scheme. ICAP Shareholders have the right to attend the Scheme Court Hearing and to appear in person or be represented by counsel or other suitably qualified persons to support or oppose the sanction of the Scheme and the confirmation of the ICAP Reduction of Capital.
If the Scheme is sanctioned and the ICAP Reduction of Capital is confirmed at the Scheme Court Hearing and the other conditions to the Scheme have been satisfied or, if capable of waiver, waived, the Scheme is expected to be implemented, and dealings in Newco Ordinary Shares are expected to commence, by 8.00 a.m. on the Business Day following the Scheme Court Hearing.
The Scheme shall not become effective unless the Scheme Court Order has been made and an office copy of the Scheme Court Order shall have been duly delivered to the Registrar of Companies for registration and, if ordered by the Court, registered.
On the Scheme Effective Date, share certificates in respect of the Scheme Shares will cease to be valid and should be destroyed. In addition, on the Scheme Effective Date, entitlements to Scheme Shares held within the CREST system will be cancelled and the Newco Ordinary Shares will be admitted to listing on the Official List.
If the Scheme has not become effective by the Long-stop Date (or such later date, if any, as ICAP and Newco may agree and the Court allows), it will lapse, in which event there will not be a new holding company of ICAP, no Newco Ordinary Shares will be issued and the Newco Reduction of Capital, Demerger and Share Consolidation will not take place. This will mean that IGBB will not be transferred to Tullett Prebon and ICAP Shareholders will not receive New Tullett Prebon Shares. If the Scheme does not become effective, ICAP Shareholders will remain shareholders of ICAP and ICAP Ordinary Shares will continue to be listed on the Official List.
If the Scheme becomes effective, it will be binding on all ICAP Shareholders who hold Scheme Shares, irrespective of whether or not, being entitled to do so, they attended or voted in favour of the Scheme at the Court Meeting or in favour of the Resolutions at the General Meeting.
The Scheme contains a provision for ICAP and Newco jointly to consent, on behalf of all persons concerned, to any modification of or addition to the Scheme, or to any condition that the Court may think fit to approve or impose. The Court would be unlikely to approve or impose any modification of, or addition or condition to, the Scheme which might be material to the interests of Scheme Shareholders unless Scheme Shareholders were informed of any such modification, addition or condition. It will be a matter for the Court to decide, in its discretion, whether or not the consent of Scheme Shareholders should be sought at a further meeting. Similarly, if a modification, addition or condition is put forward which, in the opinion of the ICAP Directors, is of such a nature or importance as to require the approval of Scheme Shareholders at a further meeting, the ICAP Directors will not take the necessary steps to enable the Scheme to become effective unless and until such approval is obtained.
The full text of the Scheme and of the resolutions to be proposed at the Court Meeting and the Resolutions to be proposed at the General Meeting are set out on pages 155 to 156 and pages 157 to 164 of this document, respectively.
The introduction of Newco as the holding company of ICAP will be followed by a further intra-group reorganisation pursuant to which all of the shares in IGBHL will be transferred to the ownership of Newco. It is intended that the transfer will be by means of a dividend in specie made out of available distributable profits of the relevant ICAP Group company, unless the ICAP Directors determine an alternative means of transfer.
The receipt of the proposed dividend of the shares in IGBHL will give rise to a reserve on the balance sheet of Newco and it is intended that Newco will capitalise an amount of those reserves by issuing one Newco Reserve Share to the Newco Subscriber Shareholder by way of bonus issue. It is intended that the Newco Reserve Share will be issued at a nominal value equal to the amount of the reserve to be capitalised. The necessary resolution for Newco to issue the Newco Reserve Share will be approved by the Newco Subscriber Shareholder in a general meeting prior to the Scheme Court Hearing. That approval is conditional upon the Scheme becoming effective.
The Newco Reserve Share will be a non-voting preference share entitling the holder to a preferential return on a winding up of Newco and the ability to share in any dividend declared on the Newco Ordinary Shares on the same basis (but disregarding the amount paid-up on the Newco Reserve Share for this purpose). The Newco Reserve Share will not be listed and will be cancelled as part of the Newco Reduction of Capital. The purpose of the issue of the Newco Reserve Share is solely to facilitate the creation of distributable reserves, which are intended to be available at the discretion of Newco for any lawful purpose to which such reserves may be applied (including future dividends and share repurchases). A summary of the rights attaching to the Newco Reserve Share is set out in paragraph 4 of Part VI ''Information on Newco and the Newco Shares'' of this document.
The issue of the Newco Reserve Share will be followed by a reduction of the share capital of Newco. The necessary resolution for Newco to implement the Newco Reduction of Capital will be approved by the Newco Subscriber Shareholder in a general meeting prior to the Scheme Court Hearing. That approval is conditional upon the Scheme becoming effective. Approval from ICAP Shareholders will also be sought in the form of the Newco Reduction of Capital Resolution to be passed at the General Meeting. The Newco Reduction of Capital will also require the confirmation of the Court and, if so confirmed, it is intended to become effective on the sixteenth Business Day following the date on which the last of the conditions to the Scheme is satisfied or, if capable of waiver, waived.
The Newco Reduction of Capital will be undertaken for the following purposes:
As part of the Newco Reduction of Capital, the nominal value of the Newco Ordinary Shares will be reduced from the amount determined by the Newco Directors prior to the Scheme Court Hearing (anticipated to be equal, in aggregate, to the net asset value of ICAP, as derived from the ICAP balance sheet, shortly prior to the Scheme Effective Date) to an amount equal to £0.10 per share (or such other amount determined by the Newco Directors prior to the Reduction Court Hearing, at which the Court is asked to confirm the Newco Reduction of Capital). Part of the capital resulting from that reduction in nominal value will be repaid to the holders of the Newco Ordinary Shares and the balance of the resulting capital will create distributable reserves in Newco.
The repayment of capital will be satisfied by the transfer to Tullett Prebon of approximately 64.5 per cent. of the issued share capital of IGBHL. In consideration for that transfer, Tullett Prebon will issue New Tullett Prebon Shares equal to, in aggregate, approximately 45.07 per cent. of the issued share capital of Tullett Prebon (calculated on a fully diluted basis and immediately following such issuance) to the holders of Newco Ordinary Shares.
Fractions of New Tullett Prebon Shares will not be allotted to holders of Newco Ordinary Shares but will be aggregated and sold in the market by a distribution agent appointed by Tullett Prebon on behalf of the relevant holders of Newco Ordinary Shares as soon as practicable after the Demerger Effective Time. To the extent that the net proceeds of such sales due to such holder of Newco Ordinary Shares (after the deduction of all expenses and commissions, including any amounts in respect of value added tax or any applicable sales tax payable thereon) exceeds £5.00, it shall be paid in cash to such holders entitled thereto in due proportion to their fractional entitlements. The distribution agent will, in its sole discretion, determine when, how and through which broker-dealer, and at what price, to sell the aggregated fractional entitlements.
The Newco Reduction of Capital will also cancel the Newco Reserve Share in its entirety and the nominal value of the Newco Reserve Share (equal to the reserves capitalised by Newco when the Newco Reserve Share was issued) will be credited to the distributable reserves of Newco. Such reserves, along with those created as a consequence of the reduction in nominal value of the Newco Ordinary Shares, are intended to be available at the discretion of Newco for any lawful purpose to which such reserves may be applied (including future dividends and share repurchases).
By way of example, on the basis of, amongst other things, the issued share capital of ICAP of 664,537,006 ICAP Ordinary Shares and a Closing Price per Tullett Prebon Ordinary Share of 347 pence, each as at 26 February 2016 (the latest practicable date prior to publication of this document) and a net asset value of ICAP as at 30 September 2015, the Newco Reduction of Capital would be expected to create an aggregate of £1.7 billion in distributable reserves for Newco.
On 18 February 2016, one subscriber ordinary share of £0.10 (the ''Newco Subscriber Ordinary Share'') and 499,999 redeemable preference shares of £0.10 (the ''Newco Redeemable Preference Shares'') were issued to Charles Gregson, the Chairman of ICAP (as the Newco Subscriber Shareholder) at par value credited as fully paid to incorporate Newco and to enable Newco to obtain a trading certificate pursuant to sections 761 and 762 of the Companies Act. The one Newco Subscriber Ordinary Share will be reclassified as a Newco Preference Share pursuant to the resolutions of the Newco Subscriber Shareholder, with effect from the Scheme Effective Time. The resulting Newco Preference Share and the 499,999 Newco Redeemable Preference Shares will also be cancelled pursuant to the Newco Reduction of Capital.
Under the proposed Share Consolidation, the Newco Ordinary Shares will be consolidated to ensure, to the extent possible, that, subject to market fluctuations, the market price of one Newco Ordinary Share immediately after the Demerger Effective Date should be approximately equal to the market price of one Newco Ordinary Share immediately beforehand. The ratio for the Share Consolidation will be determined prior to the Reduction Court Hearing, as set out below.
Immediately following the Share Consolidation, holders of Newco Ordinary Shares will own the same proportion of ordinary share capital in Newco as they did immediately prior to the Share Consolidation taking effect, subject to the sale of fractional entitlements on their behalf.
The Share Consolidation ratio cannot be fixed at this time as it will depend on a number of factors including fluctuations in the price of ICAP Ordinary Shares or Newco Ordinary Share (as the case may be) and Tullett Prebon Ordinary Shares. Accordingly, the number of Newco Ordinary Shares resulting from the Share Consolidation will be announced by the Newco Directors prior to the Reduction Court Hearing with the consolidation ratio obtained by dividing (a) the implied value of Newco (calculated by deducting the value attributed to IGBB by the transaction terms from ICAP's market capitalisation and adding the implied value of the 19.9% stake in Enlarged Tullett Prebon to be held by Newco (all based on
the Closing Prices of ICAP Ordinary Shares and Tullett Prebon Ordinary Shares)) by (b) ICAP's market capitalisation (based on the Closing Price of ICAP Ordinary Shares on the same day), subject to such amendments as the Newco Directors may agree to deal with fractions, rounding or other practical problems or matters which may result from such division and/or to achieve a ratio which in their judgment is the most appropriate to seek to maintain comparability of the share price of a Newco Ordinary Share before and after the Demerger.
By way of example, on the basis of the Closing Price per ICAP Ordinary Share of 433 pence as at 26 February 2016 (the latest practicable date prior to publication of this document), and on the basis of the Closing Price per Tullett Prebon Ordinary Share of 347 pence on the same date, the consolidation ratio would be 3 Newco Ordinary Shares for every 4 Newco Ordinary Shares held prior to the Share Consolidation.
In order to ensure that a whole number of Newco Ordinary Shares results from the Share Consolidation, it is proposed that Newco may issue new Newco Ordinary Shares to one of Newco's employee benefit trusts, or that ICAP or Newco may repurchase ICAP Ordinary Shares or Newco Ordinary Shares (as the case may be) under then existing shareholder authorities, in advance of the Newco Reduction of Capital Record Time. The number of ICAP Ordinary Shares or Newco Ordinary Shares to be issued or repurchased would be such as will result in the total number of Newco Ordinary Shares (including any held in treasury) being exactly divisible in accordance with the consolidation ratio.
Application will be made to the UK Listing Authority for the Official List to be amended to reflect the Newco Ordinary Shares resulting from the Share Consolidation and trading in such number of Newco Ordinary Shares is expected to commence at 8.00 a.m. on the Business Day after the Demerger Effective Date. General market transactions will continue to be settled within the CREST system.
ICAP Shareholders may have a fractional entitlement to a Newco Ordinary Share following the Share Consolidation. For example, if the Share Consolidation ratio was 3 for 4, an ICAP Shareholder holding 101 Newco Ordinary Shares would, after the Share Consolidation, be entitled to 75 Newco Ordinary Shares and a fractional entitlement of 0.75 of a Newco Ordinary Share. By contrast, an ICAP Shareholder holding 100 Newco Ordinary Shares would, after the Share Consolidation, be entitled to 75 Newco Ordinary Shares and no fractional entitlement.
Fractional entitlements to Newco Ordinary Shares will be aggregated and sold as soon as practicable by instructing a broker to sell them in the open market at the then prevailing prices. The net proceeds of sale (after deduction of all expenses and commissions incurred) will be distributed to the ICAP Shareholders entitled to them, save that, where the proceeds from the sale of any such fractional entitlement are less than £5.00, ICAP Shareholders will have no entitlement or right to the proceeds of sale but instead any such proceeds will be donated to charity. If the price per Newco Ordinary Shares does not exceed £5.00, no payments to ICAP Shareholders in respect of fractional entitlements to New Ordinary Shares will be made.
Cash proceeds arising from the sale of any fractional entitlements will be paid to ICAP Shareholders as soon as practicable following such sales.
There is one Court hearing to confirm the Newco Reduction of Capital and this is expected to be held on the sixteenth Business Day following the date on which the last of the conditions to the Scheme is satisfied or, if capable of waiver, waived (the ''Reduction Court Hearing''). Holders of Newco Ordinary Shares will have the right to attend the Reduction Court Hearing and to appear in person or be represented by counsel or other suitably qualified persons to support or oppose the sanction of the Newco Reduction of Capital.
Prior to confirming the Newco Reduction of Capital, the Court will need to be satisfied that the creditors (if any) of Newco are not thereby prejudiced. Newco intends to put in place such form of creditor protection (if any) as it may be advised is appropriate to satisfy the Court in this regard.
The implementation of the Newco Reduction of Capital and the Demerger are conditional upon the following having been satisfied or, if capable of waiver, waived:
(a) the Scheme becoming effective and being fully implemented;
The Scheme is not conditional on the Demerger taking place. Consequently, if once the Scheme has become effective, the conditions to the Demerger cease to be capable of being satisfied (or, where permitted, are not waived), Newco will nevertheless have been inserted as the new holding company of the ICAP Group. In such circumstances, ICAP Shareholders would still have received Newco Ordinary Shares but, as the Demerger would not complete, ICAP Shareholders would not receive Tullett Prebon Ordinary Shares. Similarly, the Share Consolidation (as described below) would not be implemented but Newco would still expect to reduce its capital so as to create distributable reserves in Newco.
Provided the conditions to the Newco Reduction of Capital have been satisfied or, if capable of waiver, waived and the Court has issued the Reduction Court Order, the Newco Reduction of Capital will become effective once an office copy of the Reduction Court Order confirming the Newco Reduction of Capital has been delivered to the Registrar of Companies for registration and, if ordered by the Court, registered. Once the Newco Reduction of Capital becomes effective, it is expected that New Tullett Prebon Shares will be admitted to trading and that the commencement of trading in New Tullett Prebon Shares on the London Stock Exchange will commence at 8.00 a.m. on the following Business Day.
Immediately following the Demerger becoming effective, the Newco Put/Call Option in respect of the remaining approximately 35.5 per cent. of the shares in IGBHL will become exercisable. If it is exercised, as expected, then approximately 35.5 per cent. of the shares in IGBHL will be transferred to Tullett Prebon. In consideration, Tullett Prebon will issue New Tullett Prebon Shares to Newco equal to approximately 19.9 per cent of the issued share capital of Enlarged Tullett Prebon.
Assuming one of the options is exercised, following Completion, the enlarged issued share capital of Tullett Prebon will be owned approximately 44 per cent. by existing Tullett Prebon Shareholders, approximately 36.1 per cent. by ICAP Shareholders and approximately 19.9 per cent. by Newco.
If the Newco Put/Call Option is not exercised, ICAP will remain the holder of approximately 35.5 per cent. of the shares in IGBHL and ICAP will not be issued any New Tullett Prebon Shares.
The Court Meeting has been convened for 11.30 a.m. on 24 March 2016 pursuant to an order of the Court, at which meeting, or at any adjournment thereof, ICAP Shareholders will consider and, if thought fit, approve the Scheme. The Court Meeting will be held at the registered office of ICAP at 2 Broadgate, London EC2M 7UR.
The General Meeting has been convened for 11.40 a.m. on 24 March 2016 (or as soon thereafter as the Court Meeting has been concluded or adjourned). At the General Meeting, or at any adjournment thereof, ICAP Shareholders will consider and, if thought fit, pass the Resolutions covering various matters in connection with the Proposals. The General Meeting will be held at the registered office of ICAP at 2 Broadgate, London EC2M 7UR.
The Scheme Court Hearing, at which the Court will be asked to sanction the Scheme pursuant to Part 26 of the Companies Act and to confirm the ICAP Reduction of Capital pursuant to sections 645 to 648 of the Companies Act, is expected to be held approximately ten Business Days following the date on which the last of the conditions to the Scheme have been satisfied or, if capable of waiver, waived. ICAP Shareholders have the right to attend the Scheme Court Hearing and to appear in person or be represented by counsel to support or oppose the sanctioning of the Scheme and the confirmation of the ICAP Reduction of Capital.
If the Scheme is sanctioned and the ICAP Reduction of Capital is confirmed at the Scheme Court Hearing, and the other conditions to the Scheme (as outlined in paragraph 3 above) have been satisfied or, if capable of waiver, waived, the Scheme is intended to become effective on the same day as it is sanctioned, and dealings in Newco Ordinary Shares are expected to commence the following Business Day.
At the Scheme Effective Time, share certificates in respect of the ICAP Ordinary Shares will cease to be valid and should be destroyed once new certificates for Newco Ordinary Shares have been received. In addition, at or as soon as reasonably practicable after the Scheme Effective Time, entitlements to ICAP Ordinary Shares held within the CREST system will be cancelled.
If the Scheme has not become effective by the Long-stop Date, it will lapse, in which event there will not be a new holding company of ICAP, no Newco Ordinary Shares will be issued and the Demerger and Share Consolidation will not take place. This will mean that ICAP Shareholders will not receive Newco Ordinary Shares or New Tullett Prebon Ordinary Shares. If the Scheme does not become effective, ICAP Shareholders will remain shareholders of ICAP and ICAP Ordinary Shares will continue to be admitted to the premium listing segment of the Official List.
The Reduction Court Hearing, at which the Court will be asked to confirm the Newco Reduction of Capital, is expected to be held on approximately the sixteenth Business Day following the date on which the last of the conditions to the Scheme have been satisfied or, if capable of waiver, waived. If the Newco Reduction of Capital is confirmed at the Reduction Court Hearing, and the other conditions to the Demerger (as outlined in paragraph 5 above) have been satisfied or, if capable of waiver, waived, the Demerger is intended to become effective on the same day upon which the Newco Reduction of Capital is confirmed.
The intra-group reorganisation that will result in IGBHL becoming a direct subsidiary of Newco and the issue of the Newco Reserve Share is each expected to take place in the period between the Scheme Effective Date and the Reduction Court Hearing.
The Share Consolidation is expected to take place immediately following the Newco Reduction of Capital, such that dealings in the Newco Ordinary Shares resulting from the Share Consolidation are expected to commence at 8.00 a.m. on the Business Day after the Demerger Effective Date.
The full text of the Scheme is set out in Part XI ''The Scheme of Arrangement'' of this document.
As at 26 February 2016 (the latest practicable date prior to publication of this document), the Newco Directors are Charles Gregson, Michael Spencer and Stuart Bridges. On or before the date on which the Scheme becomes effective, all of the current Directors of ICAP that are not already Newco Directors will be appointed as Newco Directors. Details of the ICAP Directors' service contracts, the terms of their appointment and their fees and remuneration are set out in paragraph 6 of Part VI ''Information on Newco and the Newco Shares'' and paragraph 6 of Part VIII ''Additional Information—ICAP'' of this document. The total fees and remuneration receivable by each ICAP Director will not be varied as a result of the Scheme. In addition, and with effect from the Scheme Effective Date, the executive ICAP Directors will enter into new service agreements with Newco and the non-executive ICAP Directors will enter into new letters of appointment with Newco.
Details of the current interests of the ICAP Directors in, and options and awards relating to, ICAP Ordinary Shares are set out in paragraph 4 of Part VIII ''Additional Information—ICAP'' of this document.
The effect of the Scheme on the interests of the ICAP Directors is set out in paragraph 7 of Part VI ''Information on Newco and the Newco Shares'' of this document. Save as described above, the effect of the Scheme on the interests of the ICAP Directors does not differ from its effect on the like interests of other persons.
An explanation of the effect of the Transaction on the ICAP Employee Share Plans is set out in paragraph 9 of Part VI ''Information on Newco and the Newco Shares'' of this document.
The ICAP Group currently operates a number of pension plans, including both defined contribution and legacy defined benefit schemes. The IGBB Group is responsible for defined benefit pension arrangements in Germany and the US, which will remain with the IGBB Group (and are therefore expected to transfer across to the Enlarged Tullett Prebon Group as part of the Transaction). The other small defined contribution schemes operated in the UK and the other small defined contribution and defined benefit schemes operating elsewhere are not material in the context of the Transaction and the Transaction is not expected to have a material impact on pension provision for the employees of the IGBB Group or the remaining employees of the Newco Group.
In connection with the cancellation of the ICAP Ordinary Shares, the ADR facility that is currently in place in the United States in respect of the ICAP Ordinary Shares will be terminated. Newco intends to establish a new ADR facility in respect of the Newco Ordinary Shares issued pursuant to the Scheme.
Upon the Scheme becoming effective, the existing ICAP Ordinary Shares underlying each ICAP ADR will be cancelled and the Depositary (or its nominee) will be issued one Newco Ordinary Share for every ICAP Ordinary Share it holds at the Scheme Record Time. It is expected that Newco ADRs will be issued by the Depositary in respect of the Newco Ordinary Shares that have been issued to the Depositary (or its nominee).
Each Newco ADR will represent two Newco Ordinary Shares. Persons registered as holding ICAP ADRs at a record date and time to be established by the Depositary will be entitled to receive Newco ADRs when they have surrendered their ICAP ADRs to the Depositary for cancellation in accordance with the terms of the existing ICAP ADR deposit agreement. Holders of ICAP ADRs may have to pay fees to the Depositary under the terms of the ICAP ADR deposit agreement.
Holders of ICAP ADRs at the record date and time set by the Depositary will, assuming the surrender of their ICAP ADRs to the Depositary as noted above, own the same proportion of ordinary share capital of Newco, in the form of Newco ADRs, immediately after the Scheme Effective Date, as they held in the ordinary share capital of ICAP by virtue of their ICAP ADRs immediately prior to the Scheme Effective Date.
The Depositary will send a notice to the registered holders of ICAP ADRs in due course regarding the mechanics of surrendering ICAP ADRs for cancellation against issuance of Newco ADRs.
The Share Consolidation shall apply to each Newco Ordinary Share underlying a Newco ADR in the same manner as it will apply to any other Newco Ordinary Share. As a result, the Newco ADRs will be consolidated at the same time and in the same ratio as the Newco Ordinary Shares, and each holder of Newco ADRs will hold a proportionally smaller number of Newco ADRs than before. The Depositary will send a notice to the registered holders of ICAP ADRs or Newco ADRs in due course regarding the mechanics of how the Share Consolidation will affect their holding of Newco ADRs. In connection with the Share Consolidation, holders of the Newco ADRs may have to pay fees to the Depositary under the terms of the Newco ADR deposit agreement.
ICAP understands that Tullett Prebon does not currently have a sponsored ADR programme in the United States for Tullett Prebon Ordinary Shares. In the absence of Tullett Prebon establishing a sponsored ADR programme, it is anticipated that the Depositary will sell the New Tullett Prebon Shares received by it pursuant to the Demerger and will account to the holders of Newco ADRs for the proceeds received, net of any Depositary fees and applicable expenses and taxes.
The implications of the Scheme for, and the distribution of this document to, Overseas Shareholders may be affected by the laws of the relevant jurisdictions. Overseas Shareholders should inform themselves about and observe all applicable legal requirements.
It is the responsibility of any person into whose possession this document comes to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection with the Scheme and the distribution of this document and/or the accompanying documents, including the obtaining of any governmental, exchange control or other consents which may be required and/or compliance with other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes or levies due in such jurisdiction.
If, in respect of any Overseas Shareholder, Newco is advised that the allotment and issue of Newco Ordinary Shares pursuant to the Scheme would or might infringe the laws of any jurisdiction outside the United Kingdom, or would or might require Newco to obtain any governmental or other consent or effect any registration, filing or other formality with which, in the opinion of Newco, it would be unable to comply or which it regards as unduly onerous, the Scheme provides that Newco may determine that the Newco Ordinary Shares shall be issued to such Overseas Shareholder and then sold on their behalf as soon as practicable at the best price which can reasonably be obtained at the time of sale, with the net proceeds of sale being remitted to the Overseas Shareholder at the risk of such shareholder. Alternatively, Newco may determine that no Newco Ordinary Shares shall be allotted and issued to such Overseas Shareholder but instead those Newco Ordinary Shares shall be allotted and issued to a nominee appointed by Newco as trustee for such shareholder, on terms that they shall be sold on behalf of such shareholder as soon as practicable after the Scheme becomes effective, with the net proceeds of sale being remitted to the Overseas Shareholder concerned at the risk of such shareholder.
Overseas Shareholders should consult their own legal, financial and tax advisers with respect to the legal, financial and tax consequences of the Scheme in their particular circumstances.
The Newco Ordinary Shares to be issued in connection with the Scheme and the Tullett Prebon Ordinary Shares to be issued in connection with the Demerger have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States. The Newco Ordinary Shares and the Tullett Prebon Ordinary Shares are expected to be issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(10), and only to the extent that corresponding exemptions from the registration or qualification requirements of state ''blue sky'' securities laws are available.
Under the US securities laws, persons who are ''affiliates'' (as such term is defined in Rule 144 under the Securities Act) of Newco as at the Scheme Effective Time and persons who are ''affiliates'' (as such term is defined in Rule 144 under the Securities Act) of Tullett Prebon as at the Demerger Effective Time will be subject to certain United States transfer restrictions related to the Newco Ordinary Shares and the Tullett Prebon Ordinary Shares received pursuant to the Scheme and the Demerger, respectively. Under United States securities laws, a holder of ICAP Ordinary Shares who is an affiliate of Newco after completion of the Scheme or an affiliate of Tullett Prebon after completion of the Demerger may not resell the Newco
Ordinary Shares received pursuant to the Scheme and the Tullett Prebon Ordinary Shares received pursuant to the Demerger, respectively, without registration under the Securities Act, except (i) pursuant to Rule 144 under the Securities Act, if available, (ii) outside the United States pursuant to Regulation S under the Securities Act, (iii) pursuant to another available exemption from the registration requirements of the Securities Act, or (iv) in a transaction not subject to such requirements. Whether a person is an affiliate of Newco or Tullett Prebon for such purposes depends upon the circumstances, but can include certain officers and directors and significant shareholders. ICAP Shareholders who believe they may be affiliates for the purposes of the Securities Act should consult their own legal advisers prior to any resale of Newco Ordinary Shares and Tullett Prebon Ordinary Shares received pursuant to the Scheme or the Demerger.
For the purposes of qualifying for the exemption from the registration requirements of the Securities Act afforded by Section 3(a)(10), ICAP will advise the Court through counsel that its sanctioning of the Scheme and Newco will advise the Court through counsel that its confirmation of the Newco Reduction of Capital will be relied upon as an approval of the Scheme and the Newco Reduction of Capital (as applicable) following a hearing on its fairness to ICAP Shareholders, at which hearing all ICAP Shareholders are entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme and with respect to which notification has been given to all ICAP Shareholders.
Your attention is drawn to Part X ''Taxation'' of this document for further information about the United Kingdom and the United States taxation consequences of the Scheme.
Summary information on taxation in this document is intended as a guide only and holders of ICAP Ordinary Shares who are in any doubt about their tax position, including those who are resident for tax purposes outside the UK, are strongly advised to contact an appropriate professional, independent adviser immediately.
Application will be made to the UK Listing Authority for the listing of the ICAP Ordinary Shares to be cancelled and to the London Stock Exchange for the ICAP Ordinary Shares to cease to be admitted to trading on the London Stock Exchange's main market for listed securities. This is expected to take place by 8.00 a.m. on the Business Day following the Scheme Effective Date. The last day of dealings in ICAP Ordinary Shares on the London Stock Exchange's main market for listed securities is expected to be the Business Day immediately prior to the Scheme Effective Date and no transfers of ICAP Ordinary Shares will be registered after 6.00 p.m. on that date. On the Scheme Effective Date, share certificates in respect of the Scheme Shares will cease to be valid.
Application will be made to the UK Listing Authority for the admission of the Newco Ordinary Shares to the Official List and to the London Stock Exchange for the Newco Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.
A prospectus relating to the Newco Ordinary Shares is expected to be made available shortly prior to Admission and will be made available on the Company's website at www.icap.com or alternatively, subject to applicable securities laws, a hard copy will be available upon request by telephoning the Company secretariat on 020 7000 5783.
It is expected that Admission of the Newco Ordinary Shares will become effective and that dealings in the Newco Ordinary Shares will commence at 8.00 a.m. on the Business Day following the Scheme Effective Date.
Subject to the Scheme becoming effective (and except as provided in paragraph 13 of this Part II ''Explanatory Statement'' in relation to Overseas Shareholders), settlement of the consideration to which any Scheme Shareholder is entitled under the Scheme will be effected in the following manner:
ICAP Ordinary Shares held in uncertificated form will be disabled in CREST by the Scheme Record Time. For ICAP Shareholders who held their ICAP Ordinary Shares in a CREST account, Newco Ordinary Shares which are allotted and issued pursuant to the Scheme are expected to be credited to the relevant CREST member account on the Scheme Effective Date. CREST is a paperless settlement system enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by written instrument. The Newco Articles permit the holding of Newco Ordinary Shares under the CREST system. Application will be made for the Newco Ordinary Shares to be admitted to CREST with effect from Admission. Accordingly, settlement of transactions in Newco Ordinary Shares following Admission may take place within the CREST system. CREST is a voluntary system and holders of Newco Ordinary Shares who wish to receive and retain share certificates will be able to remove their Newco Ordinary Shares from the CREST system following the Scheme becoming effective.
Newco reserves the right to issue Newco Ordinary Shares to any or all Scheme Shareholders who hold Scheme Shares in certificated form at the Scheme Record Time in the manner referred to below if, for any reason, it wishes to do so.
For the Scheme Shareholders holding their Scheme Shares in certificated form at the Scheme Record Time, Newco Ordinary Shares to which the Scheme Shareholder is entitled will be issued in certificated form. Definitive share certificates for the Newco Ordinary Shares are expected to be despatched within fifteen Business Days of the Scheme Effective Date to reflect the Share Consolidation.
Pending the despatch of share certificates for Newco Ordinary Shares, transfers of Newco Ordinary Shares will be certified against the Newco Register. Temporary documents of title will not be issued in respect of the Newco Ordinary Shares.
With effect from and including the Scheme Effective Date, all certificates representing ICAP Ordinary Shares will cease to be of value and should be destroyed.
Application will be made to the UK Listing Authority for the New Tullett Prebon Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Tullett Prebon Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.
As the Transaction is classified as a reverse takeover for the purposes of the Listing Rules, upon Completion, the listing of the existing Tullett Prebon Ordinary Shares on the premium listing segment of the Official List will be cancelled. Simultaneously, application will be made for the re-admission of the existing Tullett Prebon Ordinary Shares and the admission of the New Tullett Prebon Shares to the premium listing segment of the Official List and, in each case, to trading on the London Stock Exchange's main market for listed securities.
It is expected that admission of the New Tullett Prebon Shares will become effective and that trading in the New Tullett Prebon Shares will commence, subject to the satisfaction of certain conditions, by 8.00 a.m. on the Business Day following the Demerger Effective Time.
Fractions of New Tullett Prebon Shares will not be allotted to holders of Newco Ordinary Shares but will be aggregated and allotted to a distribution agent appointed by Tullett Prebon and sold in the market on behalf of the relevant holders of Newco Ordinary Shares as soon as practicable after the Demerger Effective Time. To the extent that the net proceeds of such sales due to such holder of Newco Ordinary Shares (after the deduction of all expenses and commissions, including any amounts in respect of value added tax or any applicable sales tax payable thereon) exceeds £5.00, it shall be paid in cash to such holders entitled thereto in due proportion to their fractional entitlements. The distribution agent will, in its sole discretion, determine when, how and through which broker-dealer, and at what price, to sell the aggregated fractional entitlements.
Settlement of cash consideration in respect of fractional entitlements to New Tullett Prebon Shares will be paid by cheque. Any cheques are expected to be despatched within ten Business Days of the Demerger Effective Date.
Application will be made to the UK Listing Authority for the Official List to be amended to reflect the Newco Ordinary Shares resulting from the Share Consolidation and trading in such number of Newco New Ordinary Shares is expected to commence at 8.00 a.m. on the Business Day after the Demerger Effective Date. General market transactions will continue to be settled within the CREST system.
ICAP Shareholders may have a fractional entitlement to a Newco Ordinary Share following the Share Consolidation. For example, if the Share Consolidation ratio was 3 for 4, an ICAP Shareholder holding 101 Newco Ordinary Shares would, after the Share Consolidation, be entitled to 75 Newco Ordinary Shares and a fractional entitlement of 0.75 of a Newco Ordinary Share. By contrast, an ICAP Shareholder holding 100 Newco Ordinary Shares would, after the Share Consolidation, be entitled to 75 Newco Ordinary Shares and no fractional entitlement.
Fractional entitlements to Newco Ordinary Shares will be aggregated and sold as soon as practicable by instructing a broker to sell them in the open market at the then-prevailing prices. The net proceeds of sale (after deduction of all expenses and commissions incurred) will be distributed to the ICAP Shareholders entitled to them, save that, where the proceeds from the sale of any such fractional entitlement are less than £5.00, ICAP Shareholders will have no entitlement or right to the proceeds of sale but instead any such proceeds will be donated to charity. If the price per Newco Ordinary Shares does not exceed £5.00, no payments to ICAP Shareholders in respect of fractional entitlements to New Ordinary Shares will be made.
All cheques and warrants shall be in sterling and shall be made payable to the holder (or joint holders, whose name(s) appear on the ICAP Register at the Scheme Record Time or Newco Reduction of Capital Record Time (as applicable) in respect of that joint holding) or to such other persons (if any) as such persons may direct in writing and the encashment of any such cheque or warrant shall be a complete discharge for monies represented thereby.
All documents, certificates, cheques or other communications sent by or to Scheme Shareholders, or holders of Newco Ordinary Shares, or as such persons shall direct, will be sent at their own risk and will be sent by prepaid first class post to the holder's address as set out on the ICAP Register at the Scheme Record Time or Newco Register at the Newco Reduction of Capital Record Time (as applicable) (or, in the case of joint holders, to the holder whose name stands first in such register in respect of the joint holding concerned) or in accordance with any reasonable special instructions regarding communications received by ICAP or Newco (as applicable) in writing.
All instructions, mandates, elections and communication preferences in force on the Scheme Effective Date relating to notices and other communications will, unless and until varied or revoked, be deemed from the Scheme Effective Date to be valid and effective mandates or instructions to Newco in relation to the corresponding holding of Newco Ordinary Shares.
It is intended that prior to the Scheme Court Hearing a general meeting of Newco will be held at which, amongst other matters, the Newco Directors will be granted authority to allot the Newco Ordinary Shares as required by the Scheme, to allot the Newco Reserve Share, to reclassify and convert the Newco Subscriber Ordinary Share into a Newco Preference Share and to implement the Newco Reduction of Capital, the Demerger and the Share Consolidation.
The Newco Directors will be authorised to allot the Newco Reserve Share, convert the Newco Subscriber Ordinary Share, implement the Newco Reduction of Capital and implement the Share Consolidation, in each case if the Scheme becomes effective. ICAP Shareholders are also being asked to approve the Newco Reduction of Capital, the Demerger and the Share Consolidation at the General Meeting. Accordingly, ICAP Shareholders will not be asked separately to approve the Newco Reduction of Capital, the Demerger and the Share Consolidation once they become Newco Shareholders pursuant to the Scheme.
At the general meeting of Newco, the Newco Directors will also be granted authorities to allot Newco Ordinary Shares, to make allotments otherwise than in accordance with pre-emption rights and to make purchases of Newco Ordinary Shares, in each case if the Scheme becomes effective. These authorities will be equivalent to the authorities granted by ICAP Shareholders to the ICAP Directors at the most recent annual general meeting of ICAP.
For additional information on the authorities relating to Newco's share capital which are expected to be granted, see paragraph 2 of Part VI ''Information on Newco and the Newco Shares'' of this document.
It is intended that a prospectus relating to the Newco Ordinary Shares, which is required to be published in connection with Admission of the Newco Ordinary Shares, will be published shortly prior to Admission and made available on the Company's website at www.icap.com or, alternatively, subject to applicable securities laws, ICAP Shareholders will be able to request a copy by contacting the Company secretariat on 020 7000 5783.
The Scheme will require the approval of the ICAP Shareholders at the Court Meeting, convened pursuant to an order of the Court, and the passing by ICAP Shareholders of the Resolutions set out in the Notice of General Meeting. Both of the Meetings have been convened for 24 March 2016 and will be held at the registered office of ICAP at 2 Broadgate, London EC2M 7UR.
Notices of the Court Meeting and the General Meeting are set out on pages 155 to 156 and pages 157 to 164 of this document, respectively.
At the Court Meeting you will be asked to approve the Scheme. The statutory majority required to approve the Scheme at the Court Meeting is a majority in number of those ICAP Shareholders who are present and vote in person or who vote by proxy, and those voting in favour must also represent 75 per cent. or more in value of the ICAP Ordinary Shares that are voted.
The Scheme will insert Newco as the new holding company between ICAP and the ICAP Shareholders.
At the General Meeting you will be asked to approve:
as described in paragraphs 2 and 3 of this Part II ''Explanatory Statement'';
(b) Resolution 2, the Articles of Association Resolution, which approves certain amendments to the ICAP Articles which are being made in order to permit the allotment of the ICAP R Share and to avoid any person being left with unlisted ICAP Ordinary Shares following the Scheme Effective Time, as further described in paragraph 2 of this Part II ''Explanatory Statement'';
Resolutions 2 to 12 are conditional on the Scheme of Arrangement Resolution (Resolution 1) being approved. In addition, the Scheme of Arrangement Resolution (Resolution 1) is conditional upon the Articles of Association Resolution (Resolution 2) and the Authority to Allot ICAP R Share Resolution (Resolution 3) being approved, the Authority to Allot ICAP R Share Resolution (Resolution 3) is conditional on the Articles of Association Resolution (Resolution 2) being approved, and the Newco Reduction of Capital, Demerger and Share Consolidation Resolution (Resolution 5) is conditional upon the Approval of Transaction Resolution (Resolution 4) being approved. None of the Scheme of Arrangement Resolution (Resolution 1), Articles of Association Resolution (Resolution 2), Authority to Allot ICAP R Share Resolution (Resolution 3), the Approval of Transaction Resolution (Resolution 4) and the Newco Reduction of Capital, Demerger and Share Consolidation Resolution (Resolution 5) are conditional on the Employee Share Plans Resolution (Resolutions 6 to 12) being approved.
ICAP Shareholders should note that the Scheme cannot be conditional on the Demerger taking place. Consequently, if once the Scheme has become effective, the conditions to the Demerger cease to be capable of being satisfied (or, where permitted, are not waived), Newco will nevertheless have been inserted as the new holding company of the ICAP Group. In such circumstances, ICAP Shareholders would still have received Newco Ordinary Shares but, as the Demerger would not complete, ICAP Shareholders would not receive Tullett Prebon Ordinary Shares. Similarly, the Share Consolidation (as described below) would not be implemented but Newco would still expect to reduce its capital so as to create distributable reserves in Newco.
The Scheme of Arrangement Resolution (Resolution 1), the Articles of Association Resolution (Resolution 2), the Authority to Allot ICAP R Share Resolution (Resolution 3) and the Newco Reduction of Capital, Demerger and Share Consolidation Resolution (Resolution 5) will each be proposed as special resolutions and require votes in favour representing 75 per cent. or more of the votes cast at the General Meeting to be passed. The Approval of Transaction Resolution (Resolution 4) and the Employee Share Plans Resolutions (Resolutions 6 to 12) will each be proposed as ordinary resolutions and each require votes in favour representing a simple majority of the votes cast at the General Meeting in order to be passed.
ICAP Shareholders will find enclosed with this document:
It is important that, for the Court Meeting in particular, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of ICAP Shareholder opinion.
Whether or not you plan to attend either of the meetings in person, you are strongly encouraged, if you hold ICAP Ordinary Shares, to sign and return both Forms of Proxy or to appoint a proxy electronically as referred to below, as soon as possible and in any event so as to be received by ICAP's Registrars, Capita Registrars at PXS-1, 34 Beckenham Road, Beckenham, BR3 4ZF as follows:
(or, in the case of an adjourned meeting, not less than 48 hours prior to the time and date set for the adjourned meeting).
You can also submit your Forms of Proxy electronically at www.icap-shares.com so as to be received by no later than 11.30 a.m. on 22 March 2016 in the case of the Court Meeting and 11.40 a.m. on 22 March 2016 in the case of the General Meeting (or, in the case of any adjournment, not less than 48 hours prior to the time fixed for the adjourned meeting).
If you hold your ICAP Ordinary Shares in uncertificated form (i.e. in CREST), you may vote using the CREST electronic proxy appointment service in accordance with the procedures set out in the CREST manual (please also refer to the accompanying notes for the Notice of General Meeting set out on pages 157 to 164 of this document). Proxies submitted via CREST (under CREST participant ID RA10) must be received by ICAP's Registrars, Capita Asset Services, not later than 11.30 a.m. on 22 March 2016 in the case of the Court Meeting and by 11.40 a.m. on 22 March 2016 in the case of the General Meeting (or, in the case of any adjournment, not less than 48 hours prior to the time fixed for the adjourned meeting).
The return of the Forms of Proxy (or appointment of a proxy electronically) will not prevent you from attending either of the Meetings and voting in person if you wish. In each case, the Forms of Proxy and voting instruction cards should be completed in accordance with the instructions printed on them.
The blue Form of Proxy in respect of the Court Meeting may also be handed to ICAP's Registrars, Capita Asset Services, on behalf of the Chairman of the Court Meeting, at the Court Meeting before the taking of the poll. However, in the case of the General Meeting, the pink Form of Proxy will be invalid unless it is lodged so as to be received at least 48 hours before the time appointed for such Meeting.
You may appoint more than one proxy provided that each proxy is appointed to exercise the rights attached to a different share or shares held by you. To appoint more than one proxy, please refer to the notes on the proxy forms accompanying this document or contact ICAP's Registrars, Capita Asset Services, who will be able to advise you on how to do this.
If you have any questions about this document, the Court Meeting, the General Meeting or the Proposals, or are in any doubt as to how to complete the Forms of Proxy or to appoint a proxy electronically, please call Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. and 5.30 p.m., Monday to Friday, excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
You should read the whole of this document.
Your attention is drawn, in particular, to the summary set out at the front of this document, the letter from your Chairman in Part I ''Letter from the Chairman of ICAP'' of this document, the Additional Information set out in Part VIII ''Additional Information—ICAP'' of this document, the Scheme set out in Part XI ''The Scheme of Arrangement'' of this document, the Notices of Meetings set out on pages 155 to 156 and pages 157 to 164 of this document, respectively.
ICAP Shareholders should consider the following risks and uncertainties together with all the other information set out in, or incorporated by reference into, this document prior to making any decision as to whether or not to vote in favour of the Proposals and the Transaction. With the exception of paragraphs 1 and 2.9 of this Part III, such risks have been included on the assumption that Initial Completion has occurred and ICAP Shareholders hold shares in Enlarged Tullett Prebon.
The risks described below are based on information known at the date of this document, but may not be the only risks to which the ICAP Group is or might be exposed in connection with the Transaction. Additional risks and uncertainties, which are currently unknown to ICAP or that ICAP does not currently consider to be material, may materially affect the business of the ICAP Group and could have material adverse effects on the business, financial condition, results and prospects of the ICAP Group. If any of the following risks were to occur, the business, financial condition, results of operations and prospects of the ICAP Group could be materially adversely affected and the ICAP Ordinary Shares or the Newco Ordinary Shares (as applicable) could decline and shareholders could lose all or part of their investment in such shares.
Completion of the Transaction is conditional upon, amongst other things: (i) completion of the relevant antitrust filing and/or obtaining the relevant approval and clearances from appropriate competition authorities in the UK, US and other relevant jurisdictions (including but not limited to the expiry of certain waiting periods); (ii) completion of the relevant regulatory notifications and/or obtaining the relevant regulatory approvals (by both ICAP and Tullett Prebon); (iii) obtaining the Tullett Prebon Consolidation Waiver by Tullett Prebon; (iv) obtaining the relevant key third party joint venture consents; (v) obtaining the approval of ICAP bondholders; (vi) obtaining the relevant approvals from ICAP Shareholders and Tullett Prebon Shareholders; (vii) the Scheme having been approved by ICAP Shareholders and sanctioned by the Court; (viii) the Newco Reduction of Capital having been sanctioned by the Court (ix) obtaining confirmation from the UK Listing Authority that the application for the admission of Newco Ordinary Shares to the premium listing segment of the Official List has been approved and will become effective as soon as the UK Listing Authority's decision to admit the Newco Ordinary Shares is announced; (x) confirmation from the London Stock Exchange that the Newco Ordinary Shares will be admitted to trading on the main market for listed securities of the London Stock Exchange (xi) obtaining confirmation from the UK Listing Authority that the application for the re-admission of all of the existing Tullett Prebon Ordinary Shares and the admission for the New Tullett Prebon Shares issued as consideration in the Transaction, in each case to the premium listing segment of the Official List, has been approved and will become effective as soon as the UK Listing Authority's decision to re-admit the existing Tullett Prebon Ordinary Shares and admit the New Tullett Prebon Shares is announced; (xii) confirmation from the London Stock Exchange that all of the existing Tullett Prebon Ordinary Shares will be re-admitted and the New Tullett Prebon Shares will be admitted, in each case to trading on the main market for listed securities of the London Stock Exchange; (xiii) the revenues and key broker and non-broker headcounts of IGBB and the Tullett Prebon Group each being, shortly prior to Initial Completion, greater than agreed thresholds; and (xiv) the passing of any other resolutions required to be passed by ICAP Shareholders, Newco Shareholders and/or Tullett Prebon Shareholders in order to effect the Transaction.
Although the Directors believe that the above conditions are capable of being satisfied, it is possible that the parties may not be able to obtain the clearances or approvals required, or that they may not be obtainable within a timescale acceptable to the parties, or that they may only be obtained subject to certain conditions or undertakings which may not be acceptable to the parties. In the event that the FCA, competition authority or any other required clearance is not obtained on terms reasonably satisfactory to ICAP or if any other condition is not fulfilled or waived (as the case may be), the Transaction may not be completed. Further, it is possible that the FCA, competition authority or other regulator may attach conditions to their approval of the Transaction, which might delay or prevent the realisation of synergies identified by the parties or otherwise impact ICAP's strategy and operations. If this were to happen it is possible that the business, results of operations and/or financial condition of the ICAP Group, following completion of the Transaction, may be materially adversely affected.
As listed companies, ICAP and Tullett Prebon are exposed to approaches from third parties seeking to instigate a public takeover of either company which might delay or prevent execution of the Transaction. As both ICAP and Tullett Prebon are listed companies whose ordinary shares are freely traded on the London Stock Exchange, it is also possible that an existing or new shareholder with a significant shareholding in either ICAP or Tullett Prebon could use, or could threaten to use, its shareholding to vote against the Transaction when shareholder consent is sought. Such an action could materially delay or prevent the implementation of the Scheme and therefore deprive the parties of some or all of the anticipated benefits of the Transaction.
Implementation of the Newco Reduction of Capital is conditional upon, amongst other things, sanction by the Court. It is possible that such sanction will be given only subject to conditions or will not be given, in which case it is possible that the Newco Reduction of Capital will not occur on a timely basis or at all. In such an event, the Newco Reduction of Capital may not be implemented and the benefits expected to result from the Newco Reduction of Capital, namely the ability to complete the Demerger and to create distributable reserves in the accounts of Newco, will not be achieved.
The success of the ICAP Group depends on the continued contribution of key personnel. The length of time from announcement of the Transaction to Completion could cause disruption to the operation and strategic progress of the ICAP Group businesses as the attention of key personnel is distracted to the delivery of the Transaction. It is also plausible that the prospect of the Transaction could cause disruptions to the businesses of the ICAP Group as current and prospective employees may experience uncertainty about their future roles in the Retained Group or the Enlarged Tullett Prebon Group (as the case may be), which may adversely affect the ICAP Group's ability to retain or recruit key managers and other employees.
If the ICAP Group fails to manage these risks effectively, the business and financial results of the ICAP Group could be adversely affected.
Newco's ability to pay dividends on the Newco Ordinary Shares and effect certain returns of capital is dependent upon, amongst other things, it having sufficient cash resources and, where necessary, sufficient distributable reserves out of which any proposed dividend may be paid (see the risk factor above: ''The Newco Reduction of Capital may not be implemented on a timely basis or at all''). Newco will be a holding company and will be dependent on payment of dividends, distributions, loans or advances by its subsidiaries to produce distributable reserves. Any payment of dividends, distributions, loans or advances to Newco by its subsidiaries is dependent upon the business and financial condition, earnings and cash flow position and other factors affecting such subsidiaries. Following Completion, the Retained Group will not have the benefit of the profits or cash flow from IGBB, which is likely to reduce the distributable profits and/or cash resources available to Newco to pay dividends or effect returns of capital. Newco's policy will be to maintain a progressive dividend in line with its view of the underlying earnings and cash flow of the Newco Group.
The Sale and Purchase Agreement contains certain warranties relating to, amongst other things:
the assets used by IGBB;
the licences and consent requirements of IGBB and its compliance with such licences and consent requirements;
The majority of the warranties will be repeated at Initial Completion.
In addition to the above warranties, ICAP has provided indemnities in favour of Tullett Prebon for, amongst other things, the Reorganisation and certain known regulatory, litigation and employment claims including any residual liability in respect of the ISDA Fix investigation. ICAP and/or Newco could have significant indemnification obligations to Tullett Prebon to the extent any of these indemnification obligations are realised. The extent to which the ICAP Group will be required in the future to incur costs under any of these warranties and indemnities is not predictable and, if the ICAP Group should incur such costs, these costs could have an adverse effect on its financial condition.
For further information on the terms of the Sale and Purchase Agreement please see Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' of this document.
The process of separating the IGBB Group from the ICAP Group will be complex, involving the separation of significant business systems. On or prior to Initial Completion, ICAP and IGBB will enter into two Transitional Services Agreements pursuant to which (i) ICAP will provide IGBB with the use of or access to certain resources that will be retained by the Retained Group as at Initial Completion (the ''Transitional Services Agreement''), and (ii) IGBB will provide the Retained Group with the use of or access to certain resources that will be transferred to the IGBB Group as at the Initial Completion (the ''Reverse Transitional Services Agreement''), while the separation and integration processes are taking place. Further details of the Transitional Services Agreement and the Reverse Transitional Services Agreement, respectively, are set out in paragraph 3 of Part IV ''Summary of Principal Terms and Conditions of the Transaction Agreement'' of this document.
ICAP could incur substantial costs, and there may be impacts on the functioning of the Retained Group's business, as a result of the separation process and/or fulfilment of ICAP's obligations under the Transitional Services Agreements. The Retained Group will be reliant on IGBB under the Enlarged Tullett Prebon Group for the provision of certain systems and related services for the continued operation of the Retained Group's business, functions and processes during the integration period following Initial Completion. There can, however, be no assurance that these systems and services will operate as expected, and they may not fulfil their intended purposes or may be damaged or interrupted by unanticipated usage, human error, unauthorised access, natural hazards or disasters or similarly disruptive events.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that, following the Transaction, ICAP will be unable to comply with its obligations as a company with securities admitted to the Official List or that any member of the ICAP Group will be unable to comply with its obligations as an authorised person regulated by the FCA.
ICAP's performance will be dependent on the performance of the Retained Group and will therefore be more exposed to the risks within those businesses with less benefit of diversification.
Following Completion, the Retained Group will be smaller and less diverse than the current ICAP Group. IGBB currently generates revenues and profits from a wide range of products, markets and customers. While many of these overlap with those of the Retained Group, they do give exposure to products, markets and customers where revenues and profits may vary over time differently from those of the Retained Group providing diversification of risk. Following Completion, the Retained Group will be more concentrated on a narrower group of products, market and customers and its financial performance will be more exposed to revenues and profits available from them. Without the benefit of the revenues or profits from IGBB, the Retained Group's overall financial performance will depend more on the performance of each of its continuing operations, in particular the EBS, Brokertec, TriOptima, Traiana, Reset, and Information businesses (excluding the IGBB Information Services).
To the extent the Retained Group does not repay or repurchase short or long-term debt, any reduction in profit as a result of the Transaction will reduce the income and cash flows available to service interest costs on outstanding debt. Additionally, any changes in the profitability of the Retained Group may have a more pronounced effect on the ratio of operating profit before interest costs to interest costs, and thus on the headroom of compliance with the Retained Group's banking covenants and the profits available to fund dividends to ICAP Shareholders or to be reinvested in the Retained Group's business.
Certain functions that support multiple businesses within the current ICAP Group may benefit from economies of scale or other synergies. The cost of these functions supporting the Retained Group after the sale of IGBB may differ from and may exceed the cost currently incurred by the ICAP Group.
Following Completion, Newco will hold approximately 19.9 per cent. of the issued share capital of Enlarged Tullett Prebon. The value of this shareholding will be dependent on Tullett Prebon management's ability to deliver the business plan for the Enlarged Tullett Prebon Group, the achievement of the expected synergies from the combination, the market environment in which the Enlarged Tullett Prebon Group operates and market conditions more broadly. Newco's regular cash flow from this shareholding, while it continues to be held, will be limited to dividends declared and paid by Enlarged Tullett Prebon, which will also be dependent on these factors. Tullett Prebon has identified a number of risks to which the Enlarged Tullett Prebon Group is subject, which may affect the value of, and cash flow from, Newco's 19.9 per cent. shareholding in Enlarged Tullett Prebon. These risks are set out in the Tullett Prebon Prospectus and included in paragraph 7 of Section B of Part IX ''Information on Tullett Prebon and the Enlarged Tullett Prebon Group'' of this document.
The Retained Group is not expected to be subject to prudential consolidation requirements under the EU Capital Requirements Regulation (''CRR'') or Directive (''CRD''). ICAP has held discussions with the FCA regarding the applicability of the CRD prudential consolidation to the Retained Group following the Transaction. If the Retained Group contains a financial holding company (as defined in the CRR), such group consolidation and group capital requirements would apply to the Retained Group. The tests under the CRR require an assessment of whether the Retained Group's subsidiaries are ''exclusively or mainly'' institutions (i.e. credit institutions or investment firms) or financial institutions. The FCA has indicated that, based on an assessment of the information and legal advice provided to the FCA by ICAP in relation to the projected balance of financial and non-financial business in the Retained Group, following the Transaction the Retained Group is not expected to meet the test related to a financial holding company and is not therefore expected to be subject to CRD prudential consolidation requirements. This conclusion is based in part on the financial projections for the Retained Group and ICAP's and the FCA's analysis and interpretation of the relevant regulations. If those projections are materially inaccurate or if the FCA's interpretation changes for any reason, including potentially in response to guidance from the European Banking Authority or other relevant body, then the Retained Group may remain subject to CRD prudential consolidation requirements, absent it obtaining a waiver.
There is a risk that the Retained Group could contain a financial holding company at some point in the future if its business mix changes such that its subsidiaries become ''exclusively or mainly'' institutions (i.e. credit institutions or investment firms) or financial institutions. This will depend in part on the growth and expansion of the business of the subsidiaries in the Retained Group that are credit institutions, investment firms or financial institutions relative to those that are not. If the Retained Group contains a financial holding company at any stage it would result in significantly increased regulatory capital requirements for the Retained Group (and potentially the application of other regulatory requirements at group level, such as those arising from the directive on the recovery and resolution of credit institutions and investment firms). Alternatively, other regulatory changes could be introduced that broaden the scope of consolidated capital requirements and impose additional capital requirements at a consolidated level. Such increased capital requirements could require the Retained Group to raise additional equity or to retain profits, diluting or reducing the returns available to shareholders. Alternatively they may require the Retained Group to change its business operations which could cause disruption to operations and/or reduction in profits.
The ICAP Board believes that the Transaction is in the best interests of ICAP Shareholders taken as a whole. If the Transaction does not complete, the realisable value of the IGBB Group to ICAP may be lower than can be realised by way of the Transaction.
To maintain shareholder value, ICAP may be required to allocate additional time and resources to the ongoing supervision and development of IGBB. This may limit the management and financial resources available to the rest of the ICAP Group. There may also be uncertainty for customers of IGBB as to ICAP's future intentions for the IGBB Group.
If the Transaction does not proceed, ICAP's key management and employees may be demotivated and may subsequently choose to leave ICAP. In addition, the prospect of the Transaction could cause current and prospective employees of the ICAP Group to experience uncertainty about their future roles in the Retained Group or the Enlarged Tullett Prebon Group (as the case may be), which may adversely affect the ICAP Group's ability to retain or recruit key managers and other employees if the Transaction does not proceed.
If the Transaction does not complete, particularly where any of the conditions set out in the risk factor above: ''Completion is subject to a number of conditions which may not be satisfied or waived'' is not satisfied or, if capable of waiver, waived by the date (if any) on which the Sale and Purchase Agreement lapses or is terminated in accordance with its terms (as modified, varied, revised, waived, extended, added to or amended from time to time), ICAP may be required to pay 50 per cent. of certain costs incurred by Tullett Prebon in relation to the Transaction as further set out in paragraph 1(D) of Part IV ''Summary of Principal Terms and Conditions of the Transaction Agreement'' of this document. ICAP has also incurred other costs in relation to the Transaction and preparation for the separation of the IGBB Group from the ICAP Group and some of these will be incurred, irrespective of whether or not the Transaction proceeds.
The above risks may adversely affect the ICAP Group's future prospects and its overall operation and financial performance.
The value of an investment in the ICAP Group may go down as well as up and can be highly volatile. The price at which the ICAP Ordinary Shares or, following the Scheme becoming effective, the Newco Ordinary Shares, may be quoted and the price at which investors may realise their ICAP Ordinary Shares or Newco Ordinary Shares (as the case may be) will be influenced by a large number of factors, some specific to the ICAP Group and its operations and some which may affect the financial services industry as a whole, other comparable companies or publicly traded companies as a whole. The sentiments of the stock market regarding the Transaction will be one such factor and this, together with other factors including the actual or anticipated fluctuations in the financial performance of the ICAP Group and its competitors, market fluctuations, and legislative or regulatory changes in the financial services industry, could lead to the market price of ICAP Ordinary Shares or Newco Ordinary Shares going up or down.
The following is a summary of the principal terms of the Transaction Agreements.
ICAP and Tullett Prebon entered into a conditional Sale and Purchase Agreement dated 11 November 2015 governing the terms and conditions of the Transaction. The Transaction has been structured as an acquisition by Tullett Prebon of the entire issued share capital of IGBHL which, following the Reorganisation, will be the holding company of IGBB.
Under the terms of the Sale and Purchase Agreement: (a) subject to the satisfaction of certain conditions, Tullett Prebon will acquire approximately 64.5 per cent. of the issued share capital of IGBHL in consideration for the issue of New Tullett Prebon Shares to be issued directly to ICAP Shareholders; and (b) Tullett Prebon granted ICAP a put option and ICAP granted Tullett Prebon a call option (together, the ''Newco Put/Call Option'') which will become exercisable following the acquisition of IGBHL shares noted in (a), such that if either option is exercised, Tullett Prebon will acquire the remaining approximately 35.5 per cent. of the issued share capital of IGBHL in consideration for further New Tullett Prebon Shares being issued to Newco.
Tullett Prebon intends, if ICAP does not exercise its put option, to exercise its call option. Assuming one of the options is exercised, following Completion, the share capital of Enlarged Tullett Prebon will be owned approximately 44 per cent. by existing Tullett Prebon Shareholders, approximately 36.1 per cent. by ICAP Shareholders and approximately 19.9 per cent. by Newco.
Tullett Prebon is under an obligation to purchase, and ICAP is under an obligation to procure that Newco shall sell, approximately 64.5 per cent. of the issued share capital of IGBHL (the ''Sale Shares'') (''Initial Completion''). The Sale Shares will be sold free from encumbrances.
Tullett Prebon and ICAP have granted each other an option to require the purchase/sale of all (and not some only) of the remaining approximately 35.5 per cent. of the issued share capital of IGBHL (the ''Option Shares''). The Option Shares will be sold free from encumbrances.
An option can be exercised by the serving of a notice by either party at any time during the 10 Business Days after Initial Completion. The transfer of the Option Shares is to take place on the business day after service of the relevant notice (''Option Completion'').
The consideration for the transfer of the Sale Shares is an issuance of New Tullett Prebon Shares comprising approximately 45.07 per cent. of Tullett Prebon's issued share capital (calculated on a fully diluted basis and at the time of issuance) directly to ICAP Shareholders. These New Tullett Prebon Shares will be issued at Initial Completion.
The consideration for the transfer of the Option Shares is an issuance of further New Tullett Prebon Shares comprising approximately 19.9 per cent. of Tullett Prebon's issued share capital (calculated on a fully diluted basis and at the time of issuance) being issued to Newco. These New Tullett Prebon Shares will be issued at Option Completion.
At Completion, after the issuance of the New Tullett Prebon Shares issued in consideration for the transfers of both the Sale Shares and the Option Shares, the enlarged issued share capital of Tullett Prebon will be owned approximately 44 per cent. by existing Tullett Prebon Shareholders, approximately 36.1 per cent. by ICAP Shareholders and approximately 19.9 per cent. by Newco.
In addition, Tullett Prebon is to procure the full repayment of a £330 million loan due from IGBHL to ICAP Group Holdings plc (''IGBHL Debt'') at Option Completion.
Key conditions precedents to Initial Completion include, amongst other things: (i) completion of the relevant antitrust filing and/or obtaining the relevant approval and clearances from appropriate competition authorities in the UK, US and other relevant jurisdictions (including but not limited to the expiry of certain waiting periods); (ii) completion of the relevant regulatory notifications and/or obtaining the relevant regulatory approvals (by both ICAP and Tullett Prebon); (iii) obtaining the Tullett Prebon Consolidation Waiver by Tullett Prebon; (iv) obtaining the relevant key third party joint venture consents; (v) obtaining the approval of ICAP bondholders; (vi) obtaining the relevant approvals from ICAP Shareholders and Tullett Prebon Shareholders; (vii) the Scheme having been approved by ICAP Shareholders and sanctioned by the Court; (viii) the Newco Reduction of Capital having been sanctioned by the Court (ix) obtaining confirmation from the UK Listing Authority that the application for the admission of Newco Ordinary Shares to the premium listing segment of the Official List has been approved and will become effective as soon as the UK Listing Authority's decision to admit the Newco Ordinary Shares is announced; (x) confirmation from the London Stock Exchange that the Newco Ordinary Shares will be admitted to trading on the main market for listed securities of the London Stock Exchange (xi) obtaining confirmation from the UK Listing Authority that the application for the re-admission of all of the existing Tullett Prebon Ordinary Shares and the admission of the New Tullett Prebon Shares issued as consideration for the Transaction, in each case to the premium listing segment of the Official List, has been approved and will become effective as soon as the UK Listing Authority's decision to re-admit the existing Tullett Prebon Ordinary Shares and admit the New Tullett Prebon Shares is announced; (xii) confirmation from the London Stock Exchange that all of the existing Tullett Prebon Ordinary Shares will be re-admitted and the New Tullett Prebon Shares will be admitted, in each case to trading on the main market for listed securities of the London Stock Exchange; (xiii) the revenues and key broker and non-broker headcounts of IGBB and the Tullett Prebon Group each being, shortly prior to Initial Completion, greater than agreed thresholds; and (xiv) the passing of any other resolutions required to be passed by ICAP Shareholders, Newco Shareholders and/or Tullet Prebon Shareholders in order to effect the Transaction.
The conditions in the Sale and Purchase Agreement have been divided into three categories: (i) first conditions; (ii) second conditions; and (iii) third conditions. Under the terms of the Sale and Purchase Agreement, the first conditions must be satisfied within a period of 18 months from the date of the agreement, the second conditions are to be satisfied on (and not before) the fifth Business Day after the date on which the last of the first conditions is satisfied or waived, and the third conditions must be satisfied within 50 Business Days after the date on which the second conditions are satisfied (in each case, or by such later date as may be agreed between ICAP and Tullett Prebon). If the relevant conditions are not satisfied (or waived in accordance with the Sale and Purchase Agreement) on or before the relevant long-stop date set out above, the provisions of the Sale and Purchase Agreement shall lapse and cease to have effect.
In the event that the conditions are not satisfied by the date (if any) on which the Sale and Purchase Agreement lapses or is terminated in accordance with its terms (as modified, varied, revised, waived, extended, added to or amended from time to time), ICAP is to pay Tullett Prebon 50 per cent. of the amount of all rating and legal fees, upfront fees, agency and coordination fees and ticking and commitment fees that are paid by any member of the Tullett Prebon Group on or prior to such lapsing (to the extent that the facility under a bridge financing facility entered into by Tullett Prebon exceeds the value of the IGBHL Debt, such amounts in respect of which ICAP is liable to pay such 50 per cent. shall be pro rated to the aggregate principal amount of the IGBHL Debt), provided that the liability of ICAP is capped at agreed amounts calculated by reference to those expected fees over time.
The Newco Put/Call Option can be exercised by the service of a notice by either party at any time during the 10 Business Days following Initial Completion. Subject to the exercise of either option, Option Completion is unconditional and is to take place on the Business Day after the service of the relevant notice.
The Sale and Purchase Agreement contains certain covenants from ICAP and Tullett Prebon in the period between signing and Initial Completion including, in particular, certain restrictions on ICAP in respect of the conduct of the IGBB business and restrictions on Tullett Prebon including in relation to the
declaration of special dividends and the amount of gross third party debt (subject in each case to agreed exceptions).
The Sale and Purchase Agreement contains mutual termination rights based on the revocation or suspension of material licences, material litigation or material regulatory investigations.
The Sale and Purchase Agreement contains certain restrictions (subject to certain exceptions) on ICAP, for a period of three years from Initial Completion, from engaging (owning securities or being involved in day-to-day management) in voice-broking in a territory where IGBB operates or has business at the time of Initial Completion. The Sale and Purchase Agreement also contains mutual non-solicit obligations in respect of certain employees (subject to certain exceptions) for a period up to three years from Initial Completion.
The Sale and Purchase Agreement contains customary warranties (subject to customary limitations) by ICAP that are normal for this type of transaction (including those based on the outcome of a due diligence exercise). The majority of these warranties will be repeated at Initial Completion. The warranty claims are subject to customary limitations, including a de minimis, aggregate claims threshold and cap and time limits for bringing a claim.
The Sale and Purchase Agreement also contains mutual warranties in relation to the accuracy and completeness of relevant information included in the Tullett Prebon Prospectus.
ICAP has provided an indemnity for: (i) the Reorganisation; and (ii) certain known regulatory, litigation and employment claims, in each case subject to certain limitations. In addition, although it is intended that any liability in respect of the ISDA Fix investigation will be retained by ICAP, Tullett Prebon has the benefit of an indemnity in the Sale and Purchase Agreement for any residual liability as a result of the ISDA Fix investigation on any member of the Enlarged Tullett Prebon Group. For further details of the ISDA Fix liability, please see paragraph 10 of Part VIII ''Additional Information—ICAP'' of this document.
The Sale and Purchase Agreement includes true-up mechanisms which oblige ICAP to make a payment to Tullett Prebon if, following Initial Completion, the amounts of regulatory capital, regulatory liquidity, liquid net assets, consolidated cash or consolidated net assets are less than certain pre-agreed amounts set out in the Sale and Purchase Agreement, provided that the amount of any true-up payment made in respect of consolidated cash or consolidated net assets shall be reduced by the aggregate amount of true-up payments made in respect of regulatory capital, regulatory liquidity and liquid net assets.
On Option Completion, as a result of the issue of New Tullett Prebon Shares to Newco, Newco will hold approximately 19.9 per cent. of the issued share capital of Enlarged Tullett Prebon. The Relationship Agreement will be entered into between Tullett Prebon and Newco on Initial Completion, effective from the Tullett Prebon Admission, to govern the relationship between Tullett Prebon and Newco as a shareholder of Enlarged Tullett Prebon following Completion. The principal purpose of the Relationship Agreement is to ensure that Enlarged Tullett Prebon is capable of carrying on its business independently of Newco and its associates. The Relationship Agreement contains customary terms and conditions, including those set out below.
The Relationship Agreement shall take effect on the Tullett Prebon Admission becoming effective and shall continue for so long as Newco and any of its associates, alone or together, are entitled to exercise, or to control, directly or indirectly, the exercise of 10 per cent. or more of the rights to vote at general meetings of Enlarged Tullett Prebon.
Pursuant to the Relationship Agreement, Newco undertakes that it shall, and shall use all reasonable endeavours to procure that its associates shall (i) not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules, (ii) not conduct any transactions and arrangements with any member of the Enlarged Tullett Prebon Group other than on an arm's length basis and on normal commercial terms, (iii) not take any action that would have the effect of preventing Enlarged Tullett Prebon from complying with its obligations under the Listing Rules, and (iv) not exercise any voting rights in relation to its Tullett Prebon Ordinary Shares in a manner that would prevent Enlarged Tullett Prebon from carrying on its business independently of Newco and/or any of its associates and/or making decisions for the benefit of Tullett Prebon Shareholders as a whole. In addition, Newco acknowledges that the board of Enlarged Tullett Prebon (including any committees of the board) and management team of Enlarged Tullett Prebon shall be independent of Newco and its associates.
Pursuant to the Relationship Agreement, Newco has the right to nominate one non-executive director for appointment to the board of Enlarged Tullett Prebon for so long as Newco's shareholding (together with its associates) in Enlarged Tullett Prebon remains at, or above, 10 per cent. The appointment of Newco's nominee director will be subject to applicable regulatory approvals and ratification by the nominations committee of the board of Enlarged Tullett Prebon.
On or before Initial Completion, ICAP and IGBB will enter into two Transitional Services Agreements pursuant to which (i) ICAP will provide IGBB with the use of or access to certain resources that will be retained by the Retained Group as at Initial Completion (the ''Transitional Services Agreement'' or ''TSA''), and (ii) IGBB will provide the Retained Group with the use of or access to certain resources that will be owned or controlled by IGBB as at Initial Completion (the ''Reverse Transitional Services Agreement'' or ''RTSA'').
The parties have agreed the scope of services that will be provided by ICAP to IGBB from Initial Completion (the ''TSA Services'') that IGBB is likely to require on ''day one''. ICAP has committed, under the Sale and Purchase Agreement, to refining the scope of the TSA Services between signing and Initial Completion to reflect the actual TSA Service requirements as at Initial Completion. IGBB will have the right to add services not specified in the TSA if required to carry on the IGBB business and provided in the ordinary course by ICAP prior to Initial Completion. The TSA Services include access to ICAP premises and facilities, IT systems and infrastructure support, access to and support for financial systems and data centres, support and information in relation to the transferring business, access to benchmarking information and support (including exchange, trade processing and operations services) for certain brokerage functions.
Each TSA Service, where applicable, will list the dependencies that IGBB, as the service recipient, must perform to enable ICAP to provide that TSA Service. A failure by IGBB to perform a dependency will relieve ICAP from its obligation to provide the affected TSA Service(s) to the extent such failure prevents ICAP from doing so. ICAP will have the right to add dependencies not specified in the TSA, but only if that dependency was performed by IGBB during the 12 months prior to the date of the TSA and is a dependency that only IGBB can carry out. The TSA contains an acknowledgement that IGBB's ability to perform the dependencies is itself dependent on it having inherited the resources necessary to do so by Initial Completion. IGBB will be relieved from its obligations to perform a dependency to the extent its failure to do so is a result of it not having access to the required resources as at Initial Completion, and ICAP will, in such a situation, not be relieved from its duty to perform the affected TSA Service(s).
Services are to be provided on an ''as is'' basis, i.e. to the same standard as provided in the previous 12 months. ICAP is required to provide the services to meet the volumes consumed by the IGBB business in the 12 months prior to signing and as forecast in the business plans.
The TSA charges are specified in each of the services schedules contained in the TSA. ICAP warrants in the Sale and Purchase Agreement that the charges applied are consistent with the ICAP Group's cost allocation model during the 12 month-period prior to the date of the TSA. The total charges payable by IGBB under the TSA, taken together with the total cost of operating IGBB, may not exceed the total cost of operating IGBB as advised by ICAP under the Sale and Purchase Agreement.
Each TSA Service has a pre-determined ''Initial Service Term'' of either 6 or 12 months after Initial Completion (except in relation to facilities access and associated services, where the Initial Service Term will end 12 months after Initial Completion or on termination or expiry of the relevant underlying lease, whichever is earlier). If a TSA Service is extended beyond its Initial Service Term by more than three months, and the extension is because of IGBB's failure to comply with its TSA Migration Plan (defined below) obligations or due to changes IGBB has made to the TSA Migration Plan, a 2.5 per cent. costs ratchet will apply to the TSA Service from the fourth month after the expiry of the Initial Service Term, increasing monthly up to a 15 per cent. cap. IGBB will also be responsible for increased costs reasonably incurred by ICAP in extending the term of the relevant TSA Service(s).
The parties will be required to work co-operatively to facilitate migration away from the TSA Services in accordance with an agreed plan (''TSA Migration Plan''). ICAP will provide migration assistance to IGBB in respect of each TSA Service until IGBB has successfully migrated away from that TSA Service. However, if IGBB extends the term of any TSA Service beyond the agreed date after which ICAP does not have to provide that TSA Service or migration assistance in respect of that TSA Service (''TSA Long-Stop Date''), ICAP may require the appointment of an expert to decide whether a reasonable person in the same position as IGBB should have been able to complete the migration prior to the TSA Long-Stop Date, and where the expert decides a reasonable person would have been able to do so, the extension would not be permitted.
ICAP is responsible for obtaining the third party consents required to provide the TSA Services, at its own cost. If a third party agreement expires or is terminated or revoked, ICAP shall be responsible at its own cost for implementing an alternative solution. If the term of a TSA Service is extended, and (further) third party consents are required, ICAP is responsible for obtaining these at its own cost unless the reason for the extension is wholly or substantially due to IGBB's failure to comply with its obligations under the TSA Migration Plan, in which case IGBB will reimburse ICAP for these costs. If ICAP is unable to obtain a third party consent required to provide a TSA Service by Initial Completion, the parties will meet and discuss the necessary changes to the TSA Services in good faith.
ICAP is not liable for the performance of third parties to whom the performance of the TSA Services is subcontracted. However, if it recovers amounts from a third party supplier following a breach it shall pass a pro rata amount to IGBB. If ICAP does not pursue a third party supplier for losses and it is subsequently established (by an expert) that such losses were recoverable, ICAP will be liable to IGBB for the recoverable losses (capped at £25 million).
ICAP's liability under the TSA is capped at £5 million (excluding losses arising as a result of third party supplier failure). Subject to that overall cap, in respect of a claim by IGBB for loss of profits, ICAP's liability is capped at £2.5 million. IGBB's liability is capped at £1.5 million.
Each TSA Service can be terminated by IGBB (in whole or in part) on an agreed notice period. Termination in part is only permitted to the extent the terminated part is not a dependent service for other services not terminated. The TSA may be terminated by one party if the other commits, and fails to remedy, a material breach.
The parties have agreed the scope of services that will be provided by IGBB to ICAP from Initial Completion (the ''RTSA Services''). ICAP has committed, under the Sale and Purchase Agreement, to refining the scope of the RTSA Services between signing and Initial Completion to reflect the actual RTSA requirements as at Initial Completion. ICAP will have the right to add services not specified in the RTSA, but only if that service was available to ICAP during the 12 months prior to the date of the agreement using resources that were available to IGBB as at Initial Completion. The RTSA contains an acknowledgement that IGBB's ability to provide the RTSA Services is dependent on it having access to the resources necessary to do so as at Initial Completion. IGBB will be relieved from its obligations to provide the services and meet the service levels to the extent its failure to do so is a result of it not having access to the required resources as at Initial Completion. The RTSA Services include access to IGBB premises and facilities, IT systems and infrastructure support, access to and support for data centres, data governance, support (including exchange, trade processing and operations services) for certain brokerage functions and assistance with the planning, implementation and execution of ICAP's annual charity event.
Each RTSA Service, where applicable, will list the dependencies that ICAP, as the service recipient, must perform to enable IGBB to provide that RTSA Service. A failure by ICAP to perform a dependency will relieve IGBB from its obligation to provide the affected RTSA Service(s) to the extent such failure prevents IGBB from doing so. IGBB will have the right to add dependencies not specified in the RTSA if required to be performed by ICAP to enable IGBB to provide an RTSA Service, where those dependencies were performed by the ICAP Group in the ordinary course during the 12 months prior to Initial Completion.
Services are to be provided on an ''as is'' basis, i.e. to the same standard as provided in the previous 12 months. IGBB is required to provide the RTSA Services to meet the volumes consumed by the services recipients in the 12 months prior to signing.
The RTSA charges are specified in each of the services schedules contained in the RTSA. ICAP warrants in the Sale and Purchase Agreement that the charges applied are consistent with the ICAP Group's cost allocation model during the 12-month period prior to the date of the agreement, subject to an additional margin of 20 per cent. The total amount of charges payable by ICAP may not reduce below £2.3 million.
Each RTSA Service has a pre-determined ''Initial Service Term'' of either 6 or 12 months after Initial Completion (except in relation to facilities access and associated services, where the Initial Service Term will end 12 months after Initial Completion or on termination or expiry of the relevant underlying lease, whichever is earlier). If an RTSA Service is extended beyond its Initial Service Term by more than three months then, unless the extension is required due to IGBBs failure to comply with its RTSA Migration Plan (defined below) obligations, a 2.5 per cent. costs ratchet will apply to the receipt of that service from the fourth month after the expiry of the Initial Service Term, increasing monthly up to a 15 per cent. cap. ICAP will also be responsible for increased costs reasonably incurred by IGBB in extending the term of the relevant RTSA Service(s).
The parties will be required to work co-operatively to facilitate migration away from the RTSA Services in accordance with an agreed plan (''RTSA Migration Plan''). Each RTSA Service has a date beyond which IGBB does not have to provide that service or migration assistance in respect of that service, unless the delay is wholly or mainly attributable to a failure of IGBB to meet its obligations under the RTSA Migration Plan.
ICAP is responsible, at its own cost, for obtaining the third party consents required for IGBB to provide the RTSA Services with effect from Initial Completion. IGBB is responsible for obtaining third party consents if IGBB changes the manner in which it provides the RTSA Services after Initial Completion. If a third party agreement is terminated by IGBB or IGBB elects not to renew it, and IGBB is at that time still providing RTSA Services to ICAP, then IGBB will be responsible at its own cost for implementing an alternative solution. If a third party agreement is terminated or revoked by the third party supplier (other than as a result of IGBB breach), IGBB shall have no obligation to provide the affected service(s) but shall assist ICAP in finding an alternative (and may pass on a pro rata increase in the cost of implementing that alternative). If the term of an RTSA Service is extended because of changes IGBB has made to the RTSA Services, or because of IGBB's failure to comply with its obligations under the RTSA Migration Plan, and (further) third party consents are required, IGBB is responsible for obtaining these at its own cost. If ICAP is unable to obtain a third party consent required by IGBB to provide an RTSA Service by Initial Completion, the parties will meet and discuss the necessary changes to the RTSA Services in good faith.
IGBB can subcontract the provision of the RTSA to a third party (i.e. including its existing supply chain as part of its business integration) provided that the third party has not been involved in material legal proceedings against a member of the ICAP Group in the past three years. IGBB is not liable for the performance of third parties to whom the performance of the RTSA Services is subcontracted. However, if it recovers amounts from a third party supplier following a breach it shall pass a pro rata amount to ICAP. If IGBB does not pursue a third party supplier for losses and it is subsequently established (by an expert) that such losses were recoverable, IGBB will be liable to ICAP for the recoverable losses (capped at £25 million).
IGBB's liability under the RTSA is capped at £5 million (excluding losses arising as a result of third party supplier failure). Subject to that overall cap, in respect of a claim by ICAP for loss of profits, IGBB's liability is capped at £2.5 million. ICAP's liability is capped at £1.5 million.
Each RTSA Service can be terminated by ICAP on an agreed notice period. The RTSA may be terminated by one party if the other commits, and fails to remedy, a material breach. ICAP cannot terminate an RTSA Service in part unless permitted to do so by IGBB.
The following historical financial information relating to IGBB has been extracted without material adjustment from the consolidation schedules used in preparing ICAP's audited consolidated financial statements for the years ended 31 March 2013, 31 March 2014 and 31 March 2015, and ICAP's unaudited consolidated financial statements for the six months ended 30 September 2015.
The financial information in this Part V for the years ended 31 March 2013, 31 March 2014 and 31 March 2015 and the six months ended 30 September 2015 have been prepared using IFRS accounting principles used to prepare the consolidated financial statements of ICAP for the year ended 31 March 2015.
ICAP Shareholders should read the whole of this document and not rely solely on the summarised financial information in this Part V.
| Six months ended 30 September |
Year ended 31 March | |||
|---|---|---|---|---|
| 2015 | 2015 | 2014 | 2013 | |
| £m | £m | £m | £m | |
| Revenue |
366 | 808 | 913 | 992 |
| Trading operating expenses | (330) | (727) | (803) | (872) |
| Acquisition and disposal costs | — | (1) | (14) | (88) |
| Exceptional items | — | (73) | (76) | (36) |
| Operating expenses | (330) | (801) | (893) | (996) |
| Other income |
1 | 3 | 5 | 8 |
| Trading operating profit | 37 | 84 | 115 | 128 |
| Acquisition and disposal costs | — | (1) | (14) | (88) |
| Exceptional items | — | (73) | (76) | (36) |
| Operating profit | 37 | 10 | 25 | 4 |
| Trading finance income | 1 | 2 | 10 | 6 |
| Acquisition and disposal costs | — | 1 | — | — |
| Finance income | 1 | 3 | 10 | 6 |
| Trading finance costs . |
(1) | (1) | — | (1) |
| Acquisition and disposal costs | — | — | (1) | — |
| Finance costs |
(1) | (1) | (1) | (1) |
| Share of profit of associates and JVs after tax |
3 | 8 | 6 | 6 |
| Trading profit before tax | 40 | 93 | 131 | 139 |
| Acquisition and disposal costs | — | — | (15) | (88) |
| Exceptional items | — | (73) | (76) | (36) |
| Profit before tax |
40 | 20 | 40 | 15 |
| Trading tax charge . |
(8) | (15) | (30) | (32) |
| Acquisition and disposal costs Exceptional items |
— — |
(3) 19 |
22 12 |
19 7 |
| Tax |
(8) | 1 | 4 | (6) |
| Trading profit for the year . |
32 | 78 | 101 | 107 |
| Acquisition and disposal costs | — | (3) | 7 | (69) |
| Exceptional items | — | (54) | (64) | (29) |
| Profit for the year |
32 | 21 | 44 | 9 |
| Attributable to | ||||
| Owners of IGBB | 34 | 22 | 46 | 8 |
| Non-controlling interests . |
(2) | (1) | (2) | 1 |
| 32 | 21 | 44 | 9 |
Notes:
(1) The income statement presented above is unaudited.
| As at 30 September 2015 |
As at 31 March 2015 |
|
|---|---|---|
| £m | £m | |
| Non-current assets Intangible assets arising on consolidation |
82 | 82 |
| Intangible assets arising from development expenditure . |
46 | 44 |
| Property and equipment | 24 | 26 |
| Investment in joint ventures Investment in associates |
7 37 |
7 36 |
| Deferred tax asset | 10 | 12 |
| Trade and other receivables |
1 | 2 |
| Available-for-sale investments . |
11 | 9 |
| 218 | 218 | |
| Current assets | ||
| Trade and other receivables |
17,468 | 24,236 |
| Receivable from affiliates | 78 | 122 |
| Available-for-sale investments |
1 | — |
| Restricted funds | 27 | 35 |
| Cash and cash equivalents | 359 | 350 |
| 17,933 | 24,743 | |
| Total assets | 18,151 | 24,961 |
| Liabilities | ||
| Current liabilities | ||
| Trade and other payables | (17,428) | (24,194) |
| Payable to affiliates | (38) | (75) |
| Bank overdraft . |
(7) | (33) |
| Tax payable | (23) | (30) |
| Provisions . |
(16) | (14) |
| (17,512) | (24,346) | |
| Non-current liabilities | ||
| Trade and other payables | (5) | (6) |
| Deferred tax liabilities . |
(12) | (11) |
| Retirement benefit obligations | (3) | (4) |
| Provisions . |
(18) | (20) |
| (38) | (41) | |
| Total liabilities | (17,550) | (24,387) |
| Net assets | 601 | 574 |
Notes:
(1) The balance sheet presented above is unaudited.
Newco was incorporated and registered in England and Wales under the Companies Act as a public limited company with registered number 10013770 on 18 February 2016.
The principal legislation under which Newco operates is the Companies Act and regulations made thereunder. The principal legislation under which the Newco Subscriber Shares have been created and the other Newco Shares will be created is the Companies Act and regulations made thereunder.
Newco is domiciled in the United Kingdom and its registered and head office is at 2 Broadgate, London, EC2M 7UR. The telephone number of Newco's registered office is +44 (0) 20 7000 5000.
Newco has not traded since its incorporation. PricewaterhouseCoopers LLP, whose address is 7 More London Riverside, London SE1 2RT, are the auditors of Newco and have been the only auditors of Newco since its incorporation. PricewaterhouseCoopers LLP is a member firm of the Institute of Chartered Accountants in England and Wales.
On incorporation, and as at the date of this document, Newco's share capital consisted of one subscriber ordinary share with a par value of £0.10 (the ''Newco Subscriber Ordinary Share'') and 499,999 redeemable non-voting preference shares (the ''Newco Redeemable Preference Shares'') with a par value of £0.10 (together with the Newco Subscriber Ordinary Share, the ''Newco Subscriber Shares''). The Newco Subscriber Shares were issued, fully paid, to the Newco Subscriber Shareholder on incorporation. On 19 February 2016, Newco obtained a trading certificate pursuant to section 761 of the Companies Act.
Accordingly, as at the date of this document, the issued and fully paid share capital of Newco is as follows:
| Class of share | Number of shares |
Total nominal value (£) |
|---|---|---|
| Newco Subscriber Ordinary Share with a par value of £0.10 | 1 | 0.10 |
| Newco Redeemable Preference Shares with a par value of £0.10 each |
499,999 | 49,999.90 |
| 50,000.00 |
It is intended that one or more general meetings of Newco will be held prior to the Scheme Court Hearing at which the Newco Subscriber Shareholder is expected to resolve, inter alia, that:
Preference Share'') having the rights and being subject to the conditions set out in the Newco Articles as adopted pursuant to resolution (iii) above;
market at the price prevailing at the time of sale to any person(s), and to distribute the proceeds of sale (net of expenses) in due proportion among the relevant members who would otherwise be entitled to the fractions so sold, save that (i) any fraction of a penny (or equivalent) which would otherwise be payable shall be rounded up or down in accordance with the usual practice of the registrar of Newco and (ii) any due proportion of such proceeds of less than £5.00 (net of expenses) shall be donated to charity;
and (unless previously renewed, varied or revoked by Newco in general meeting) these authorities shall expire at the conclusion of the annual general meeting of Newco in 2017 (or an earlier date as determined by the Newco Directors), save that Newco may before such expiry make any offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert any security into shares to be granted after such expiry and the Newco Directors may allot such shares or grant such rights under any such offer or agreement as if the authority conferred hereby had not expired. These authorities shall be in substitution for and shall replace any existing authorities to the extent not utilised at the date this resolution is passed (save for the authorities set out in resolutions (ii) and (v) above);
as if section 561 of the Companies Act did not apply to any such allotment or sale, provided that this power shall be limited:
and (unless previously renewed, varied or revoked by Newco in general meeting) these authorities shall expire at the conclusion of the annual general meeting of Newco in 2017 (or an earlier date as determined by the Newco Directors), save that Newco may before such expiry make any offer or agreement which would or might require equity securities to be allotted, or treasury shares to be sold after such expiry and the Newco Directors may allot equity securities, or sell treasury shares, in pursuance of any offer or agreement as if the authority conferred hereby had not expired. These authorities shall be in substitution for and shall replace any existing authorities to the extent not utilised at the date of this resolution if passed;
(E) Newco may enter into a contract for the purchase of Newco Ordinary Shares before the expiry of this authority which will or may be completed wholly or partly after the expiry of such authority and may make a purchase of ordinary shares in pursuance of any such contract as if the authority inferred hereby had not expired;
(xiii) with effect from the Scheme Effective Time, Newco and those companies which are subsidiaries of Newco at any time during the period for which this resolution has effect be authorised for the purposes of section 366 of the Companies Act during the period from the date of the passing of the resolution to the end of the next annual general meeting of Newco or an earlier date as determined by the Newco Directors):
provided that the aggregate amount of any such donation and expenditure shall not exceed £100,000 during the period beginning with the date of the passing of this resolution and expiring upon the conclusion of the Newco annual general meeting in 2017, provided that such amount may comprise sums in different currencies which shall be converted at such rate as the directors may in their absolute discretion determine to be appropriate. For the purposes of this resolution the terms 'political donations', 'political parties', 'independent election candidates', 'political organisations' and 'political expenditure' have the meanings set out in Part 14 of the Companies Act;
(xvii)Newco's name be changed to a name to be determined by the Newco Directors.
Under the Scheme, Newco will issue Newco Ordinary Shares credited as fully paid to the Scheme Shareholders on the basis of one Newco Ordinary Share for every Scheme Share held at the Scheme Record Time. It is also proposed to convert the Newco Subscriber Ordinary Share into a Newco Preference Share, effective as of the Scheme Effective Time. It is further proposed that following the Scheme Effective Time (and prior to the Reduction Court Hearing), Newco will capitalise certain of its reserves and will issue the Newco Reserve Share to the holder of the existing Newco Preference Share by way of bonus issue.
The nominal value of the Newco Ordinary Shares will be determined by the Newco Directors prior to the Scheme Court Hearing. Without prejudice to that determination, it is expected that the aggregate nominal value of all of the Newco Ordinary Shares will be equal to the net asset value of ICAP (as derived from the ICAP balance sheet) shortly prior to the Scheme Effective Date.
Accordingly, the issued and fully paid share capital of Newco following Admission (and immediately before the Newco Reduction of Capital becomes effective pursuant to the Demerger) is expected to be as follows (on the assumption that no new ICAP Ordinary Shares will be issued between 26 February 2016 (the latest practicable date prior to publication of this document) and the Scheme Effective Time and that all of the existing ICAP Ordinary Shares held in treasury are transferred out of treasury or cancelled prior to the Scheme Effective Time):
| Class of share | Number of shares |
Total nominal value (£) |
|---|---|---|
| Newco Preference Share with a par value of £0.10 | 1 | 0.10 |
| Newco Redeemable Preference Shares with a par value of £0.10 |
499,999 | 49,999.90 |
| Newco Ordinary Shares | 664,537,006 | To be determined by the Newco Directors |
| Newco Reserve Share | 1 | To be determined by the Newco Directors |
Under the Newco Reduction of Capital, the share capital of Newco will be reduced by decreasing the nominal value of each Newco Ordinary Share to £0.10 (or such other nominal value as the Newco Directors may determine) and by cancelling and extinguishing the Newco Subscriber Shares, the Newco Preference Share and the Newco Reserve Share.
The Share Consolidation, which is expected to take place immediately following the Demerger, is intended broadly to maintain comparability, as far as possible, of the share price of a Newco Ordinary Share before and after the Demerger. As such, the Share Consolidation will affect the number of Newco Ordinary Shares in issue and the nominal value of each Newco Ordinary Share. The Share Consolidation ratio (and therefore the resulting number of Newco Ordinary Shares and their nominal value) cannot be fixed at this time and will be announced by the Newco Directors prior to the Reduction Court Hearing. Further information on the Share Consolidation is set out in paragraph 5 of Part II ''Explanatory Statement'' of this document.
Following the Demerger and the Share Consolidation, Newco's share capital will therefore consist exclusively of the Newco Ordinary Shares. The Newco Ordinary Shares are ordinary shares. The Newco Ordinary Shares will be in registered form and will be eligible for electronic settlement. The Newco Ordinary Shares can be held in certificated form. In addition, the Newco Ordinary Shares can be held within CREST so that, should they wish to, investors will be able to hold their Newco Ordinary Shares in uncertificated form. No temporary documents of title have been or will be issued in respect of the Newco Ordinary Shares. The rights attaching to the Newco Ordinary Shares will be equivalent to the rights attaching to the ICAP Ordinary Shares in all material respects, including their dividend, voting and other rights.
Further information on the rights attaching to the Newco Shares is set out in paragraph 4 of this Part VI.
Application will be made to the UK Listing Authority for the Newco Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for the Newco Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (''Admission''). Admission to the Official List, together with admission to trading on the London Stock Exchange's main market for listed securities, constitutes admission to official listing on a regulated market. As at the date of this document, no Newco Ordinary Shares are admitted to trading on a regulated market. If the Scheme proceeds as currently envisaged, it is expected that Admission will become effective, and that dealings in the Newco Ordinary Shares will commence on the London Stock Exchange, at 8.00 a.m. on the Business Day following the Scheme Effective Date.
Application will be made to the UK Listing Authority for the Official List to be amended to reflect the Newco Ordinary Shares resulting from the Share Consolidation and trading in such number of Newco Ordinary Shares is expected to commence at 8.00 a.m. on the Business Day after the Demerger Effective Date. General market transactions will continue to be settled within the CREST system.
As at 26 February 2016 (the latest practicable date prior to publication of this document), Newco does not hold any shares in treasury.
No commissions, discounts, brokerages or other special terms have been granted in respect of the issue of any share capital of Newco.
The Newco Ordinary Shares have not been marketed and are not available in whole or in part to the public otherwise than pursuant to the Scheme. No application has been or is currently intended to be made for the Newco Ordinary Shares to be admitted to listing elsewhere or dealt in on any other exchange.
The Newco Articles, to be adopted by Newco with effect from the Scheme Effective Date, are based on the ICAP Articles (excluding, for the avoidance of doubt, the changes to the Newco Articles proposed to be made pursuant to the Articles of Association Resolution, further details of which are set out in paragraph 20 of Part II ''Explanatory Statement'' of this document) and do not contain any substantive differences, save that the Newco Articles include rights in relation to the Newco Redeemable Preference Shares, the Newco Preference Shares and the Newco Reserve Share, as further described in paragraph 4 of this Part VI.
Subject to the Newco Articles generally and to any special rights or restrictions attached to any class of shares, at a general meeting, every shareholder who is present in person and every duly appointed proxy has one vote on a show of hands, and on a poll every shareholder who is present in person or by proxy has one vote for every ordinary share of which he is the holder.
A shareholder entitled to attend and vote at a general meeting is entitled to appoint a proxy or proxies to exercise all or any of their rights to attend and speak and vote in their place. A shareholder may appoint more than one proxy in relation to a general meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by the shareholder. Proxies need not be shareholders of Newco.
No shareholder will, unless the Newco Directors otherwise determine, be entitled in respect of any share held by him, to vote either personally or by proxy at a general meeting, or to exercise any other right conferred by membership in relation to general meetings, or to be counted in a quorum, if any call, or other sum presently payable by him to Newco in respect of that share, remains unpaid; or he, or any person who appears to be interested in the shares held by him, has been served with a notice pursuant to section 793 of the Companies Act, and is in default for a period of 14 days from the date of service of the notice.
(ii) Joint holders
In the case of joint holders of shares, only the vote of the senior holder who votes (and any proxies duly authorised by him) shall be counted to the exclusion of the votes of other joint holders. For this purpose, the senior holder of a share shall be determined by the order in which the names of the joint holders stand in the register of members.
(iii) Dividends
Newco may by ordinary resolution declare dividends, provided that no dividend may exceed the amount recommended by the Newco Directors. The Newco Directors may also from time to time pay interim dividends as they think fit and may also pay the fixed dividends payable on any shares of the Company half-yearly or otherwise on fixed dates. No dividend or interim dividend shall be payable otherwise than in accordance with the Companies Act.
The Newco Directors may offer shareholders the right to elect to receive, in lieu of a dividend (or part thereof), specific assets (and in particular new shares or debentures of any other company credited as fully paid). Before they may do this, the shareholders must have passed an ordinary resolution authorising the Newco Directors to make the offer.
The Newco Directors may retain any dividend payable on or in respect of a share on which Newco has a lien and may apply the same in or towards satisfaction of the monies payable to Newco in respect of that share. Any dividend unclaimed after a period of 12 years after it was declared will be forfeited and revert to Newco.
(i) Voting rights
The Newco Redeemable Preference Shares carry no rights to receive notice of or attend, speak or vote at any general meeting of Newco (save as required by law).
The rights conferred upon the holders of the Newco Redeemable Preference Shares shall not be deemed to be varied by the Newco Reduction of Capital.
(ii) Participation in profits or assets
The Newco Redeemable Preference Shares carry no rights to participate in the profits or assets of Newco, except as set out below.
The Newco Redeemable Preference Shares carry a right to a fixed, cumulative, preferential dividend of one per cent. of the nominal amount paid up in respect of those shares. Such dividend accrues only yearly and is payable on any date specified by the Newco Directors. Any dividend is paid in priority to dividends in respect of the Newco Ordinary Shares.
If there is a return of capital on a winding up, the assets of Newco available for distribution amongst the members shall be applied first in repaying in full to the holders of the Newco Redeemable Preference Shares the amount paid up on such shares on a pari passu basis with that of the Newco Preference Shares and the Newco Reserve Share and in priority to the Newco Ordinary Shares.
(iii) Redemption
Subject to the provisions of the Companies Act, the Newco Redeemable Preference Shares may be redeemed by Newco (in respect of all the Newco Redeemable Preference Shares) or the holder (in respect of all the Newco Preference Shares he holds) by notice in writing at any time and on payment of the nominal amount and any unpaid fixed preferential dividend on those shares. On the redemption of any Newco Redeemable Preference Shares, such shares shall be cancelled.
(i) Voting rights
The Newco Preference Shares carry no rights to receive notice of or attend, speak or vote at any general meeting of Newco (save as required by law).
The rights conferred upon the holders of the Newco Preference Shares shall not be deemed to be varied by the Newco Reduction of Capital.
The Newco Preference Shares carry the same rights to participate in the profits or assets of Newco as the Newco Ordinary Shares, except as set out below.
The Newco Preference Shares may participate in a capitalisation issue of Newco declared only on the Newco Preference Shares. This is intended solely to facilitate the bonus issue of the Newco Reserve Share in order to capitalise certain of Newco's reserves.
If there is a return of capital on a winding up, the assets of Newco available for distribution amongst the members shall be applied first in repaying in full to the holders of the Newco Preference Shares the amount paid up on such shares on a pari passu basis with that of the Newco Redeemable Preference Shares and the Newco Reserve Share and in priority to the Newco Ordinary Shares.
(i) Voting rights
The Newco Reserve Share carries no rights to receive notice of or attend, speak or vote at any general meeting of Newco (save as required by law).
The rights conferred upon the holder of the Newco Reserve Share shall not be deemed to be varied by the Newco Reduction of Capital.
(ii) Participation in profits or assets
The Newco Reserve Share carries the same rights to participate in the profits or assets of Newco as the Newco Ordinary Shares, except as set out below.
The Newco Reserve Share shall, for the purposes of calculating any dividend entitlement, be treated as having been paid up only as to 10 pence, regardless of the actual amount paid up on that share.
If there is a return of capital on a winding up, the assets of Newco available for distribution amongst the members shall be applied first in repaying in full to the holder of the Newco Reserve Share an amount equal to the lesser of: (a) 10 pence; and (b) the amount paid up on such shares, on a pari passu basis with that of the Newco Redeemable Preference Shares and the Newco Preference Shares and in priority to the Newco Ordinary Shares and to the extent that there are further assets available for distribution amongst the members, the holder of the Newco Reserve Share shall, for the purposes of that distribution, be entitled to no more than if he were holding one Newco Ordinary Share with a nominal value of 10 pence.
On incorporation, and as at the date of this document, the following individuals are directors of Newco:
| Name | Age | Position |
|---|---|---|
| Charles Gregson . |
68 | Director |
| Michael Spencer . |
60 | Director |
| Stuart Bridges | 55 | Director |
As at the Scheme Effective Time, the following individuals will be the directors of Newco:
| Name | Age | Position |
|---|---|---|
| Charles Gregson | 68 | Chairman |
| Michael Spencer | 60 | Group Chief Executive Officer |
| Stuart Bridges | 55 | Group Finance Director |
| John Sievwright . |
61 | Senior Independent Director |
| Ivan Ritossa | 54 | Independent Non-Executive Director |
| Robert Standing | 49 | Independent Non-Executive Director |
It is intended that the Newco Directors will enter into new service agreements or letters of appointment (as appropriate) with Newco following the Scheme Effective Time on terms and conditions substantially the same as their existing service agreements or letters of appointment (as the case may be) with ICAP, further details of which are provided in paragraph 6 of Part VIII ''Additional Information—ICAP''.
As at the Scheme Effective Time the ICAP Directors will receive one Newco Ordinary Share for every ICAP Ordinary Share they hold in the share capital of ICAP. The interests of the ICAP Directors and persons connected with them within the meaning of section 252 of the Companies Act in the issued share capital of ICAP (all of which, unless otherwise stated, are beneficial) as at 26 February 2016 (the latest practicable date prior to publication of this document) are set out in paragraph 4 of Part VIII ''Additional Information—ICAP'' of this document.
As at the Scheme Effective Time, the major shareholders of the Company will receive one Newco Ordinary Share for every ICAP Ordinary Shares they hold in the share capital of ICAP. The major
shareholders of ICAP who, directly or indirectly, are interested in 3 per cent. or more of ICAP's share capital, and the amount of each of their interests, are set out in paragraph 5 of Part VIII ''Additional Information—ICAP'' of this document.
It is ICAP's intention that rights under the ICAP Employee Share Plans will continue on the same basis following the Transaction, other than that participants will ultimately receive Newco Ordinary Shares rather than ICAP Ordinary Shares if their awards vest or options are exercised. Participants in a number of the ICAP Employee Share Plans will be able to choose either to exercise their rights under those plans for a limited period following the Transaction or for those awards to continue over Newco Ordinary Shares on the same terms.
The Share Consolidation is intended to preserve the prevailing value immediately before the Demerger Effective Date of each Newco Ordinary Share under option or award, subject to any market fluctuations. As a result, the value of each option and award under the ICAP Employee Share Plans both after the Scheme and after the Demerger and the Share Consolidation is intended to remain approximately the same. No adjustments, therefore, are proposed to be made to options or awards that have been made under the ICAP Employee Share Plans. The number of Newco Ordinary Shares over which participants have options or awards, the exercise price and the other terms of the relevant options or awards will remain unchanged.
The Newco remuneration committee will separately consider whether any changes should be made to the performance conditions applying to any awards but any amended performance conditions will not be materially less difficult to satisfy than the existing performance conditions.
ICAP will write to participants in the ICAP Employee Share Plans in due course to explain the effect on their awards in more detail. The effect of the Transaction on the ICAP Employee Share Plans is summarised below.
The ICAP 2015 Performance Share Plan (the ''PSP''), the ICAP 2015 Deferred Share Bonus Plan (the ''DSBP'') and the ICAP Senior Management Long Term Incentive Plan (the ''LTIP'').
When Newco becomes the parent company of the ICAP Group, existing awards granted under the PSP, DSBP and LTIP will be automatically exchanged for awards over Newco Ordinary Shares on equivalent terms to the existing awards and subject to the same vesting conditions without needing participant agreement. PSP, DSBP and LTIP awards will neither vest nor, in the case of an award granted as an option, become exercisable as a result of the Scheme.
The ICAP 2013 Bonus Share Matching Plan (the ''BSMP''), the ICAP Unapproved Company Share Option Plan 2011 (the ''2011 UCSOP''), the ICAP 2008 Senior Executive Equity Participation Plan (the ''2008 SEEPP''), the ICAP 2008 Sharesave Scheme (the ''Sharesave''), the ICAP 2003 Bonus Share Matching Plan (the ''2003 BSMP''), the ICAP 2001 Unapproved Company Share Option Plan (the ''2001 UCSOP''), the ICAP Senior Executive Equity Participation Plan (the ''1998 SEEPP'') and the Traiana Plan.
When Newco becomes the parent company of the ICAP Group, Newco intends to invite participants to release their existing awards in exchange for the grant of new awards by Newco over Newco Ordinary Shares on equivalent terms to the existing awards and subject to the same vesting conditions (the ''Roll-over Offer''). Participants may choose to exercise their awards for a limited period following the Transaction or accept the Roll-over Offer.
The Newco Directors have confirmed to ICAP that they will adopt the Newco Employee Share Plans, subject to the ICAP Shareholders approving the Newco Employee Share Plans at the General Meeting and conditional upon the Scheme becoming effective. ICAP Shareholders (who will ultimately become shareholders of Newco) are being asked to approve the adoption of the Newco Employee Share Plans at the General Meeting. The Newco Employee Share Plans are being adopted as part of the ICAP Group arrangements to incentivise employees following the introduction of Newco as the new parent company of the ICAP Group. The Newco Employee Share Plans are replacements for, and are materially identical to, the PSP, the LTIP, the DSBP, the 2011 UCSOP and Sharesave.
The unaudited pro forma statement of net assets at 30 September 2015 and the unaudited pro forma income statement for the year ended 31 March 2015 and the related notes thereto set out in Section A of this Part VII have been prepared on the basis of the notes set out below to illustrate the effect of the Transaction on the statement of net assets and results of operations of the ICAP Group.
PwC's report on the Unaudited Pro Forma Financial Information is set out in Section B of this Part VII.
The unaudited pro forma financial information set out below has been prepared on the basis set out in the notes below to illustrate the effect of the Transaction on the consolidated net assets and income statement of the ICAP Group had the Transaction occurred on the dates stated below. It has been prepared for illustrative purposes only. Because of its nature, the pro forma financial information addresses a hypothetical situation and, therefore, does not represent the Retained Group's actual financial position or results. It is based on the unaudited consolidated interim financial statements of the ICAP Group as at 30 September 2015, the audited consolidated financial statements of the ICAP Group for the year ended 31 March 2015, and the unaudited financial information of IGBB as at 30 September 2015 and for the year ended 31 March 2015 contained in Part V ''Financial Information of IGBB'' of this document and presented in accordance with ICAP's accounting policies.
The unaudited pro forma financial information has been prepared in accordance with Annex II of the Prospectus Directive. The unaudited pro forma financial information does not constitute financial statements within the meaning of Section 434 of the Companies Act. ICAP Shareholders should read the whole of this document and not rely solely on the summarised financial information contained in this Part VII.
The unaudited pro forma statement of net assets at 30 September 2015 gives effect to the Transaction as if it had occurred on 30 September 2015. The unaudited pro forma income statement for the year ended 31 March 2015 is presented as if the Transaction had taken place at the beginning of the period. As pro forma information is prepared to illustrate retrospectively the effects of subsequent transactions using generally accepted approaches and reasonable assumptions, there are limitations that are inherent to the nature of pro forma information. As such, had the Transaction taken place on the dates assumed above, the actual effects would not necessarily have been the same as those presented in the unaudited pro forma financial information. Furthermore, in consideration of the different purpose of the unaudited pro forma financial information as compared with historical financial statements and the different methods of calculation of the effects of the Transaction on the pro forma statement of net assets and the pro forma income statement, these statements should be read and interpreted without comparisons between them.
All pro forma financial adjustments are directly attributable to the Transaction. No pro forma adjustments have been made to reflect any matters not directly attributable to the Transaction.
The unaudited pro forma financial information does not attempt to predict or estimate the future results of the Retained Group and should not be used for this purpose.
This section presents the unaudited consolidated pro forma statement of net assets at 30 September 2015, the unaudited consolidated pro forma income statement for the year ended 31 March 2015, and related explanatory notes.
| Unaudited pro forma consolidated statement of net assets at 30 September 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| -- | -- | ------------------------------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- | -- |
| Adjustments | |||||||
|---|---|---|---|---|---|---|---|
| ICAP Group as at 30 September 2015 |
IGBB net asset adjustment as at 30 September 2015 |
IGBB assets/ liabilities to be retained by ICAP |
Transaction consideration and repayment of borrowings |
Other Transaction adjustments |
Retained Group pro forma as at 30 September 2015 |
||
| Note 1 | Note 2 | Note 3 | Note 4 | Note 5 | |||
| £m | £m | £m | £m | £m | £m | ||
| Non-current assets Intangible assets arising on consolidation . Intangible assets arising from development |
898 | (82) | — | — | — | 816 | |
| expenditure . |
114 | (46) | 16 | — | — | 84 | |
| Property and equipment | 38 | (24) | 14 | — | 6 | 34 | |
| Investment in joint ventures . |
13 | (7) | — | — | — | 6 | |
| Investment in associates | 114 | (37) | — | — | — | 77 | |
| Deferred tax assets | 8 | (10) | 2 | — | — | — | |
| Trade and other receivables | 10 | (1) | — | — | — | 9 | |
| Available-for-sale investments | 19 | (11) | — | 382 | — | 390 | |
| 1,214 | (218) | 32 | 382 | 6 | 1,416 | ||
| Current assets | |||||||
| Held for sale assets | 4 | — | — | — | — | 4 | |
| Trade and other receivables | 17,592 | (17,468) | 25 | — | — | 149 | |
| Receivable from affiliates Amount receivable by Retained Group from |
— | (78) | 78 | — | — | — | |
| IGBHL . |
— | — | 330 | (330) | — | — | |
| Available-for-sale investments | 1 | (1) | — | — | — | — | |
| Restricted funds | 34 | (27) | — | — | — | 7 | |
| Cash and cash equivalents | 493 | (359) | 49 | 157 | (50) | 290 | |
| 18,124 | (17,933) | 482 | (173) | (50) | 450 | ||
| Total assets | 19,338 | (18,151) | 514 | 209 | (44) | 1,866 | |
| Liabilities | |||||||
| Current liabilities | |||||||
| Trade and other payables |
(17,550) | 17,428 | — | — | — | (122) | |
| Payable to affiliates | — | 38 | (38) | — | — | — | |
| Short-term borrowings and overdrafts . |
(62) | 7 | — | — | — | (55) | |
| Tax payable . |
(30) | 23 | (24) | — | 4 | (27) | |
| Held for sale liabilities Short-term provisions |
(2) (18) |
— 16 |
— (2) |
— — |
— — |
(2) (4) |
|
| (17,662) | 17,512 | (64) | — | 4 | (210) | ||
| Non-current liabilities | |||||||
| Trade and other payables . |
(29) | 5 | — | — | — | (24) | |
| Deferred tax liabilities | (70) | 12 | (2) | — | — | (60) | |
| Long-term borrowings |
(564) | — | — | 173 | — | (391) | |
| Retirement benefit obligations | (6) | 3 | — | — | — | (3) | |
| Long-term provisions | (17) | 18 | (12) | — | — | (11) | |
| (686) | 38 | (14) | 173 | — | (489) | ||
| Total liabilities | (18,348) | 17,550 | (78) | 173 | 4 | (699) | |
| Net assets | 990 | (601) | 436 | 382 | (40) | 1,167 | |
Notes to the unaudited pro forma consolidated statement of net assets:
(1) The consolidated statement of net assets of the ICAP Group has been directly extracted from the unaudited consolidated interim financial statements of the ICAP Group as at 30 September 2015.
(2) Represents the Transaction. The financial information used in this adjustment has been extracted from the financial information of IGBB set out in Part V ''Financial Information of IGBB'' of this document.
| Adjustment | Explanation of adjustment | |
|---|---|---|
| £m | ||
| Intangible assets arising from development | ||
| expenditure . |
16 | Intangible assets arising from development expenditure which will remain with the Retained Group on Completion |
| Property and equipment | 14 | Property and equipment which will remain with the Retained Group on Completion |
| Deferred tax asset | 2 | Balance sheet reclassification of deferred tax liability by the Retained Group on Completion |
| Trade and other receivables | 25 | The full risks and rewards of certain receivables will reside with the Retained Group on Completion |
| Receivable from affiliates | 78 | Amounts receivable from affiliates are to be settled by Completion |
| IGBHL debt | 330 | As set out in Part IV of this document there will be a loan of £330 million due from IGBHL to the Retained Group on Completion |
| Cash and cash equivalents | 49 | IGBB had cash and cash equivalents and restricted funds net of bank overdrafts of £379 million as at 30 September 2015, compared to a minimum of £330 million at Completion under the Sale and Purchase Agreement |
| Payable to affiliates | (38) | Amounts payable to affiliates are to be settled by Completion |
| Tax payable . |
(24) | The obligation relates to certain potential tax liabilities of £30 million which will reside with the Retained Group on Completion. This is offset by £6 million of tax credits relating to the adjustments set out in the unaudited pro forma consolidated income statement |
| Short-term provisions | (2) | Short term provisions relating to onerous leases will remain with the Retained Group on Completion |
| Deferred tax liability | (2) | Balance sheet reclassification of deferred tax liability by the Retained Group on Completion |
| Long-term provisions | (12) | Long term provisions of £8 million relating to onerous leases will remain with the Retained Group on Completion. Additionally, £4 million obligation of interest on certain tax liabilities will remain with the Retained Group on Completion |
| Net assets | 436 |
The terms of the Sale and Purchase Agreement set a minimum cash balance for IGBB on Completion of £330 million and require the Completion balance sheet of IGBB to include a single amount payable to the Retained Group of £330 million. An internal reorganisation of the ICAP Group will be performed prior to Completion, such that £330 million of cash remains in IGBB together with a single amount payable of £330 million due to the Retained Group. For the purposes of the unaudited pro forma financial information, it is assumed that the £330 million loan payable to the Retained Group by IGBB is settled on 30 September 2015.
(4) Tullett Prebon intends to acquire 100 per cent. of IGBB in return for the issue of New Tullett Prebon Shares to the Retained Group and to ICAP Shareholders.
The ICAP Group plans to undertake a Court-approved capital reduction prior to Completion. The associated return of capital will be satisfied by the transfer to Tullett Prebon of approximately 64.5 per cent. of the issued share capital of IGBHL in return for the issue of approximately 45.07 per cent. of Tullett Prebon's issued share capital (calculated on a fully diluted basis and immediately following such issuance) to the holders of Newco Ordinary Shares. It is expected that the remaining shares in IGBHL of approximately 35.5 per cent. of the shares in IGBHL not transferred at Initial Completion will be acquired by Tullett Prebon on the exercise of the Newco Put/Call Option by either the Retained Group or Tullett Prebon.
For the purposes of this unaudited pro forma financial information, it is assumed that the Newco Put/Call Option is exercised on 30 September 2015 such that the Retained Group holds an approximately 19.9 per cent. stake in Enlarged Tullett Prebon following Completion. For the purpose of the unaudited pro forma financial information, the fair value of the share in Enlarged Tullett Prebon of approximately 19.9 per cent. received by the Retained Group in consideration for the share in IGBHL of approximately 35.5 per cent. (£382 million) has been estimated based on the Tullett Prebon share price on 26 February 2016 (the latest practicable date prior to publication of this document) of 347 pence per share and 110,272,402 shares (on the assumption that no Tullett Prebon Ordinary Shares are issued by Tullett Prebon between 26 February 2016 (the latest practicable date prior to publication of this document) and admission of the New Tullett Prebon Shares (other than the New Tullett Prebon Shares and 302,148 Tullett Prebon Ordinary Shares that may be issued as a result of the exercise of a vested share option award under Tullett Prebon's long term incentive plan)) to be issued to the Retained Group by Tullett Prebon.
Management intends to use the cash received on repayment by Tullett Prebon of the £330 million loan from the Retained Group to IGBB to repay any remaining borrowings on the ICAP Group revolving credit facility. At 30 September 2015, the ICAP Group had £173 million drawings on its revolving credit facility. This adjustment to long term borrowings reflects the repayment of these drawings, with the remaining £157m of the £330m proceeds reflected as an increase in cash.
| Adjustment | Explanation of adjustment | |
|---|---|---|
| Cash received from loan repayment . |
£m 330 |
As set out in Part IV of this document there will be a loan of £330 million due from IGBHL to the Retained Group which will be repaid on Completion. |
| Repayment of revolving credit facility Adjustment to cash and cash equivalents . |
(173) 157 |
Repayment of remaining borrowings on the revolving credit facility. |
(5) The £50 million adjustment to cash comprises £17 million of estimated separation and related costs including technology, facilities and related staff costs to separate the business which will be incurred by the Retained Group before Completion. Of the £17 million, an estimated £6 million represents capital expenditure on assets that will be capitalised by the Retained Group. In addition, an adjustment of £33 million has been made in respect of costs directly attributable to executing the Transaction including professional fees, bankers' fees and other related costs.
(6) No account has been taken of any trading activity of the ICAP Group or IGBB since 30 September 2015.
| Adjustments | ||||||
|---|---|---|---|---|---|---|
| ICAP Group for the year ended 31 March 2015 |
IGBB income statement for the year ended 31 March 2015 |
IGBB costs to be retained by ICAP |
Dividend income on investment in Enlarged Tullett Prebon |
Other Transaction adjustments |
Retained Group pro forma for the year ended 31 March 2015 |
|
| Note 1 | Note 2 | Note 3 | Note 4 | Note 5 | ||
| £m | £m | £m | £m | £m | £m | |
| Revenue |
1,276 | (808) | — | — | — | 468 |
| Trading |
(1,026) | 727 | (21) | — | — | (320) |
| Acquisition and disposal costs | (59) | 1 | — | — | (33) | (91) |
| Exceptional items | (75) | 73 | (14) | — | (18) | (34) |
| Operating expenses |
(1,160) | 801 | (35) | — | (51) | (445) |
| Other income—trading | 2 | (3) | — | — | — | (1) |
| Trading . |
252 | (84) | (21) | — | — | 147 |
| Acquisition and disposal costs | (59) | 1 | — | — | (33) | (91) |
| Exceptional items | (75) | 73 | (14) | — | (18) | (34) |
| Operating profit | 118 | (10) | (35) | — | (51) | 22 |
| Trading . |
4 | (2) | — | 19 | — | 21 |
| Acquisition and disposal costs | — | (1) | — | — | — | (1) |
| Finance income | 4 | (3) | — | 19 | — | 20 |
| Finance costs—trading Share of profit of associates and JVs after tax— |
(35) | 1 | — | — | — | (34) |
| trading Gain on distribution and disposal of IGBB— |
8 | (8) | — | — | — | — |
| acquisition and disposal | ||||||
| costs | — | — | — | — | 830 | 830 |
| Trading . |
229 | (93) | (21) | 19 | — | 134 |
| Acquisition and disposal costs | (59) | — | — | — | 797 | 738 |
| Exceptional items | (75) | 73 | (14) | — | (18) | (34) |
| Profit before tax | 95 | (20) | (35) | 19 | 779 | 838 |
| Trading |
(44) | 15 | 3 | — | — | (26) |
| Acquisition and disposal costs | 15 | 3 | — | — | 2 | 20 |
| Exceptional items | 18 | (19) | 3 | — | 2 | 4 |
| Tax | (11) | (1) | 6 | — | 4 | (2) |
| Trading profit for the year | 185 | (78) | (18) | 19 | — | 108 |
| Acquisition and disposal costs Exceptional items |
(44) (57) |
3 54 |
— (11) |
— — |
799 (16) |
758 (30) |
| Profit for the year | 84 | (21) | (29) | 19 | 783 | 836 |
| Attributable to | ||||||
| Owners . |
84 | (22) | (29) | 19 | 783 | 835 |
| Non-controlling interests | — | 1 | — | — | — | 1 |
| 84 | (21) | (29) | 19 | 783 | 836 | |
Notes to the unaudited pro forma consolidated income statement:
(1) The consolidated income statement of the ICAP Group has been directly extracted from the consolidated financial statements of the ICAP Group for the year ended 31 March 2015. The ICAP Group in its consolidated income statement discloses its trading profit separately from its reported profit.
Trading profit is reconciled to profit before tax on the face of the consolidated income statement, which also includes acquisition and disposal costs and exceptional items. Trading operating expenses, trading operating profit and trading profit before tax are non-IFRS measures that may not be comparable to similarly titled financial measures of other companies.
| Adjustments | ||||||
|---|---|---|---|---|---|---|
| ICAP Group for the year ended 31 March 2015 |
IGBB income statement for the year ended 31 March 2015 |
IGBB costs to be retained by ICAP |
Dividend income on investment in Enlarged Tullett Prebon |
Other Transaction adjustments |
Retained Group pro forma for the year ended 31 March 2015 |
|
| Note 1 | Note 2 | Note 3 | Note 4 | Note 5 | ||
| £m | £m | £m | £m | £m | £m | |
| Revenue | 1,276 | (808) | — | — | — | 468 |
| Trading operating expenses | (1,026) | 727 | (21) | — | — | (320) |
| Other income | 2 | (3) | — | — | (1) | |
| Trading operating profit | 252 | (84) | (21) | — | — | 147 |
| Finance income | 4 | (2) | — | 19 | — | 21 |
| Finance costs Share of profit of associates |
(35) | 1 | — | — | — | (34) |
| and JVs after tax . |
8 | (8) | — | — | — | — |
| Trading profit before tax | 229 | (93) | (21) | 19 | — | 134 |
| Tax | (44) | 15 | 3 | — | — | (26) |
| Trading profit for the year . | 185 | (78) | (18) | 19 | — | 108 |
'Acquisition and disposal costs' includes: any gains, losses or other associated costs on the full or partial disposal of investments, associates, joint ventures or subsidiaries and costs associated with a business combination that do not constitute fees relating to the arrangement of financing; amortisation or impairment of intangible assets arising on consolidation; any remeasurement after initial recognition of deferred contingent consideration which has been classified as a liability, and any gains or losses on the revaluation of previous interests. The costs may also include items such as gains or losses on the settlement of pre-existing relationships with acquired businesses and the remeasurement of liabilities that are above the value of indemnification.
Items which are of a non-recurring nature and material, when considering both size and nature, are disclosed separately to give a clearer presentation of the ICAP Group's results. These are shown as 'exceptional items' on the face of the consolidated income statement.
Pro forma finance costs of £34 million for the Retained Group for the year ended 31 March 2015 include £9 million of interest payments on borrowings that were drawn in that period but had been repaid by 30 September 2015. This includes £6 million of interest expense on e300 million senior notes, which were repaid in July 2014, and £3 million of interest expense on US\$193 million of guaranteed subordinated loan notes, which were repaid in June 2015.
The unaudited pro forma income statement has been adjusted to reflect:
• £830 million gain on the distribution and disposal of IGBB by the ICAP Group. For the purposes of this unaudited pro forma financial information, this gain has been calculated as follows:
| Adjustment | |
|---|---|
| Proceeds | £m |
| Available-for-sale investments Receivable from IGBHL . |
382 330 |
| Assets deconsolidated Unrealised foreign exchange reserves recycled to the income statement |
712 (534) (40) |
| Distribution received by Newco Shareholders | 138 692 |
| Gain on distribution and disposal . |
830 |
The gain on distribution and disposal will be presented as an acquisition and disposal cost in the income statement of the Retained Group and will not have a continuing impact on the results of the Retained Group. The gain on distribution and disposal will not be taxable. The excess of the fair value of the 36.1 per cent. share in Enlarged Tullett Prebon received by Newco Shareholders over the carrying value of the 64.5 per cent. of IGBB will be distributed directly to Newco Shareholders through the reduction and repayment of capital.
The unaudited pro forma income statement assumes that the disposal took place on 1 April 2014 and therefore considers IGBB net assets at that date to calculate the gain on distribution and disposal. For the purposes of calculating the gain on distribution and disposal set out above, adjustments have been made to IGBB net assets as at 1 April 2014 in relation to assets and liabilities that will not be sold with IGBB under the terms of the Sale and Purchase Agreement:
| Explanation of adjustment | ||
|---|---|---|
| IGBB net assets as at 1 April 2014 | £m 627 |
|
| Sale and Purchase Agreement adjustments: Intangible assets arising from development expenditure |
(16) | Intangible assets arising from development expenditure which will remain with the Retained Group on Completion. |
| Property and equipment | (14) | Property and equipment which will remain with the Retained Group on Completion |
| Trade and other receivables | (25) | The full risks and rewards of certain receivables will reside with the Retained Group on Completion |
| Cash and cash equivalents | (72) | IGBB had cash and cash equivalents and restricted funds net of bank overdrafts of £402m as at 1 April 2014, compared to a minimum of £330m at Completion under the Sale and Purchase Agreement |
| Tax payable | 30 | The obligation relates to certain potential tax liabilities which will reside with the Retained Group on Completion |
| Long-term provisions | 4 | Obligation of interest on certain tax liabilities will remain with the Retained Group on Completion |
| Adjusted net assets | 534 |
(6) No account has been taken of any trading activity of the ICAP Group or IGBB since 31 March 2015.
The Directors ICAP plc 2 Broadgate London EC2M 7UR
J.P. Morgan Limited 25 Bank Street London E14 5JP
Evercore Partners International LLP 15 Stanhope Gate London W1K 1LN
1 March 2016
Dear Sirs
We report on the unaudited pro forma financial information (the ''Pro Forma Financial Information'') set out in section A of Part VII of the Company's circular dated 1 March 2016 (the ''Circular'') which has been prepared on the basis described in the notes to the Pro Forma Financial Information, for illustrative purposes only, to provide information about how the proposed disposal of the Global Broking Business (''IGBB'') by the Company might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the year ended 31 March 2015. This report is required by item 13.3.3R of the Listing Rules of the UK Listing Authority (the ''Listing Rules'') and is given for the purpose of complying with that Listing Rule and for no other purpose.
It is the responsibility of the directors of the Company to prepare the Pro Forma Financial Information in accordance with item 13.3.3R of the Listing Rules.
It is our responsibility to form an opinion, as required by item 13.3.3R of the Listing Rules, as to the proper compilation of the Pro Forma Financial Information and to report our opinion to you.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed and which we may have to shareholders of the Company as a result of the inclusion of this report in the Circular, to the fullest extent permitted by law we do not assume any responsibility and will
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of
PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.
not accept any liability to any other person for any loss suffered by any such person as a result of, arising out of, or in connection with this report or our statement, which is required by and given solely for the purposes of complying with item 13.4.1R(6) of the Listing Rules, and consenting to its inclusion in the Circular.
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the Directors of the Company.
We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.
In our opinion:
Yours faithfully
PricewaterhouseCoopers LLP Chartered Accountants
ICAP and the ICAP Directors, whose names appear in Part I ''Letter from the Chairman of ICAP'', accept responsibility for the information contained in this document. To the best of the knowledge and belief of ICAP and ICAP Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
The directors' remuneration report set out on pages 72 to 90 of ICAP's 2015 Annual Report are incorporated by reference into this document.
ICAP was incorporated and registered in England and Wales on 3 August 1998 as a public company limited by shares with registered number 03611426 and with the name CAPITALRETURN PLC. The Company's name was changed to Garban plc on 5 August 1998, to Garban-Intercapital plc on 9 September 1999 and again on 25 July 2001 to its current name, ICAP plc.
The registered and head office of ICAP is at 2 Broadgate, London EC2M 7UR. The telephone number of ICAP's registered and head office is +44 (0)20 7000 5000.
The principal legislation under which ICAP operates is the Companies Act.
As at 26 February 2016 (the latest practicable date prior to publication of this document), the interests of the ICAP Directors and persons connected with them within the meaning of section 252 of the Companies Act in the issued share capital of ICAP (all of which, unless otherwise stated, are beneficial) that have been notified by each ICAP Director to ICAP pursuant to the Disclosure Rules and Transparency Rules are as follows:
| ICAP Director | Number of ICAP Ordinary Shares |
Percentage of issued share capital of ICAP |
|---|---|---|
| Executive Directors | ||
| Michael Spencer (together with IPGL, IPGL Limited, INFBV and | ||
| INCAP Overseas BV)(1) | 109,708,943 | 16.51% |
| Stuart Bridges | — | 0% |
| Non-Executive Directors | ||
| Charles Gregson | 241,625 | 0.04% |
| Ivan Ritossa . |
— | 0% |
| John Sievwright |
20,873 | 0.003% |
| Robert Standing | 10,000 | 0.002% |
(1) Michael Spencer has a direct interest in 3,889,383 ICAP Ordinary Shares, representing 0.59 per cent. of the issued share capital of ICAP. He owns a majority of shareholding in IPGL, of which INFBV is a wholly-owned subsidiary and is deemed to be interested in all the ICAP Ordinary Shares held by INFBV and its indirect wholly-owned subsidiary, INCAP Overseas BV, totalling 105,819,560 ICAP Ordinary Shares, representing 15.92 per cent. of the issued share capital of ICAP. This includes the 250,000 ICAP Ordinary Shares held by IPGL Limited acquired via a contract for difference.
| ICAP Director | Scheme and year of award |
Number of ICAP Ordinary Shares subject to award |
Exercise price (pence) |
Exercisable from | Expiry date |
|---|---|---|---|---|---|
| Michael Spencer | 2014 BSMP matching award |
91,657 | 100 | Day of announcement of the Company's annual results for financial year end 31 March 2017 |
31 March 2022 |
| Michael Spencer | 2014 SAYE option |
1,490 | 302 | 1 August 2017 | 31 January 2018 |
| Michael Spencer | 2015 Performance Share Plan award |
173,262 | 0 | 28 May 2018 | 28 May 2018 |
| Michael Spencer | 2015 SAYE option |
2,986 | 452 | 1 August 2018 | 31 January 2019 |
| Stuart Bridges |
2015 Performance Share Plan award |
98,750 | 0 | 1 September 2016 |
1 September 2016 |
| Stuart Bridges |
2015 Performance Share Plan award |
98,750 | 0 | 1 September 2017 |
1 September 2017 |
| Stuart Bridges |
2015 Performance Share Plan award |
197,500 | 0 | 28 May 2018 | 28 May 2018 |
As at 26 February 2016 (the latest practicable date prior to publication of this document), and so far as is known to ICAP by virtue of the notifications made to it pursuant to the Disclosure Rules and Transparency Rules, the name of each person (other than any ICAP Director whose interest is set out in paragraph 4 (a) of this Part VIII) who, directly or indirectly, is interested in 3 per cent. or more of the ICAP's share capital, and the amount of such person's interest, is as follows:
| Shareholder | Number of ICAP Ordinary Shares |
Percentage of issued share capital of ICAP |
|---|---|---|
| Schroders plc | 84,659,259 | 12.74% |
| Silchester International Investors LLP |
64,765,365 | 9.75% |
| FIL Ltd | 32,156,061 | 4.84% |
| Newton Investment Management Ltd |
31,907,355 | 4.80% |
| AXA S.A. |
29,749,171 | 4.48% |
The terms and conditions relating to the employment of the executive Directors, including the remuneration payable to each executive Directors, are set out in the Directors' Remuneration Report on pages 72 to 90 of ICAP's 2015 Annual Report, which is hereby incorporated by reference into this document.
The remuneration payable to the executive Directors are as disclosed in the Directors' Remuneration Report on pages 72 to 90 of ICAP's 2015 Annual Report, with the exception of the remuneration of Michael Spencer, which will be £750,000 per annum (less tax and national insurance contributions) with effect from 1 April 2015.
The terms and conditions relating to the appointment of the non-executive Directors are set out in the Directors' Remuneration Report on pages 72 to 90 of ICAP's 2015 Annual Report, which is hereby incorporated by reference into this document.
The Directors may be granted indemnities by ICAP subject to the Companies Act (including the right to recover costs on an ''as incurred'' basis) and subject to certain exceptions.
As at 26 February 2016 (the latest practicable date prior to publication of this document), the benefits upon termination of employment of Directors are the same as those disclosed in paragraph (a) above and there are no existing or proposed service agreements between any Director and any member of the ICAP Group providing for benefits upon termination of employment.
Executive Directors currently participate in the ICAP plc 2015 Deferred Share Bonus Plan and the ICAP plc 2015 Performance Share Plan and hold awards under a number of legacy share plans, as described in the Directors' Remuneration Report on pages 72 to 90 of ICAP's 2015 Annual Report, which is hereby incorporated by reference into this document.
Following the Scheme becoming effective, the executive Directors may participate in the Newco PSP, the Newco LTIP, the Newco DSBP and Newco Sharesave (as defined in paragraphs 7(b), (d), (e) and (f) below), the full terms of which are set out in paragraph 7 of this Part VIII.
Under the Newco PSP, executive Directors can receive an annual award of shares (or share-based cash equivalent) with a value on grant of a maximum of 300 per cent. of annual salary. Awards vest after three years to the extent performance targets are met over a performance period. The performance targets are set annually by the Remuneration Committee. Awards may be subject to an additional holding period ending on the fifth anniversary of the grant date.
Under the Newco LTIP, participants can receive awards of shares in the form of basic awards (based on bonus) and matching awards (linked to an underlying basic award, but subject to forfeiture if participants leave employment in certain circumstances) that each vest after a period set by the board.
The Newco DSBP is used to defer a portion of an executive Director's annual bonus into an award of shares which vests after a period set by the board. Awards may be subject to an additional retention period which will (unless the board determines otherwise) be six months.
The Newco Sharesave, which will be registered with HMRC, is an all-employee savings-related share option plan under which participants may save a monthly amount to buy shares and are granted an option over shares with an exercise price that is set at a discount of up to 20 per cent. of the market value of Newco Ordinary Shares on the date of grant.
Newco has confirmed to ICAP that, following the Scheme becoming effective, it proposes to continue to use employee share plans to incentivise employees of the ICAP Group. Accordingly, Newco has confirmed to ICAP that the Newco Directors will adopt the Newco Employee Share Plans subject to the approval of ICAP Shareholders at the General Meeting and conditional on the Scheme becoming effective. No new rights will be granted under the ICAP Employee Share Plans following the Scheme Effective Date.
The Newco Employee Share Plans are replacements for, and are materially identical to, the PSP, LTIP, DSBP, 2011 UCSOP and Sharesave. The principal provisions of the Newco Employee Share Plans are set out below.
(i) Eligibility
Any employee (including an executive Director) of Newco or any of its subsidiaries will be eligible to participate in the Newco PSP at the discretion of the board.
(ii) Form of Awards
Awards under the Newco PSP may be in the form of:
Unless the board determines otherwise, awards will be subject to the satisfaction of a performance condition which will determine the proportion (if any) of the award which will vest at the end of a performance period of at least three years. Awards granted to Newco's executive Directors under the rules of the Newco PSP will comply with Newco's prevailing remuneration policy.
Awards which are not subject to a performance condition will vest three years from grant, or on such other date as the board determines.
Any performance condition may be amended or substituted if one or more events occur which cause the board to consider that an amended or substituted performance condition would be more appropriate. Any amended or substituted performance condition would not be materially less difficult to satisfy.
(iv) Holding Period
Awards may be granted subject to an additional holding period, which will begin on the vesting date and, unless the board determines otherwise, end on the fifth anniversary of the grant date.
(v) Individual Limits
Unless the board determines otherwise, awards will not be granted to a participant under the Newco PSP over shares with a market value (as determined by the board) in excess of 300 per cent. of salary in respect of any financial year.
(vi) Grant of Awards
Awards may be granted only within the period of 42 days following the approval of the Newco PSP by ICAP Shareholders, the dealing day after the day on which Newco makes an announcement of its results for any period, or on any day on which the board resolves that exceptional circumstances exist which justify the grant of awards.
(vii) Terms of Awards
Awards may be granted over newly issued Newco Ordinary Shares, treasury shares or Newco Ordinary Shares purchased in the market. Awards are not transferable (other than on death). No payment will be required for the grant of an award. Awards will not form part of pensionable earnings.
(viii) Dividend Equivalents
Except in respect of Restricted Awards, the board may determine that the number of shares to which a participant's award relates shall increase to take account of dividends that would have been paid on released Newco Ordinary Shares on such terms as it determines, or that an equivalent amount should be paid in cash.
(ix) Overall Limits
The Newco PSP is subject to the following overall limits:
Treasury shares will be treated as newly issued for the purpose of these limits until such time as guidelines published by institutional investor representative bodies determine otherwise.
(x) Reduction for Malus and Clawback
Where, during the period starting on the grant date (or if the award is subject to a performance condition, the first day of the performance period), or if the board determines, an earlier date ending on the seventh anniversary of the grant date (or such later date as is necessary to comply with any applicable law or regulation), there is:
Where there is an ongoing investigation on the seventh anniversary of the grant date (or such later date as is necessary to comply with any applicable law or regulation), the board may extend this period.
Awards that are subject to a performance condition will normally vest as soon as practicable after the end of any performance period (or on such later date as the board determines) and then only to the extent that any performance condition has been satisfied. Awards that are not subject to a performance condition will usually vest on the third anniversary of the grant date.
If a holding period does not apply to an award, it will be released immediately on vesting. If, however, awards are subject to an additional holding period, vested Newco Ordinary Shares will not usually be released to the participant until the end of the holding period.
Nil-Cost Options will then normally be exercisable from release until the tenth anniversary of the grant date.
The release of a Conditional Award or the exercise of a Nil-Cost Option is subject to obtaining any necessary approvals or consents from the UK Listing Authority, compliance with applicable regulations regarding market abuse and Newco's share-dealing policy, and any other applicable laws or regulations.
At any time before the point at which a Conditional Award has been released or a Nil-Cost Option has been exercised, the board may decide to pay a participant a cash amount equal to the value of the Newco Ordinary Shares he would otherwise have received.
Any Newco Ordinary Shares or cash that are to be issued, transferred or paid (as appropriate) to a participant in respect of a vested award (or the exercise of a Nil-Cost Option) will be issued, transferred or paid (as appropriate) as soon as practicable thereafter.
(xii) Cessation of Employment
If a participant dies, unless the board determines otherwise an unvested award will vest and be released as soon as reasonably practicable after the date of death. An unvested award will vest to the extent that the board determines, taking into account the satisfaction of any performance condition and (unless the board determines otherwise) the period of time that has elapsed since the award was granted until the date of death as a proportion of the vesting period. A vested award which has not yet been released will be released on the date of death to the extent vested. A participant's personal representatives will normally have twelve months to exercise any vested Nil-Cost Options.
If a participant ceases to hold office or employment with the ICAP Group by reason of ill-health, injury, disability, or the sale out of the ICAP Group of the business or entity that employs him or for any other reason at the board's discretion (except where a participant is summarily dismissed), their unvested award will continue until the normal release date.
The board will decide the extent to which an unvested award vests in these circumstances, taking into account the extent to which any performance condition has been satisfied, the period of time that has elapsed from the date on which the award was granted, and the date on which the participant ceases to be an officer or employee as a proportion of the vesting period.
If a participant ceases to hold office or employment with the ICAP Group in any other circumstances, an award will lapse on the date on which the participant ceases to hold that office or employment.
If a participant ceases to hold office or employment with the ICAP Group during the holding period, their vested award will continue until the normal release date (unless he is summarily dismissed, in which case the award will lapse).
Where Nil-Cost Options vest and are released in these circumstances (or if they had already been released, but had not been exercised prior to cessation) they will normally be exercisable for a period of twelve months thereafter.
In the event of a change of control of Newco, awards will vest and be released, taking into account (unless the board determines otherwise) the extent that any performance condition has been satisfied and the period of time which has elapsed between the grant date and the relevant event as a proportion of the vesting period. Nil-Cost Options will then usually be exercisable for a period of one month.
Alternatively, the board may require or permit participants to exchange awards for equivalent awards which relate to shares in a different company. If the change of control is an internal reorganisation of the ICAP Group or if the board so decides, participants will be required to exchange their awards (rather than awards vesting).
If other corporate events occur such as a winding up of Newco, demerger, delisting, special dividend or other event which, in the opinion of the board, may affect the current or future value of Newco Ordinary Shares, the board may determine that awards will vest (if unvested) and be released at that time taking into account the satisfaction of any relevant performance condition and the period from the grant date to the date of the relevant event as a proportion of the vesting period, unless the board determines otherwise. The board will determine in these circumstances the length of time during which awards structured as Nil-Cost Options can then be exercised.
In the event of a variation of Newco's share capital or a demerger, delisting, special dividend, rights issue or other event, which may, in the board's opinion, affect the current or future value of Newco Ordinary Shares, the number of Newco Ordinary Shares subject to an award and/or any performance condition attached to awards, may be adjusted.
The board may amend the Newco PSP or the terms of any award at any time provided that the prior approval of Newco Shareholders in a general meeting will be required for amendments to the advantage of eligible employees or participants relating to eligibility, limits, the basis for determining a participant's entitlement to, and the terms of, the Newco Ordinary Shares or cash comprised in an award and the impact of any variation of capital.
Any minor amendment to benefit the administration of the Newco PSP, to take into account legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment, may be made by the board without shareholder approval.
No amendment may be made to the material disadvantage of participants in the Newco PSP unless consent is sought from the affected participants and given by a majority of them.
The Newco PSP will usually terminate on the tenth anniversary of its approval by shareholders, but the rights of existing participants will not be affected by any termination.
Participation in the Newco PSP does not form part of the terms of a participant's contract of employment and participants have no rights in respect of Newco PSP benefits.
The Newco PSP will be governed in accordance with the laws of England and Wales and the parties submit to the exclusive jurisdiction of the courts of England and Wales.
Any employee (including an executive Director) of Newco or any participating member of the ICAP Group who is required to devote substantially the whole of his working time to his employment or office is eligible to participate in the Newco UCSOP.
(ii) Form of Awards
Awards under the Newco UCSOP take the form of options to acquire Newco Ordinary Shares at a price set by the board (see ''Exercise and Lapse of Options'' below). In relation to eligible employees resident in the US, options may be granted to them at the discretion of the board, either as incentive stock options or non-qualified stock options.
(iii) Grant of Awards
Options may be granted only within the period of 42 days following the approval of the Newco UCSOP by ICAP Shareholders, the dealing day after the day on which Newco makes an announcement of its annual or half-yearly results or on any day on which the board resolves that exceptional circumstances exist which justify the grant of an option. The grant of an option is subject to compliance with the applicable UK regulations regarding market abuse.
(iv) Terms of Awards
Options are not transferable (other than on death). No payment will be required for the grant of an option. Options will not form part of pensionable earnings.
(v) Performance Conditions
Options will be subject to the satisfaction of performance conditions. Options will become exercisable in three equal instalments on each of the third, fourth and fifth anniversaries of grant subject, on each anniversary, to a minimum requirement that the earnings per share must be in excess of growth in the Retail Price Index by at least 9% over the three years from date of grant. Performance conditions may be varied or waived if circumstances exist which cause the board to consider that the condition is no longer appropriate. Any varied or waived performance condition must be considered fair and reasonable by the board.
(vi) Individual Limits
No option may be granted to any individual at any time if, as a result, the aggregate number of Newco Ordinary Shares issued or issuable pursuant to options granted to him under the Newco UCSOP would exceed 1,250,000.
(vii) Overall Limits
The Newco UCSOP is subject to the following overall limits:
Treasury shares will be treated as newly issued for the purpose of these limits.
The exercise price of an option shall be determined by the board and shall not be less than the market value of a Newco Ordinary Share on the last dealing day before grant (or, in the case only of an option to subscribe for Newco Ordinary Shares, the nominal value of a Newco Ordinary Share if higher). In the case of option holders resident in the US, the exercise price of incentive stock options will be the fair market value of the Newco Ordinary Shares on the date of grant of the option if it is higher than the exercise price otherwise determined.
In normal circumstances, an option becomes capable of exercise in three equal instalments, on each of the third, fourth and fifth anniversaries of grant provided that the performance condition to which it is subject has been fulfilled or waived (see above).
Options lapse to the extent that the performance conditions attached to them have not been fulfilled and are incapable of being fulfilled.
An option lapses on the expiry of ten years from its date of grant.
(ix) Cessation of Employment
If a participant dies, an option will become exercisable immediately (notwithstanding that the performance condition has not been met) and will remain exercisable for a period of 12 months from the date of death, after which period it will lapse.
Where a participant ceases employment with the ICAP Group, for whatever reason, an option will lapse immediately unless the board determines otherwise. In that case, the board shall determine the period during which the option may be exercised and the extent to which it may be exercised. If the relevant performance condition has not been met at the date of cessation of employment, the maximum number of shares over which an option may be exercised will be determined by reference to the extent to which the performance condition has been fulfilled over the reduced performance period and will then be pro-rated according to the length of the reduced performance period when compared to the original performance period.
(x) Corporate Events
In the event of a change of control of Newco, options will usually become exercisable for a period of six months. Alternatively, the board may permit participants to exchange options for equivalent options over shares in the acquiring company.
If Newco passes a resolution for a voluntary winding up, any subsisting option must be exercised within six months of the passing of that resolution or it lapses.
(xi) Alterations of Share Capital
In the event of any variation in the share capital of Newco, adjustments to the number of shares subject to options and the exercise price may be made by the board in such manner and with effect from such date as the board may determine to be appropriate.
Until options are exercised, option holders have no voting or other rights in respect of the shares subject to their options.
Shares issued or transferred pursuant to the Newco UCSOP shall rank pari passu in all respects with the shares already in issue except that they will not rank for any dividend or other distribution paid or made by reference to a record date falling prior to the date of exercise of the option.
Options are not assignable or transferable.
The Newco UCSOP will be administered by the board's remuneration committee which may amend the Newco UCSOP at any time. The prior approval of Newco Shareholders in a general meeting will be required for amendments to the advantage of participants, with the exception of minor amendments to benefit the administration of the Newco UCSOP, to take account of legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment, each of which may be made by the board without shareholder approval.
No amendment may be made to the material disadvantage of participants in the Newco UCSOP unless consent is sought from the affected participants and given by a majority of them.
Participation in the Newco UCSOP does not form part of the terms of a participant's contract of employment and participants have no rights in respect of Newco UCSOP benefits.
(xv) Overseas Plans
The board may from time to time and without further formality establish further schemes in overseas territories, any such plan to be similar to the Newco UCSOP but modified to take account of local tax, exchange control or securities laws, regulation or practice. Newco Ordinary Shares made available under any such scheme will count against the limit on the number of new shares which may be issued under the Newco UCSOP.
(xvi) Termination
The Newco UCSOP may be terminated at any time by resolution of the board or of Newco in general meeting and shall in any event terminate on the tenth anniversary of the date on which the Newco UCSOP was adopted. Termination will not affect the outstanding rights of participants.
The Newco UCSOP will be governed in accordance with the laws of England and Wales and the parties submit to the exclusive jurisdiction of the courts of England and Wales.
(i) Eligibility
Any employee (including an executive Director) of Newco or any of its subsidiaries will be eligible to participate in the Newco LTIP at the discretion of the board.
(ii) Form of Awards
Awards under the Newco LTIP may be in the form of Conditional Awards or Cash Awards. Eligible employees may be granted basic awards (which are based on the participant's bonus) and matching awards (which are linked to an underlying basic award but may be forfeited if the participant leaves employment in certain circumstances).
(iii) Grant of Awards
Awards may be granted only within the period of 42 days following the approval of the Newco LTIP by ICAP Shareholders, the dealing day after the day on which Newco makes an announcement of its results for any period, on any day on which the board resolves that exceptional circumstances exist which justify the grant of awards, or on any day on which changes are made to the legislation affecting any discretionary employee share plan.
(iv) Terms of Awards
Awards may be granted over newly issued Newco Ordinary Shares, treasury shares or Newco Ordinary Shares purchased in the market. Awards are not transferable (other than on death). No payment will be required for the grant of an award. Awards will not form part of pensionable earnings.
(v) Dividend Equivalents
The board may determine that the number of Newco Ordinary Shares to which a participant's award relates shall increase to take account of dividends that would have been paid on released Newco Ordinary Shares on such terms as it determines, or that an equivalent amount should be paid in cash.
(vi) Overall Limits
The Newco LTIP is subject to the following overall limits:
Treasury shares will be treated as newly issued for the purpose of these limits until such time as guidelines published by institutional investor representative bodies determine otherwise.
(vii) Vesting of and satisfying awards
The vesting of a Conditional Award is subject to obtaining any necessary approvals or consents from the UK Listing Authority, compliance with applicable UK regulations regarding market abuse and Newco's share dealing policy and any other applicable laws or regulations.
At any time up to 30 days before a Conditional Award vests, the board may decide (due to legislative or administrative reasons) to pay a participant a cash amount equal to the value of the Newco Ordinary Shares he would otherwise have received.
Any Newco Ordinary Shares or cash that are to be issued, transferred or paid (as appropriate) to a participant in respect of a vested award (including a Cash Award) will be issued, transferred or paid (as appropriate) as soon as practicable thereafter.
(viii) Cessation of Employment
If a participant dies, a basic award will vest in full on the date of death. A matching award will vest on the date of death to the extent that the board determines, taking into account the period of time that has elapsed since the award was granted until the date of death as a proportion of the vesting period (unless the board determines otherwise).
If a participant ceases to hold office or employment with the ICAP Group by reason of ill-health, injury, disability, redundancy, retirement with the agreement of their employer, the entity that employs them ceasing to be a member of the ICAP Group, the sale out of the ICAP Group of the business or entity that employs them or for any other reason at the board's discretion, their basic award will vest in full on the date of cessation.
The board will decide the extent to which a matching award vests in these circumstances, taking into account the period between the grant date to the date of cessation of office or employment as a proportion of the vesting period, unless the board determines otherwise. To the extent the matching award will vest, it will continue and vest on the normal vesting date. The remainder will lapse immediately.
If a participant ceases to hold office or employment with the ICAP Group as a result of resignation to join a competitor or in circumstances where Newco would be entitled to terminate the participant's employment, both a basic award and a matching award will lapse on the date that the participant ceases to hold that office or employment.
If a participant ceases to hold office or employment with the ICAP Group in any other circumstances, a basic award will vest in full and a matching award will lapse on the date on which the participant ceases to hold that office or employment, unless otherwise determined by the board.
In the event of a change of control of Newco, unvested basic awards will usually vest in full and the board will determine the extent to which unvested matching awards will vest in these circumstances taking into account the period of time which has elapsed between the grant date and the relevant event as a proportion of the vesting period (unless the board determines otherwise).
Alternatively, the board may permit participants to exchange awards for equivalent awards which relate to Newco Ordinary Shares in a different company. If the board so decides (for example where the change of control is an internal reorganisation), participants will be required to exchange their awards (rather than awards being released).
If other corporate events occur such as a demerger, delisting, special dividend or other event which, in the opinion of the board, may affect the current or future value of Newco Ordinary Shares, the board will determine whether or not unvested awards will vest and, in respect of matching awards, determine to what extent they should vest (taking into account the period of time from the grant date to the date of the relevant event as a proportion of the vesting period, unless it determines otherwise).
In the event of a variation of Newco's share capital or a demerger, special dividend, rights issue or other event, which justifies, in the board's opinion, an adjustment, the number of Newco Ordinary Shares subject to an award may be adjusted.
The board may amend the Newco LTIP or the terms of any award at any time provided that the prior approval of Newco Shareholders in a general meeting will be required for amendments to the advantage of eligible employees or participants relating to eligibility, limits, the basis for determining a participant's entitlement to, and the terms of, the Newco Ordinary Shares or cash comprised in an award and the impact of any variation of capital.
Any minor amendment to benefit the administration of the Newco LTIP, to take into account legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment may be made by the board without shareholder approval.
No amendment may be made to the material disadvantage of participants in the Newco LTIP unless consent is sought from the affected participants and given by a majority of them.
The Newco LTIP will usually terminate on the tenth anniversary of its approval by shareholders, but the rights of existing participants will not be affected by any termination.
Participation in the Newco LTIP does not form part of the terms of a participant's contract of employment and participants have no rights in respect of Newco LTIP benefits.
The Newco LTIP will be governed in accordance with the laws of England and Wales and the parties submit to the exclusive jurisdiction of the courts of England and Wales.
Any employee (including an executive Director) of Newco or any of its subsidiaries will be eligible to participate in the Newco DSBP at the discretion of the board.
(ii) Form of Awards
Awards under the Newco DSBP may be in the form of Conditional Awards, Nil-Cost Options, Restricted Awards or Cash Awards.
(iii) Grant of Awards
Awards may be granted only within the period of 42 days following the approval of the Newco DSBP by ICAP Shareholders, the dealing day after the day on which Newco makes an announcement of its results for any period, or on any day on which the board resolves that exceptional circumstances exist which justify the grant of awards.
An award may be granted only to an employee who has earned a bonus for the financial year immediately preceding the financial year in which the grant date occurs.
Awards will be granted over such number of Newco Ordinary Shares as have (at the grant date) a market value (as determined by the board) equal to the amount of bonus.
(iv) Retention Period
Awards may be granted subject to an additional retention period, which will begin on the vesting date and, unless the board determines otherwise, end six months later.
(v) Terms of Awards
Awards may be granted over newly issued Newco Ordinary Shares, treasury shares or Newco Ordinary Shares purchased in the market. Awards are not transferable (other than on death). No payment will be required for the grant of an award. Awards will not form part of pensionable earnings.
(vi) Dividend Equivalents
Except in respect of Restricted Awards, the board may determine that the number of Newco Ordinary Shares to which a participant's award relates shall be increased to take account of dividends that would have been paid on released Newco Ordinary Shares on such terms as it determines, or that an equivalent amount should be paid in cash.
(vii) Overall Limits
The Newco DSBP is subject to the following overall limits:
Treasury shares will be treated as newly issued for the purpose of these limits until such time as guidelines published by institutional investor representative bodies determine otherwise.
(viii) Reduction for Malus and Clawback
Where, during the period starting on the first day of the financial year to which the bonus relates (or an earlier date, if the board so determines) and ending on the seventh anniversary of the grant date (or such later date as is necessary to comply with any applicable law or regulation), there is:
Where there is an ongoing investigation on the seventh anniversary of the grant date (or such later date as is necessary to comply with any applicable law or regulation), the board may extend this period.
(ix) Vesting, Release and Exercise
If a retention period does not apply to an award it will be released immediately on vesting. If, however, awards are subject to an additional retention period, vested Newco Ordinary Shares will not usually be released to the participant until the end of the retention period. Nil-Cost Options will then normally be exercisable from release until the tenth anniversary of the grant date.
The vesting of a Conditional Award or the exercise of a Nil-Cost Option is subject to obtaining any necessary approvals or consents from the UK Listing Authority, compliance with applicable UK regulations regarding market abuse and Newco's share dealing policy and any other applicable laws or regulations.
At any time before the point at which a Conditional Award has been released, or a Nil-Cost Option has been exercised, the board may decide to pay a participant a cash amount equal to the value of the Newco Ordinary Shares he would otherwise have received.
Any Newco Ordinary Shares or cash to be issued, transferred or paid (as appropriate) to a participant in respect of a vested award or an exercised Nil-Cost Option (including a Cash Award) will be issued, transferred or paid (as appropriate) as soon as practicable thereafter.
(x) Cessation of Employment
If a participant dies, unless the board determines otherwise, an unvested award will vest and be released as soon as reasonably practicable after the date of death. An unvested award will vest to the extent that the board determines, taking into account the period of time that has elapsed since the award was granted until the date of death as a proportion of the vesting period (unless the board determines otherwise). A vested award which has not yet been released will be released on the date of death to the extent vested. A participant's personal representatives will normally have 12 months to exercise any vested Nil-Cost Options.
If a participant ceases to be employed by the ICAP Group by reason of ill-health, injury, disability, or the sale out of the ICAP Group of the business or entity that employs him, or for any other reason at the board's discretion (except where a participant is summarily dismissed) their unvested award will continue until the normal release date.
The board will decide the extent to which an unvested award vests in these circumstances, taking into account the period from the grant date to the date of cessation of employment as a proportion of the vesting period, unless the board determines otherwise.
If a participant ceases to be employed by the ICAP Group in any other circumstances, an award will lapse on the date on which the participant ceases to hold that office or employment.
If a participant ceases to be employed by the ICAP Group during the retention period, their vested award will continue until the normal release date (unless he is summarily dismissed, in which case their award will lapse upon cessation of employment).
Where Nil-Cost Options vest and are released in these circumstances (or they had already been released, but had not been exercised prior to cessation) they will normally be exercisable for a period of twelve months.
(xi) Corporate Events
In the event of a change of control of Newco, awards will usually vest (if unvested), and be released at that time. The board will determine the extent to which an unvested award will vest in these circumstances taking into account the period of time which has elapsed between the grant date and the relevant event as a proportion of the vesting period (unless the board determines otherwise). Nil-Cost Options will then be exercisable for a period of one month.
Alternatively, the board may permit participants to exchange awards for equivalent awards which relate to shares in a different company. If the change of control is an internal reorganisation of the ICAP Group or if the board so decides, participants will be required to exchange their awards (rather than awards being released).
If other corporate events occur such as a winding up of Newco, demerger, delisting, special dividend or other event which, in the opinion of the board, may affect the current or future value of Newco Ordinary Shares, the board will determine whether or not awards will be released and, in respect of unvested awards, determine to what extent they should vest (taking into account the period of time from the grant date to the date of the relevant event as a proportion of the vesting period, unless it determines otherwise). The board will determine in these circumstances the length of time during which awards structured as Nil-Cost Options can then be exercised.
(xii) Adjustments
In the event of a variation of Newco's share capital or a demerger, delisting, special dividend, rights issue or other event, which may, in the board's opinion, affect the current or future value of Newco Ordinary Shares, the number of Newco Ordinary Shares subject to an award may be adjusted.
The board may amend the Newco DSBP or the terms of any award at any time provided that the prior approval of Newco Shareholders in a general meeting will be required for amendments to the advantage of eligible employees or participants relating to eligibility, limits, the basis for determining a participant's entitlement to, and the terms of, the Newco Ordinary Shares or cash comprised in an award and the impact of any variation of capital.
Any minor amendment to benefit the administration of the Newco DSBP, to take into account legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment, may be made by the board without shareholder approval.
No amendment may be made to the material disadvantage of participants in the Newco DSBP unless consent is sought from the affected participants and given by a majority of them.
The Newco DSBP will usually terminate on the tenth anniversary of its approval by shareholders, but the rights of existing participants will not be affected by any termination.
(xiv) Legal Entitlement
Participation in the Newco DSBP does not form part of the terms of a participant's contract of employment and participants have no rights in respect of Newco DSBP benefits.
(xv) Governing Law
The Newco DSBP will be governed in accordance with the laws of England and Wales and the parties submit to the exclusive jurisdiction of the courts of England and Wales.
All employees (including directors working at least 25 hours per week excluding meal breaks) of Newco or any participating member of the ICAP Group who have completed a period of service determined by the board (such period not to exceed five years) and who are UK tax resident are eligible to participate in the Newco Sharesave. The board may at its discretion extend participation to other employees or directors of participating members of the ICAP Group who do not meet these requirements.
(ii) Savings Contract
Participating employees must enter into a Save-As-You-Earn savings contract with an approved savings carrier under which they agree to make monthly contributions from net salary for a period of either three or five years. On maturity of the savings contract, a tax-free bonus is added to the employee's savings. The bonus set by HMRC is currently nil. Monthly savings contributions must be between £5 and £500.
(iii) Grant of Options
Each employee who joins the Newco Sharesave and enters into a savings contract is granted an option to acquire Newco Ordinary Shares. The number of Newco Ordinary Shares under option is equal to that number of Newco Ordinary Shares which may be acquired at the option price with the proceeds of the savings contract (including any bonus) at maturity. The board may impose a limit on the number of Newco Ordinary Share over which options may be granted, in which case applications from employees may be scaled down.
The option price per Newco Ordinary Share will be the market value of a Newco Ordinary Share when invitations to participate in the Newco Sharesave are issued less a discount of up to 20 per cent. (or, in the case of an option to subscribe, the nominal value of a share if higher). Market value is determined as the middle market quotation of a Newco Ordinary Share as derived from the Daily Official List of the London Stock Exchange on the last dealing day before invitations to participate in the Newco Sharesave are sent out.
No option may be granted later than ten years after the approval of the Newco Sharesave.
(iv) Timing of Invitations
Invitations to participate in the Newco Sharesave will be issued only within 28 days after the announcement of Newco's results for any period or within 42 days after (i) the approval of the Newco Sharesave, (ii) the date on which any change to the legislation affecting sharesave schemes takes effect or (iii) the date on which a new savings contract prospectus is announced or takes effect. Invitations may also be issued at any other time where the board determines that exceptional circumstances exist which justify the grant of options.
On any date, no option may be granted under the Newco Sharesave if, as a result, the aggregate number of Newco Ordinary Shares issued or committed to be issued pursuant to grants made under the Newco Sharesave and during the previous 10 years under all employee share schemes established by Newco would exceed 10 per cent. of the issued ordinary share capital of Newco on that date. Newco Ordinary Shares which have been the subject of options or rights granted under any employee share scheme which have lapsed shall not be taken into account for the purposes of this limit. Treasury shares will be treated as newly issued for the purposes of this limit until such time as guidelines published by institutional investor representative bodies determine otherwise.
In normal circumstances, an option may be exercised within six months following the date on which a bonus is payable under the savings contract (the ''Bonus Date'') and any option not exercised within that period will lapse.
An option may be exercised earlier than the Bonus Date, for a limited period, on the death of a participant or on their ceasing to hold office or employment with the ICAP Group by reason of injury, disability, redundancy, retirement, the sale or transfer out of the ICAP Group of their employing company or business or on a participant ceasing to hold employment prior to the Bonus Date but more than three years from the grant date.
(vii) Takeovers and Liquidations
Rights to exercise options early for a limited period also arise if another company acquires control of Newco as a result of a takeover or a scheme of arrangement. An option may be exchanged for an option over shares in the acquiring company if the participant so wishes and the acquiring company agrees.
If Newco passes a resolution for a voluntary winding up, any subsisting option must be exercised within six months of the passing of that resolution or it lapses.
In the event of any variation in the share capital of Newco, adjustments to the number of Newco Ordinary Shares subject to options and the exercise price may be made by the board in such manner and with effect from such date as the board may determine to be appropriate.
Until options are exercised, option holders have no voting or other rights in respect of the Newco Ordinary Shares subject to their options.
Newco Ordinary Shares issued or transferred pursuant to the Newco Sharesave shall rank pari passu in all respects with the Newco Ordinary Shares already in issue except that they will not rank for any dividend or other distribution paid or made by reference to a record date falling prior to the date of exercise of the option. Benefits obtained under the Newco Sharesave shall not be pensionable.
Options are not assignable or transferable.
The Newco Sharesave will be administered by the board's remuneration committee which may amend the Newco Sharesave by resolution provided that prior approval of Newco in general meeting will be required for any amendment to the advantage of participants to those provisions of the Newco Sharesave relating to eligibility, the limitations on the number of Newco Ordinary Shares, cash or other benefits subject to the Newco Sharesave, a participant's maximum entitlement or the basis for determining a participant's entitlement under the Newco
Sharesave and the adjustment thereof in the event of a variation in capital, except in the case of minor amendments to benefit the administration of the Newco Sharesave and amendments to take account of changes in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any member of the ICAP Group.
No amendment may be made which would alter to the disadvantage of a participant any rights already acquired by him under the Newco Sharesave without the prior approval of the majority of the affected participants.
No amendment to any key feature of the Newco Sharesave shall have effect while the Scheme is intended to be a tax-qualifying plan. No cash or other non-share benefits are available under the Newco Sharesave.
(xi) Overseas Plans
The board may from time to time and without further formality establish further schemes in overseas territories, any such plan to be similar to the Newco Sharesave but modified to take account of local tax, exchange control or securities laws, regulation or practice. Newco Ordinary Shares made available under any such scheme will count against the limit on the number of new Newco Ordinary Shares which may be issued under the Newco Sharesave.
(xii) Termination
The Newco Sharesave may be terminated at any time by resolution of the board or of Newco in general meeting and shall in any event terminate on the tenth anniversary of the date on which the Newco Sharesave was adopted. Termination will not affect the outstanding rights of participants.
(g) ICAP Employee Share Plans
No new options or awards will be granted under the ICAP Employee Share Plans once the Scheme becomes effective. The ICAP Employee Share Plans will continue in effect only as follows:
From 31 March 2015 up to and including 26 February 2016 (the latest practicable date prior to publication of this document), the Company has not entered into any material transaction with related parties save as disclosed in note 29 to the Company's audited consolidated financial statements for the year ended 31 March 2015.
(a) Material contracts of the Retained Group
The following are all of the contracts (not being contracts entered into in the ordinary course of business) which have been entered into by ICAP and/or members of the Retained Group within the two years immediately preceding the date of this document and are, or may be, material to the Retained Group or which have been entered into at any time by ICAP or any member of the Retained Group and contain any provisions under which ICAP or any member of the Retained Group has any obligation or entitlement which is, or may be, material to the Retained Group as at 26 February 2016 (the latest practicable date prior to publication of this document):
ICAP and Tullett Prebon entered into the Sale and Purchase Agreement dated 11 November 2015 governing the terms and conditions of the Transaction. Please refer to paragraph 1 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' for an overview of the key provisions of the Sale and Purchase Agreement.
ICAP Group Holdings plc entered into a £425,000,000 multicurrency revolving credit facility (the ''RCF'') (incorporating an up to US\$200,000,000 swingline (the ''Swingline'') including an up to US\$75,000,000 fronted swingline (the ''Fronted Swingline'')) dated 18 June 2013 as amended and restated by an amendment and restatement agreement (the ''ARA'') on 11 November 2015 and as further amended by an amendment request letter dated 3 December 2015 (as acknowledged and agreed by J.P. Morgan Europe Limited as facility agent on 10 December 2015) and entered into between, amongst others, ICAP Group Holdings plc as the company and J.P. Morgan Europe Limited as facility agent (the ''Facility Agreement'').
(A) Purpose
The RCF is made available for: (i) ICAP Group's general corporate and working capital purposes; (ii) repaying any loan made available under the Swingline; (iii) financing any acquisition that is permitted under the Facility Agreement (including any associated fees, costs and expenses); and (iv) refinancing amounts outstanding under an existing credit agreement.
(B) Interest and fees
The rate of interest payable on borrowings under the RCF is the aggregate of LIBOR (or, in relation to any loan denominated in euro, EURIBOR) and the applicable margin. ICAP Group Holdings plc may select interest periods for each loan made available under the RCF (an ''RCF Loan'') of one week, one, two, three or six months or any other period agreed with the lenders who will have a share in that RCF Loan.
The rate of interest payable on each loan made available under the Swingline or the Fronted Swingline (each a ''Swingline Loan'' or a ''Fronted Swingline Loan'') for each day is the applicable margin plus the rate per annum determined by the swingline agent or the fronted swingline agent (as applicable) to be the federal funds rate (the rate per annum at which US Dollar deposits with an overnight maturity and in comparable principal amount to the relevant Swingline Loan or Fronted Swingline Loan are offered (or would be offered) by the swingline agent or the fronted swingline agent (as applicable) in the federal funds market on the relevant day). ICAP Group Holdings plc may select the interest period for a Swingline Loan in the relevant utilisation request for that loan for a period of up to five New York Business Days. An interest period for a Fronted Swingline Loan is one New York Business Day.
Certain fees and expenses, including, facility agent's fee, participation fee, arrangement fee, commitment fee, utilisation fee and fronted swingline lender fees are also payable.
(C) Repayment
Each loan made under the RCF, Swingline and Fronted Swingline is repayable on the last day of its interest period but, subject to the terms of the Facility Agreement, may be reborrowed.
(D) Mandatory and voluntary prepayment
The Facility Agreement allows for voluntary prepayments and requires mandatory prepayments in full in certain circumstances, including on a change of control of ICAP (or following the anticipated reorganisation, Newco).
(E) Representations, warranties and undertakings
The Facility Agreement contains certain customary representations and warranties.
It requires ICAP Group Holdings plc (and its subsidiaries) to comply with certain negative covenants, including covenants relating to creation of security, financial indebtedness, disposals, acquisitions and change in business. Such negative covenants were amended by the ARA to permit the various steps that need to be undertaken in respect of the Transaction.
The Facility Agreement also requires ICAP Group Holdings plc to maintain specified financial ratios in relation to consolidated total gross debt to consolidated EBITDA and consolidated EBITDA to consolidated finance charges.
In addition, ICAP Group Holdings plc must ensure that the aggregate consolidated EBITDA of ICAP Group Holdings plc and any guarantors of the facility is greater than or equal to 85 per cent. of ICAP Group's consolidated EBITDA at the end of each measurement period. This obligation ceases to apply if ICAP accedes as, and remains, an additional guarantor in accordance with the terms of the Facility Agreement.
The Facility Agreement also contains certain customary positive undertakings including, amongst others, undertakings in relation to delivery of financial statements, compliance with laws, insuring the business and assets and pari passu ranking. In addition, ICAP Group Holdings plc must procure that, on or before the date falling 15 Business Days after the date of Initial Completion, the IGBHL Debt is repaid in full.
(F) Final maturity
The final date of the Facility Agreement is 31 March 2018 (the ''Final Maturity Date''). ICAP Group Holdings plc may request following the completion of the Transaction that the Final Maturity Date be extended to the date which is 12 months after the Final Maturity Date. The extension of the Final Maturity Date shall be in the sole discretion of each lender.
(G) Events of default
The Facility Agreement contains certain customary events of default including, amongst others, events relating to failure to pay, misrepresentation, cross default, breach of financial covenants, insolvency, insolvency proceedings and material adverse change. Customary materiality tests, carve-outs and grace periods also apply.
Upon the occurrence of an event of default that is not remedied or waived, the facility agent may (and must if so instructed by the majority lenders) cancel the available facility, may declare all outstanding payments immediately due and payable and/or payable on demand by the facility agent acting on the instructions of the majority lenders.
Following Completion, the total commitments under the RCF will automatically reduce by £125,000,000 to £300,000,000. Each lender's commitment in relation to the RCF shall be reduced rateably. The Swingline and the Fronted Swingline shall remain unchanged.
On 31 July 2012, ICAP issued GBP 125,000,000 Notes due 31 July 2018 (the ''2018 Notes'') with a 5.5 per cent. initial rate of interest. The 2018 Notes are unconditionally and irrevocably guaranteed by ICAP Group Holdings plc for as long as ICAP Group Holdings plc has any outstanding Financial Indebtedness (as defined in the conditions of the 2018 Notes).
On issue, the 2018 Notes were rated as Baa2 by Moody's Investors Service Ltd. (''Moody's'') and BBB+ by Fitch Ratings Limited (''Fitch''), and in the event that there is a decrease in the ratings of the 2018 Notes to below Baa3, in the case of Moody's, or below BBB, in the case of Fitch, the initial 5.5 per cent. rate of interest shall be subject to a 1.25 per cent. increase (the ''Step-up Margin''). On any subsequent announcement by both Moody's and Fitch of an increase in the ratings of the 2018 Notes to at least BBB, in the case of Fitch, and Baa3 in the case of Moody's, the Step-up Margin will cease to apply.
If a Change of Control (as defined in the conditions of the 2018 Notes) occurs in relation to ICAP, and this Change of Control results in a downgrade in the credit rating assigned to the 2018 Notes to below BBB (in the case of Fitch) or Baa3 (in the case of Moody's), the noteholders will have the option to require ICAP to redeem or repurchase their Notes at their aggregate nominal amount, together with accrued interest.
Unless previously purchased, redeemed or cancelled, the 2018 Notes shall be redeemed on 31 July 2018 at 100 per cent. of their nominal amount (together with accrued interest).
Pursuant to the terms of the subscription agreement relating to the initial offering and distribution of the 2018 Notes, ICAP and ICAP Group Holdings plc have agreed to indemnify the underwriters in respect of certain losses which may arise in connection with the initial subscription and placement of the 2018 Notes. Pursuant to the terms of the trust deed constituting the 2018 Notes, ICAP and ICAP Group Holdings plc have also agreed to indemnify BNY Mellon Corporate Trustee Services Limited in respect of certain losses which may arise as a result of it acting as trustee for the 2018 Notes.
On 6 March 2014, ICAP Group Holdings plc issued EUR 350,000,000 3.125 per cent. Fixed Rate Notes due 2019 (the ''2019 Notes'').
On issue, the 2019 Notes were rated as Baa2 by Moody's and BBB by Fitch and in the event that there is a decrease in the ratings of the 2019 Notes to below Baa3, in the case of Moody's, or below BBB, in the case of Fitch, the Step-up Margin shall be applied to the initial 3.125 per cent. rate of interest. On any subsequent announcement by both Moody's and Fitch of an increase in the ratings of the 2019 Notes to at least BBB, in the case of Fitch, and Baa3 in the case of Moody's, the Step-up Margin will cease to apply.
If a Change of Control (as defined in the conditions of the 2019 Notes) occurs in relation to ICAP, and this Change of Control results in a downgrade in the credit rating assigned to the 2019 Notes to below BBB (in the case of Fitch) or Baa3 (in the case of Moody's), the Noteholders will have the option to require ICAP Group Holdings plc to redeem or repurchase their Notes at their aggregate nominal amount, together with accrued interest.
Unless previously purchased, redeemed or cancelled, the 2019 Notes shall be redeemed on 31 March 2018 at 100 per cent. of their nominal amount (together with accrued interest).
Pursuant to the terms of the subscription agreement relating to the initial offering and distribution of the 2019 Notes, ICAP Group Holdings plc has agreed to indemnify the underwriters in respect of certain losses which may arise in connection with the initial subscription and placement of the 2019 Notes. Pursuant to the terms of the trust deed constituting the 2019 Notes, ICAP and ICAP Group Holdings plc have also agreed to indemnify BNY Mellon Corporate Trustee Services Limited in respect of certain losses which may arise as a result of it acting as trustee for the 2019 Notes.
On 30 May 2013, ICAP issued EUR 15,000,000 4.30 per cent. Fixed Rate Notes due 2023 (the ''2023 Notes''). The 2023 Notes are unconditionally and irrevocably guaranteed by ICAP Group Holdings plc for as long as ICAP Group Holdings plc has any outstanding Financial Indebtedness (as defined in the conditions of the 2023 Notes).
If a Change of Control (as defined in the conditions of the 2023 Notes) occurs in relation to ICAP, and this Change of Control results in a downgrade in the credit rating assigned to the 2023 Notes to below BBB (in the case of Fitch) or Baa3 (in the case of Moody's), the Noteholders will have the option to require ICAP to redeem or repurchase their Notes at their aggregate nominal amount, together with accrued interest.
Unless previously purchased, redeemed or cancelled, the 2023 Notes shall be redeemed on 30 May 2023 at 100 per cent. of their nominal amount (together with accrued interest).
Pursuant to the terms of the subscription agreement relating to the initial offering and distribution of the 2023 Notes, ICAP and ICAP Group Holdings plc have agreed to indemnify the underwriters in respect of certain losses which may arise in connection with the initial subscription and placement of the 2023 Notes. Pursuant to the terms of the trust deed constituting the 2023 Notes, ICAP and ICAP Group Holdings plc have also agreed to indemnify BNY Mellon Corporate Trustee Services Limited in respect of certain losses which may arise as a result of it acting as trustee for the 2023 Notes.
On Option Completion, as a result of the issue of New Tullett Prebon Shares to Newco, Newco will hold 19.9 per cent. of the issued share capital of Enlarged Tullett Prebon. The Relationship Agreement will be entered into between Tullett Prebon and Newco on Initial Completion, effective from the Tullett Prebon Admission, to govern the relationship between Tullett Prebon and Newco as a shareholder of Enlarged Tullett Prebon following Completion. The principal purpose of the Relationship Agreement is to ensure that Enlarged Tullett Prebon is capable of carrying on its business independently of Newco and its associates. The Relationship Agreement contains customary terms and conditions, including those set out below.
Please refer to paragraph 2 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' for an overview of the key provisions of the Relationship Agreement.
On or before Initial Completion, IGBB and ICAP will enter into two Transitional Services Agreements pursuant to which (i) ICAP will provide IGBB with the use of or access to certain resources that will be retained by the Retained Group as at Initial Completion (the ''Transitional Services Agreement'' or ''TSA''), and (ii) IGBB will provide the Retained Group with the use of or access to certain resources that will be owned or controlled by IGBB as at Initial Completion (the ''Reverse Transitional Services Agreement'' or ''RTSA'').
Please refer to paragraph 3 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' for an overview of the key provisions of the Transitional Services Agreement and the Reverse Transitional Services Agreement.
(viii) Tax Deed
On Initial Completion, a Tax Deed will be entered into pursuant to which Newco will indemnify Tullett Prebon for any tax liabilities of IGBHL and its subsidiaries relating to the period on or before Initial Completion (grossed up for any tax thereon). The indemnity to be provided by Newco would be subject to certain exclusions and financial limits. The financial limits are a de minimis of £500,000, a threshold of £10 million (where the whole amount is payable when the threshold has been exceeded), and an overall cap of £300 million (subject to certain adjustments) which applies to the aggregate of claims under the Tax Deed and warranty claims by Tullett Prebon under the Sale and Purchase Agreement.
If the completion balance sheet overprovides for tax, Newco will be entitled to benefit of the overprovision, but only by way of set-off/repayment of amounts owing/paid under the Tax Deed or in respect of tax-related warranties. Similar principles apply to tax refunds and tax benefits that only arise as a result of a matter that gives rise to a claim under the Tax Deed.
Tullett Prebon will indemnify Newco for secondary tax liabilities falling on the ICAP Group, where the Tullett Prebon Group has the primary liability for such tax (excluding tax for which Newco indemnifies Tullett Prebon under the Tax Deed).
The Tax Deed also provides that Tullett Prebon will generally be responsible for pre-completion tax affairs of IGBHL and its subsidiaries (such as the filing of returns). Newco is entitled to take the conduct of matters that have the potential to give rise to a liability of Newco under the Tax Deed.
As at 26 February 2016 (the last practicable date prior to publication of this document), there is no contract which has been entered into by any member of the IGBB Group within the two years immediately preceding the date of this document which is, or may be, material to the IGBB Group or any member of the IGBB Group nor is there any contract which contains any provisions under which such member of the IGBB Group has any obligation or entitlement which is, or may be, material to the IGBB Group.
Save as disclosed below, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Retained Group is aware) during the year preceding the date of this document which may have, or have had in the recent past, significant effects on the financial position or profitability of the Retained Group.
The CFTC and other government agencies have requested information from the ICAP Group in relation to the setting of the US dollar segment of a benchmark known as ISDA Fix. ICAP continues to cooperate with the agencies' inquiries into the setting of that rate. ICAP Capital Markets LLC was the collection agent for ISDA Fix panel bank submissions in US dollars, but was not a panel member itself. It is not possible to predict the ultimate outcome of this investigation or to provide an estimate of any potential financial impact.
Subsequently, in September and October 2014, five class actions were filed alleging injury due to purported manipulation of the USD ISDA Fix rate. ICAP Capital Markets LLC is a defendant in those actions along with several ISDA Fix panel banks. The cases were filed in the US District Court in the Southern District of New York and have been consolidated into a single case. The defendants filed a motion to dismiss the complaint for failure to state a claim, and the parties are awaiting a decision on the motion.
It is intended that any liability arising as a result of the ISDA Fix investigation or the resulting litigation or class actions will be retained by the ICAP Group. Although ICAP Capital Markets LLC is a principal trading subsidiary of IGBB, in order that any liability relating to the ISDA Fix investigation is retained by the ICAP Group, under the terms of the Transaction, the business of ICAP Capital Markets LLC (excluding any liability relating to the ISDA Fix investigation) will be transferred to another subsidiary of IGBHL prior to Completion. The legal entity ICAP Capital Markets LLC will then be retained by the ICAP Group as it will not be a subsidiary of IGBB at Completion and, therefore, will not be acquired by Tullett Prebon. Under the terms of the Sale and Purchase Agreement, Tullett Prebon also has the benefit of an indemnity for any liability on any member of the Enlarged Tullett Prebon Group arising out of ISDA Fix.
Save as set out below, there are no government, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the previous 12 months which may have, or have had in the recent past, significant effects on the financial position or profitability of IGBB.
dismissed the plaintiff's antitrust and unjust enrichment claims, but upheld the plaintiff's claim for purported manipulation under the Commodity Exchange Act. ICAP was subsequently dismissed from the litigation for lack of personal jurisdiction in March 2015. The Court issued an order permitting the plaintiff to add new defendants to the action, including IEL. The plaintiff filed a new amended complaint on 18 December 2015 which went beyond what the Court permitted, and that complaint was subsequently struck by the Court on 8 January 2016. The plaintiff was then required to submit a request to the Court proposing amendments to the complaint and the Defendants were permitted to respond to that request. On 19 February 2016, the Court issued an order denying certain proposed amendments as futile and permitting other portions of the amendments to be filed. Once the plaintiff files the amended complaint, IEL will file a motion to dismiss. Other plaintiffs have filed a related complaint, which includes IEL and ICAP as defendants, also alleging injury as a result of the purported manipulation of Yen LIBOR and/or Euroyen TIBOR by panel banks and interdealer brokers. Plaintiffs amended their complaint on 18 December 2015. Defendants, including ICAP and IEL, filed motions to dismiss for lack of personal jurisdiction, lack of subject matter jurisdiction and failure to state a claim on 1 February 2016. A conference is scheduled before the Court for 7 April 2016 to address a motion filed by plaintiffs seeking preliminary approval of settlements reached with two defendants and conditional certification of a settlement class of plaintiffs. Conferences are currently scheduled before the Court for 14 April 2016 and 5 May 2016 to discuss the motions and status for both cases.
class action, the legal entity ICAP Capital Markets LLC and the liability relating to this class action will be retained by the Retained Group following Completion.
(ix) From time to time the ICAP Group is engaged in litigation in relation to a variety of matters that relate to IGBB, and is also frequently required to provide information to regulators and other government agencies as part of informal and formal inquiries or market reviews. It is not possible to determine the final outcome of these litigations or to provide an estimate of any potential liabilities, but currently there are none that are expected to have a significant effect on IGBB's financial position or profitability.
It is expected that the litigation disclosed in paragraphs (ii) to (vi) will be retained by the entities to which they relate and will transfer to the Enlarged Tullett Prebon Group on Completion. However, the Tullett Prebon Group has the benefit of an indemnity from ICAP in respect of certain known regulatory, litigation and employment claims (in each case subject to certain limitations), including those disclosed in paragraphs (iii) to (vi).
Save for the 10% decrease in revenue on a constant currency basis within the Electronic Markets division, which was partially offset by a 8% increase in revenue on a constant currency basis from the Post Trade Risk and Information division, as described in the Q3 trading statement set out in Paragraph 11 of Part 1 of this document, there has been no significant change in the financial or trading position of the Retained Group since 30 September 2015, the date to which ICAP's last unaudited interim financial information was prepared.
Save for the 5% decrease in IGBB revenue from continuing businesses on a constant currency basis as described in the Q3 trading statement set out in paragraph 11 of Part I of this document, there has been no significant change in the financial or trading position of the IGBB Group since 30 September 2015, the date to which the unaudited financial information on the IGBB Group presented in Part V ''Financial Information of IGBB'' of this document was prepared.
ICAP is of the opinion that, taking into account the bank and other facilities available to the Retained Group, the working capital available to the Retained Group is sufficient for its present requirements, that is, for at least the next 12 months from the date of this document.
Each of J.P. Morgan Cazenove and Evercore has given and has not withdrawn its written consent to the inclusion in this document of references to its name in the form and context in which the name appears.
PwC has given and has not withdrawn its written consent to the inclusion of its report on the unaudited pro forma financial information set out in Section B of Part VII ''Unaudited Pro Forma Financial Information of the Retained Group'' of this document in the form and context in which it is included.
Copies of the following documents will be available for inspection, during usual business hours on any Business Day at the offices of Clifford Chance LLP, 10 Upper Bank Street, London E14 5JJ and at the registered office of ICAP at 2 Broadgate, London EC2M 7UR, from the date of this document up to and including the date of the General Meeting:
The following information on Tullett Prebon has been prepared and presented on the assumption that the Demerger takes effect and ICAP Shareholders hold shares in Enlarged Tullett Prebon. This information, including statements in relation to the intentions and beliefs of Tullett Prebon, the Tullett Prebon board and the Tullett Prebon directors have been accurately reproduced (save for adapting the defined terms used in the Tullett Prebon Prospectus to the defined terms used in this document) from the Tullett Prebon Prospectus and, so far as ICAP is aware, no facts have been omitted which would render the reproduced information inaccurate or misleading. Unless otherwise stated, such information has not been audited.
Further information on Tullett Prebon will be published in the Tullett Prebon Prospectus which is expected to be made available on or around 1 March 2016 for information purposes on Tullett Prebon's website at www.tullettprebon.com and via ICAP's website at www.icap.com.
The Tullett Prebon Group's business involves the provision of broking services to counterparties operating in the world's major wholesale OTC and exchange traded financial and commodity markets. As an intermediary, the Tullett Prebon Group provides a valuable service to its clients through its ability to create liquidity through price and volume discovery to facilitate trading, and to provide anonymity and confidentiality for counterparties.
The business offers broking services in five major product groups: fixed income securities and their derivatives; interest rate derivatives; treasury products; equities; and energy.
The Tullett Prebon Group's broking business is conducted through voice-broking, where brokers, supported by proprietary screens displaying historical data, analytics and real-time prices, discover price and liquidity for their clients; and through electronic platforms.
The business brokers trades on either a name passing (also known as ''name give-up'') basis (where all counterparties to a transaction settle directly with each other), a matched principal basis (where the Tullett Prebon Group is a counterparty to both sides of a matching trade), or an executing broker basis (where the Tullett Prebon Group executes transactions on certain regulated exchanges in accordance with client orders and then 'gives-up' the trade to the relevant client or its clearing member). The Tullett Prebon Group does not take any proprietary positions.
The Tullett Prebon Group also has an established information sales business (''Tullett Prebon Information Sales Business''), which collects, cleanses, collates and distributes real-time information to data providers, and a risk management services business (''Tullett Prebon Risk Management Services Business''), which provides clients with post-trade, multi-product matching services.
The Tullett Prebon Group operates in Europe, the Middle East, Africa, North and South America and Asia Pacific. Its principal offices are in London, New York, New Jersey, Singapore, Hong Kong and Tokyo.
The Tullett Prebon Group can trace its roots back to 1868 when Marshall & Son was established as an exchange brokerage company. The Marshall family remained in active control of the business, which was renamed M.W. Marshall and Co., through to 1967. During the 1970s and 1980s the business, along with a number of other independent broking houses, was consolidated by Mercantile House Holdings. In 1999, the M.W. Marshall business merged with Prebon Yamane to form Prebon Marshall Yamane.
In 2003, Collins Stewart Holdings plc, a financial services group whose principal activities were institutional and private client stock broking and wealth management, acquired Tullett plc, and the enlarged business was renamed Collins Stewart Tullett plc. Tullett plc was originally founded as Tullett & Riley in 1971. The Tullett business merged with Liberty Brokerage in 1999 and was renamed Tullett Liberty in 2000.
In 2004, Collins Stewart Tullett plc acquired Prebon Marshall Yamane and integrated the two interdealer broker businesses to form Tullett Prebon.
In 2006, through a court approved scheme of arrangement, Collins Stewart Tullett plc formed a new parent company, Tullett Prebon, which acquired Collins Stewart Tullett plc and demerged the stock broking and wealth management business to form a separate listed company, Collins Stewart plc. The demerger was effective on 19 December 2006 when Tullett Prebon became the listed parent of the interdealer broker business.
Since December 2006, Tullett Prebon has continued to acquire businesses to extend its product and geographic coverage, including the oil products brokers Primex and Aspen, both based in London, in 2008, Conven¸cao, an interdealer broker based in Brazil, in 2011, and Chapdelaine & Co., a New York ˜ based municipal bonds broker, in 2012.
Tullett Prebon completed the acquisition of PVM Oil Associates Limited and its subsidiaries (''PVM''), a leading independent broker of oil instruments, in November 2014. PVM, which is focused entirely on energy products, has increased the scale of the Tullett Prebon Group's activities in the energy sector, particularly in Europe, and gives the Tullett Prebon Group a significant presence in broking crude oil and petroleum products, complementing its existing activities in these areas. Crude oil is the world's most actively traded commodity.
During 2015, Tullett Prebon has expanded its broking activities in North America through the acquisition in January of 40 brokers from Murphy & Durieu, a New York based interdealer broker in a wide range of fixed income products, and through the acquisition in July of MOAB, a leading independent broker of physical and financial instruments in the energy markets.
The Tullett Prebon Group's strategy is to continue to develop its business, operating as an intermediary in the wholesale OTC and exchange-traded financial and commodity markets, with the scale and breadth to deliver superior performance and returns, underpinned by strong financial management disciplines, and without actively taking credit and market risk.
Tullett Prebon's goal is to become the world's most trusted source of liquidity in hybrid OTC markets and the world's best operator in global hybrid voice-broking.
In order to deliver this strategy the Tullett Prebon Group will aim:
Following the conclusion of the global strategic review in the first half of 2015, Tullett Prebon announced the launch of ten key initiatives (the ''Tullett Prebon Ten Arrows Initiatives'') each of which has a number of projects and work streams which are designed to optimise the existing business and to pursue opportunities to add new high quality revenue and earnings to the Tullett Prebon Group.
The first four arrows of the Tullett Prebon Ten Arrows Initiatives are focused on building revenue in the most attractive areas of the Tullett Prebon Group's markets. The Tullett Prebon Group will:
(2) seek to continue to build the business's activities in energy and commodities;
(3) look to extend the business's broking offering to service clients who have not traditionally been served by the interdealer brokers in those products where the market is receptive to a broadening of the client base; and
The remainder of the Tullett Prebon Ten Arrows Initiatives are focused on improving the functions in the business that support the revenue generating divisions. The Tullett Prebon Group will:
The Tullett Prebon Group's business model is based on generating a return from providing a facilitation service to clients, enabling them to trade efficiently and effectively. This service can be provided without actively taking credit and market risk.
In accordance with the risk appetite set by Tullett Prebon's board of directors, the Tullett Prebon Group is willing to accept a limited exposure to certain risks as a consequence of its activities, primarily to counterparty credit risk and operational risk, and also to a limited amount of market risk. This is reflected in the business model adopted by the Tullett Prebon Group whereby it acts only as an intermediary in the financial markets. The Tullett Prebon Group's risk management policies explicitly prohibit any active taking of trading risk and the Tullett Prebon Group does not trade for its own account. The Tullett Prebon Group's operational risks include the risk of business disruption, employee error and the failure of a business process or IT system, as well as the risk of litigation.
The broking business of the Tullett Prebon Group is conducted through three distinct models: the name passing model (also known as ''name give-up''); the matched principal model; and the executing broker model.
Around 75 per cent. of the Tullett Prebon Group's broking revenue is derived from name passing activities, where the Tullett Prebon Group is not a counterparty to the trade, and where its exposure to a client is limited to outstanding invoices for commission. Almost all of the Tullett Prebon Group's activities in derivatives, such as forward FX, FX options, interest rate swaps, interest rate options, credit derivatives, and the vast majority of the energy and commodities activities are conducted under the name passing model. The level of invoiced receivables is monitored closely, by individual clients and in aggregate, and there have been very few instances in the past few years when invoiced receivables have not been collected.
Around 20 per cent. of the Tullett Prebon Group's broking revenue is derived from matched principal activities, where the Tullett Prebon Group is the counterparty to both sides of a matching trade. The vast majority of the Tullett Prebon Group's activities conducted under the matched principal model are in government and agency bonds, municipal bonds, mortgage backed securities, and corporate bonds. The Tullet Prebon Group bears the risk of counterparty default during the period between execution and settlement of the trade. In the event of a counterparty default prior to settlement in a matched principal trade, the Tullett Prebon Group's exposure is not to the trade date value of the underlying instrument, but to the movement in that value between trade date and the date of default, and so the Tullett Prebon Group's exposure becomes a market risk. This risk is mitigated by the use of central counterparty services and other default risk transfer agreements, where appropriate, and by taking swift action to close out any position that arises as a result of a counterparty default. The Tullett Prebon Group does undertake, under strict controls, a limited amount of matched principal broking where a counterparty is buying its own securities, and in these circumstances in the event of that counterparty defaulting prior to settlement the risk of loss due to movement in the value of the underlying instrument is heightened. To mitigate settlement risk the Tullett Prebon Group's risk management policies require that transactions are undertaken on a strict delivery-versus-payment basis. The Tullett Prebon Group's matched principal activity also gives rise to limited market risk as a result of the infrequent residual balances which result from the Tullett Prebon Group's failure to match clients' orders precisely or through broker error. The Tullett Prebon Group's matched principal activities give rise to liquidity risk as the settlement agents and central counterparty services used by the Tullet Prebon Group can call for increased cash collateral or margin deposits at short notice and the Tullett Prebon Group may be required to fund a purchase of a security before the delivery of that security on to the Tullett Prebon Group's matching counterparty. Once a matched principal transaction has settled (usually 1-3 days after trade date), there is no on-going risk for the business.
Around 5 per cent. of the Tullett Prebon Group's broking revenue is derived from the business operating as an executing broker, where the Tullett Prebon Group executes transactions on certain regulated exchanges as per client orders, and then 'gives-up' the trade to the relevant client (or its clearing member). The majority of the Tullett Prebon Group's revenue generated under the executing broker model relates to listed equity derivatives and listed interest rate futures and options on futures. The Tullett Prebon Group is exposed to short term pre-settlement risk during the period between the execution of the trade and the client claiming the trade. This exposure is minimal, as under the terms of the 'give-up' agreements the Tullett Prebon Group has in place with its clients, trades must be claimed by the end of the trade day. The Tullett Prebon Group is also exposed to some liquidity risk as exchanges and clearers may require additional cash collateral or margin deposits at short notice if trades have not been claimed. Once the trade has been claimed, the Tullett Prebon Group's only exposure to the client is for the invoiced commission receivable.
The directors of Tullett Prebon believe that the principal strengths of the Tullett Prebon Group are:
The business provides a valuable service to clients through its ability to create liquidity through price and volume discovery to facilitate trading in a wide range of financial instruments. The business employs experienced brokers with established relationships with potential counterparties in the wholesale financial markets, who work to bring together buyers and sellers of financial instruments to provide depth of liquidity and increased certainty of trading. The quality of the broking service the business provides to clients has been recognised by the Tullett Prebon Group being voted number one in more product categories than any other single interdealer broker in Risk Magazine's annual interdealer rankings in each of the years 2010 to 2014. In Risk magazine's annual interdealer rankings published in September 2015, the Tullett Prebon Group was voted the number one overall interdealer broker in currency, and the business also performed strongly in rates and equities. The Tullett Prebon Group was named Interest Rates Broker of the Year and SEF of the Year in the 2015 Global Capital awards, and was voted the top broker in FX options in the 2015 FX Week Best Bank Awards.
The Tullett Prebon Group has broking expertise in all the main financial asset classes that are traded in the OTC markets, and also has a significant presence in broking physical commodities and related financial instruments. The Tullett Prebon Group is a member of the major derivatives exchanges and offers broking services in listed, exchange traded, derivatives. As markets evolve and new financial instruments are introduced the Tullett Prebon Group has been able to adapt its broking offering to facilitate client trading activity in those instruments. The group has a presence in all of the world's major financial centres and has continued to expand its geographic footprint by establishing local offices in smaller and emerging financial centres including Dubai, Madrid, Geneva, Johannesburg, Sao Paulo and Mexico City, which facilitates the development of broking services tailored to specific markets.
The Tullett Prebon Group's brokers discover price and liquidity for their clients through voice-broking and through electronic platforms which complement and support the voice-broking activity. The Tullett Prebon Group has developed electronic platforms to provide clients with a variety of execution methods to offer the flexibility to transact either entirely electronically or via the business's comprehensive voice execution broker network. This hybrid model is consistent with the nature and operation of the majority of the OTC product markets which depend upon the intervention and support of voice brokers for their liquidity and effective operation. The Tullett Prebon Group has launched a wide range of platforms across the various asset classes reflecting market demand and changing regulatory requirements. Tullett Prebon believes that these regulatory reforms and the introduction of more electronic platforms to service these markets reflect an evolution of the facilitation service that the business provides. As a result of the investment that has been made in these platforms and associated infrastructure, the directors believe that the Tullett Prebon Group is well positioned to respond to and benefit from changes in the way in which OTC product markets operate as a result of the regulatory reforms of these markets.
The Tullett Prebon Group's business model is based on generating a return from providing a facilitation service to clients, enabling them to trade efficiently and effectively. This service can be provided without actively taking credit and market risk. The business does not take trading risk and does not hold proprietary trading positions. The Tullett Prebon Group's exposure to market risk is only in relation to incidental positions in financial instruments as a result of the business's failure to match clients' orders precisely or through broker error. The Tullett Prebon Group's risk management policies are designed to reduce the likelihood of such trade mismatches and the Tullett Prebon Group's policy is to close out such balances immediately. As the Tullett Prebon Group does not hold proprietary trading positions, the Tullett Prebon Group's exposure to credit risk is principally counterparty credit risk as opposed to issuer risk. The majority of the Tullett Prebon Group's revenue is derived from name passing broking where the Tullett Prebon Group's exposure to credit risk is limited to the client failing to pay the brokerage commission charged. The Tullett Prebon Group's exposure to credit risk from its matched principal and executing broker activities is very short term in nature (generally up to three days) and the risk is contingent in nature; in the event of client default the Tullett Prebon Group would only suffer loss if the value of the underlying financial instrument had moved adversely in that time. The Tullett Prebon Group's exposure to matched principal settlement risk is minimal as the Tullett Prebon Group seeks always to effect settlement on a delivery-versus-payment basis.
The Tullett Prebon Information Services Business, which provides valuable market data through the major data vendors and directly to customers, is an award-winning provider of high quality independent price information and data from the global OTC markets. The business has been awarded the title of Best Data Provider (Broker) at the Inside Market Data Awards for the last five years.
The business has strong cash flow generation, converting 88 per cent. of its underlying operating profit into operating cash flow over the four years from 2012 to 2015. The Tullett Prebon Group is conservatively financed, and has an investment grade credit rating from Fitch of ''BBB''. The Tullett Prebon Group's gross debt of £221.1 million is all in the form of fixed rate sterling bonds. The Tullett Prebon Group manages its day to day liquidity through holding significant cash balances and other financial assets, and through various credit and settlement significant cash balances and other financial assets, and through various credit and settlement facilities provided by the Tullett Prebon Group's bankers and settlement agents. The Tullett Prebon Group's cash, cash equivalents and short term financial assets as at 31 December 2015 totalled £379.2 million. The Tullett Prebon Group has a committed revolving credit facility of £250 million which matures in April 2018, which remains undrawn.
The principal purpose of Tullett Prebon is to act as a parent undertaking for the Tullett Prebon Group. The Tullett Prebon Group operates through a number of subsidiaries.
All principal subsidiaries of the Tullett Prebon Group are wholly owned by Tullett Prebon. The principal trading subsidiary undertakings, principal intermediate holding companies and associates of the Tullett Prebon Group are set out in Note 37 to the consolidated financial statements of Tullett Prebon for the year ended 31 December 2014.
The Tullett Prebon Group is financed through shareholders' equity and debt.
The Tullett Prebon Group seeks to ensure that it has access to an appropriate level of cash, marketable securities and facilities to enable it to finance its on-going operations on cost effective terms. The primary source of liquidity for the Tullett Prebon Group's operations is the cash balances and marketable securities that are held in each individual legal entity, and overdraft facilities provided by settlement agents or clearing banks to support the settlement process. The Tullett Prebon Group also has recourse to a committed revolving credit facility of £250 million.
As at 31 December 2015, the Tullett Prebon Group's outstanding debt comprised £141.1 million 7.04 per cent. Guaranteed Notes due 6 July 2016 (ISIN: XS0437404824) issued by Tullett Prebon Group Holdings plc, and £80.0 million 5.25 per cent. Notes due 11 June 2019 (ISIN: XS0859261520) issued by Tullett Prebon.
The business offers broking services in five major product groups: fixed income securities and their derivatives, interest rate derivatives, treasury products, equities and energy. The Tullett Prebon Group also has the Tullett Prebon Information Sales Business and the Tullett Prebon Risk Management Services Business.
The Tullett Prebon Group has a broad-based business in fixed income products. The Tullett Prebon Group's operations cover the broking of cash bonds including US Treasuries, US government agencies, US mortgage-backed securities, US municipal bonds, and European government bonds, as well as servicing the repo market and brokering bond futures and options. The fixed income business also covers credit products including high-grade and high-yield corporate bonds, credit default swaps, and emerging markets bonds. In 2015, the Tullett Prebon Group's fixed income securities product group generated revenue of £171.2 million (2014: £186.5 million).
The Tullett Prebon Group brokers derivative products which facilitate the management of interest rate risk. The products brokered cover the full yield curve on a multi-currency basis and include interest rate swaps in all forms (spread, coupons and basis), interest rate options, and forward rate agreements. In 2015, the Tullett Prebon Group's interest rate derivatives product group generated revenue of £135.3 million (2014: £140.6 million).
The Tullett Prebon Group brokers treasury products including spot and forward foreign exchange, non-deliverable forwards in non-convertible currencies, foreign exchange options, and cash and deposits. In 2015, the Tullett Prebon Group's treasury products product group generated revenue of £185.0 million (2014: £190.5 million).
The Tullett Prebon Group offers broking services in a variety of equity derivative products including index and single stock options, and in some cash equity products including American depositary receipts and global depositary receipts. In 2015, the Tullett Prebon Group's equities product group generated revenue of £46.3 million (2014: £39.5 million).
The Tullett Prebon Group's broking activities in the energy markets cover a wide variety of products in oil (including crude oil, fuel oil, gas oil, gasoline, naphtha and derivatives related to those products), power (electricity) and gas, as well as in commodities such as metals, coal and soft commodities. In 2015, the Tullett Prebon Group's energy product group generated revenue of £204.3 million (2014: £100.0 million).
The Tullett Prebon Information Sales Business provides high quality independent real-time and end of day price information from the wholesale interdealer brokered financial and commodity markets to both major data vendors and directly to end users. The Tullett Prebon Risk Management Services Business provides clients with services to facilitate their post-trade management of interest rate risk in a number of currencies and date mismatch risk on non-deliverable forward contracts. In 2015, these businesses generated revenue of £53.9 million (2014: £46.4 million).
The table below shows the Tullett Prebon Group's revenue for the financial years ended 31 December 2015, 31 December 2014, 31 December 2013 and 31 December 2012, respectively, broken down in relation to each of the product groups:
| Year ended 31 December | ||||
|---|---|---|---|---|
| 2015 | 2014 | 2013 | 2012 | |
| (£ in millions) | ||||
| Revenue by product group | ||||
| Fixed Income | 171.2 | 186.5 | 225.5 | 241.0 |
| Interest Rate Derivatives |
135.3 | 140.6 | 174.2 | 185.2 |
| Treasury Products | 185.0 | 190.5 | 211.4 | 229.8 |
| Equities | 46.3 | 39.5 | 43.2 | 42.6 |
| Energy | 204.3 | 100.0 | 102.4 | 106.4 |
| Tullett Prebon Information Sales Business and Tullett Prebon Risk Management Services Business |
53.9 | 46.4 | 47.0 | 45.8 |
| Total |
796.0 | 703.5 | 803.7 | 850.8 |
The Tullett Prebon Group manages its operations on a regional basis in Europe and the Middle East, Americas, and Asia Pacific. Each of the three regions provides broking services in the five product groups, Information Sales and Risk Management Services.
The Tullett Prebon Group has offices in London, Paris, Frankfurt, Madrid, Zurich, Luxembourg, Warsaw, Geneva, Bahrain and Dubai. The Tullett Prebon Group has also recently opened an office in Johannesburg which is managed as part of Europe and the Middle East. Revenue from the Tullett Prebon Group's activities in Europe and the Middle East for 2015 was £455.3 million (2014: £405.6 million), representing 57 per cent. of total Tullett Prebon Group revenue (2014: 58 per cent.). Broker headcount in Europe and the Middle East as at 31 December 2015 was 799, with 634 brokers based in the Tullett Prebon Group's offices in London, and 165 brokers based in offices in Continental Europe and the Middle East.
The Tullett Prebon Group has offices in New York, Jersey City, Houston, Toronto and Sao Paulo. The Tullett Prebon Group has also recently opened an office in Mexico City. Revenue from the Tullett Prebon Group's activities in the Americas for 2015 was £234.5 million (2014: £201.6 million), representing 29 per
cent. of total Tullett Prebon Group revenue (2014: 29 per cent.). Broker headcount in the Americas as at 31 December 2015 was 543, with 503 brokers based in the Tullett Prebon Group's offices in North America and Mexico (primarily New York and New Jersey), and 40 brokers based in Brazil.
The Tullett Prebon Group has offices in Singapore, Hong Kong, Tokyo, Sydney, Seoul, Jakarta, and Manila. The Tullett Prebon Group also operates through associated companies with offices in Shanghai, Mumbai and Bangkok. Revenue from the Tullett Prebon Group's activities in Asia Pacific for 2015 was £106.2 million (2014: £96.3 million), representing 13 per cent. of total Tullett Prebon Group revenue (2014: 14 per cent.). Broker headcount in Asia Pacific as at 31 December 2015 was 385.
The table below shows the Tullett Prebon Group's revenue for the years ended 31 December 2015, 31 December 2014, 31 December 2013 and 31 December 2012, respectively, broken down according to region:
| Year ended 31 December | ||||
|---|---|---|---|---|
| 2015 | 2014 | 2013 | 2012 | |
| (£ in millions) | ||||
| Revenue by region | ||||
| Europe and the Middle East |
455.3 | 405.6 | 468.7 | 501.2 |
| Americas | 234.5 | 201.6 | 233.9 | 236.9 |
| Asia Pacific | 106.2 | 96.3 | 101.1 | 112.7 |
| Total |
796.0 | 703.5 | 803.7 | 850.8 |
The Tullett Prebon Group deploys a number of computer and communications systems and networks to operate its broking business, including front office broking platforms available to customers and brokers to disseminate information, provide analytics and to collect and manage orders; and middle office systems to record, confirm, enrich, report, monitor, and settle trades and to calculate brokerage commission.
In the Tullett Prebon Information Sales Business, the Tullett Prebon Group deploys computer and communications systems and networks to capture, cleanse and package data, and to disseminate it both real-time and at end of day to customers.
In the Tullett Prebon Risk Management Services Business, the Tullett Prebon Group deploys computer and communications systems and networks to collect information from customers, and to compare and analyse that information to facilitate matching trades that reduce portfolio risk.
The Tullett Prebon Group deploys back office systems for invoicing customers, for financial management, and to support other administrative functions.
The Tullett Prebon Group's systems form an integral part of the services offered to customers who rely upon them to facilitate their activities. The capability, availability and performance of these systems are a significant factor in the Tullett Prebon Group's ability to attract and maintain customer business.
Over the last few years the Tullett Prebon Group has made investments in the development and launch of new electronic platforms, straight-through-processing functionality and associated technology infrastructure. The Tullett Prebon Group's electronic broking platforms provide clients with the flexibility to transact either entirely electronically or via the business's comprehensive voice execution broker network.
The regulatory reforms to the OTC derivatives markets that have been and are being introduced in the main territories in which the Tullett Prebon Group operates, require in some cases, the deployment of front office order management systems and middle office deal management systems with particular functionality and connectivity capability. In the United States, the Tullett Prebon Group's SEF is required to operate an electronic system to meet the minimum functionality requirements to enable all market participants to enter multiple bids and offers, to observe and receive bids and offers, and to transact on such bids and offers.
The Tullett Prebon Group deploys technical infrastructure to run the various platforms and systems and has established primary and secondary data centres in each of the three regions in which the Tullett Prebon Group operates. These data centres are connected through a wide area network that carries data communications at the high speed necessary for low-latency trading systems, together with sufficient bandwidth to accommodate telephone communications over the global network.
The Transaction will combine the complementary strengths of two leading global hybrid voice-broking franchises. The Transaction will establish a stronger platform to deliver Tullett Prebon's objectives of becoming the world's best operator in global hybrid voice-broking and the most trusted source of liquidity in the OTC markets.
The acquisition of IGBB will position the Enlarged Tullett Prebon Group as the leading inter-institutional liquidity provider in OTC products and as a nexus of product knowledge, broking experience and client relationships. The Enlarged Tullett Prebon Group will play a pivotal role in the facilitation of OTC trading as a partner of choice to institutions, corporates and governments, supported by a best-in-class risk management and compliance infrastructure.
The OTC markets are facing significant change from increased regulatory and disclosure requirements, a reduction in capital that the investment banks devote to certain activities, and rising concerns about low liquidity following record levels of issuance of corporate and government bonds. Notwithstanding the current challenging market conditions, Tullett Prebon's recent strategic review concluded that the central role played by interdealer brokers in providing liquidity in many asset classes across the OTC spectrum remains secure and that there are opportunities to provide that valuable service to a wider range of participants.
The Transaction provides a unique opportunity to:
and reputation underpinned by trust and integrity, reinforced through compensation structures that align staff with Tullett Prebon's values and the expectations of various stakeholders.
The Transaction brings together some of the most experienced management and employees in the industry. Tullett Prebon attaches great importance to the skills and expertise of the management and employees and believes that they will be an important factor for the success of the Enlarged Tullett Prebon Group. The directors of Tullett Prebon believe that the Transaction will create an enlarged platform from which to attract and retain the best talent in the industry.
The Enlarged Tullett Prebon Group will seek to continue to build a culture and reputation underpinned by the highest standard of ethics and professionalism, built on trust and integrity, reinforced through rewards and incentives that align all staff with the clearly established conduct and values of Tullett Prebon, and commensurate with the expectations of clients and the wider public. Tullett Prebon confirms that the employment rights of all employees will be fully safeguarded.
The Transaction is expected to generate significant cost synergies of at least £60 million, driven by the elimination of duplicated management and support costs.
Approximately 40 per cent. of these synergies are expected to be delivered from the Tullett Prebon Group and IGBB consolidating onto common technology platforms. The remaining synergies are expected to be achieved from de-duplication across functions including regional management, operations, finance, facilities and legal / compliance / risk / internal audit.
The management and support cost synergies represent approximately one-sixth of the combined management and support cost base which amounts to approximately £360 million and are expected to be largely realised by the second full year following Completion and fully realised by the third full year following Completion.
The identified cost synergies will accrue as a direct result of the proposed Transaction and could not be achieved on a standalone basis. In addition to the management and support cost synergies, Tullett Prebon expects to derive, over time, additional efficiencies in front office activities from the combination of the two businesses. Cash integration spend to achieve the cost synergies is expected to be approximately £60 million and is expected to be incurred in the first two years following Completion.
The estimated synergies reflect both the beneficial elements and the relevant costs.
A project management office will be established to manage the integration, to deliver the management and support cost synergies (as outlined above) and to drive further efficiencies from the combination of the two businesses. The project management office will be staffed with executives drawn from both organisations.
For the period following Completion, Tullett Prebon intends to continue to employ the existing portfolio of brands in use by both organisations, including ICAP, Tullett Prebon, PVM and MOAB and expects both businesses' desks will continue to operate in parallel.
Tullett Prebon intends to maintain its annual dividend of 16.85 pence per share during the integration period, with an ambition to grow the dividend over time.
The risks set out in paragraphs 7.1, 7.2 and 7.3 below, including statements in relation to the intentions or beliefs of Tullett Prebon, the Tullett Prebon board, and the Tullett Prebon directors, have been accurately reproduced (save for adapting the defined terms used in the Tullett Prebon Prospectus to the defined terms used in this document) from the Tullett Prebon Prospectus and, so far as ICAP is aware, no facts have been omitted which would render the reproduced information inaccurate or misleading.
(a) The Tullett Prebon Group and IGBB are currently operating in challenging market conditions, characterised by relatively short periods of volatility and extended periods of subdued market activity. Domestic or international market factors that reduce activity levels could significantly reduce the TP Group's revenue
The TP Group generates revenue primarily from commissions it earns by facilitating and executing customer orders. These revenue sources are substantially dependent on customer trading volumes. The volume of transactions the TP Group's customers conduct with it will be directly affected by domestic and international market factors that are beyond the TP Group's control, including:
Material decreases in trading volumes from period to period may significantly reduce the TP Group's reported revenue which can contribute to reduced profit levels and lower retained earnings.
(b) Tullett Prebon, in respect of the Tullett Prebon Group and ICAP, in respect of IGBB, undertook cost improvement and restructuring programmes to manage their respective cost bases, each to support its profitability and as circumstances required it. The TP Group plans to carry out significant cost improvement and restructuring programmes as part of the integration of the Tullett Prebon Group and IGBB, and may in the future take further significant action to manage its cost base. These actions may involve significant one-off costs, may have a disruptive effect on the TP Group's business, and the anticipated benefits of the actions may not be realised in full
Tullett Prebon took a number of actions in 2014 to reduce headcount and other fixed costs. This cost improvement programme involved the exit of 166 front office staff, 51 support and other staff, and the vacating of office space, reducing annual fixed costs by over £45 million. The costs of these actions was £46.7 million, of which £22.0 million were non-cash charges, including the £3.2 million write down of an employment incentive grant receivable that may not be recoverable due to the reduction in headcount, and was charged as an exceptional item in the income statement in the annual report and accounts of Tullett Prebon for the year ended 31 December 2014.
Tullett Prebon implemented a cost improvement programme towards the end of 2015 focused on reducing headcount in Europe and the Middle East and on restructuring broker contracts in North America to reduce fixed costs and to reduce the level of pay out as a percentage of broking revenue. Front office broking headcount is being reduced by approximately 70 heads representing a reduction of around 7.5 per cent. of the front office headcount in Europe and the Middle East and in North America in treasury products, interest rate derivatives and fixed income. The cost of the actions taken in 2015 of £25.7 million, of which £4.4 million represents a non-cash write down of amounts previously paid, has been charged as an exceptional item in the income statement to be included in the annual report and accounts of Tullett Prebon for 2015. A further charge of less than £10 million is expected to be made in the first half of 2016 relating to actions that will be taken as part of this programme.
In the year ended 31 March 2015, ICAP completed a restructuring programme aimed at focusing and realigning systems, processes and legal entity structures and increasing workforce productivity. The programme covered all of ICAP's activities but with a particular focus on IGBB Global Broking and ICAP Group infrastructure. As a result of the programme, 496 brokers and 244 infrastructure employees left the ICAP Group, which resulted in one-off employee termination costs of £35 million for the ICAP Group (including £34 million for IGBB). Office spaces in key regions including London, New York and Singapore were vacated and £18 million of property exit costs for IGBB including onerous lease provisions were charged to the income statement.
The TP Group plans to carry out significant cost improvement and restructuring programmes as part of the integration of the Tullett Prebon Group and IGBB, and the TP Group may undertake further cost improvement and restructuring programmes from time to time in the future. Any such future action might involve significant costs, may have a disruptive effect on the TP Group's business, and may harm the TP Group's business through its impact on capability or employee morale, and the anticipated benefits of any actions might not be realised in full.
The TP Group's future success depends upon the expertise and continued services of certain key personnel, including personnel involved in the management and development of the business, personnel directly generating revenue, and personnel involved in the management of the control functions, and upon its ability to recruit, train, retain and motivate qualified and highly trained personnel in all areas of the business. In addition, following Completion, the future success of the TP Group will, in part, be dependent upon the successful retention of key IGBB personnel. The TP Group's employment contracts with key personnel generally include minimum notice periods and non-compete provisions and fixed terms with staggered renewal dates, and the TP Group seeks to ensure that it has appropriate succession plans in place, to lessen the impact of the departure of a key member of personnel or a team of revenue generators. Nevertheless, the TP Group's business, its operating results, and its financial condition may be adversely affected by the departure of one or more key members of personnel.
The TP Group competes with other interdealer brokers for front office personnel and the level of this competition is intense. Such competition may significantly increase front office personnel costs and may result in the loss of capability, customer relationships and expertise through the loss of front office personnel to competitors. The TP Group may also suffer from predatory actions of competitors aimed at poaching large numbers of brokers. The TP Group's business, its operating results and its financial condition may be adversely affected due to such competitor activity, which may continue or intensify in the future; see paragraph 7.2(b) (''The markets in which the TP Group operates are highly competitive and competition could intensify in the future. If the TP Group is unable to continue to compete effectively for any reason, certain aspects of its business may be materially damaged which could result in lower revenue and loss of reputation'') below. If the TP Group is not able to attract and retain highly skilled employees, or if it incurs increased costs associated with attracting and retaining personnel, or if it fails to assess training needs adequately or deliver appropriate training, this could be substantially detrimental to the TP Group's ability to compete and would therefore have an adverse effect on its revenue and profitability and could harm its reputation.
The Tullett Prebon Group's ability to recruit, train, retain and motivate personnel and to ensure that employment contract terms are appropriate may be adversely affected as a result of the announcement of the Transaction and, following Completion, the integration of the Tullett Prebon Group and IGBB.
The TP Group also faces the risk that any of its employment agreements may contain terms under which it is obliged to make payments to an employee in excess of the benefit to the business of the employee's services. In such cases, the TP Group's profitability could be adversely affected.
The TP Group maintains controls designed to mitigate a wide range of operational risks. However, these controls will not be able to eliminate the occurrence of these risks. The principal operational risks faced by the TP Prebon Group include:
Should the TP Group's operational risk controls prove to be inadequate and an operational risk occurs, the TP Group is likely to be adversely impacted and this could result in significant damage to the TP Group's reputation, a material financial loss or potential litigation and regulatory sanctions.
There have been a number of highly publicised cases involving fraud or other misconduct by employees of financial services firms in recent years and various investigations have been conducted by the FCA in the United Kingdom, the CFTC in the United States and other regulators around the world, including in relation to the alleged manipulation of LIBOR which have resulted in substantial fines being imposed on a number of institutions.
Tullett Prebon is currently under investigation by the FCA in relation to certain trades undertaken between 2008 and 2011, including trades which are risk free, with no commercial rationale or economic purpose, on which brokerage is paid and trades on which brokerage may have been improperly charged. As part of its investigation the FCA is considering the extent to which during the relevant period (i) Tullett Prebon's systems and controls were adequate to manage the risks associated with such trades and (ii) whether certain of Tullett Prebon's managers were aware of, and/or managed appropriately the risks associated with, the trades. The FCA is also reviewing the circumstances surrounding a failure in 2011 to discover certain audio files and produce them to the FCA in a timely manner. As the investigation is on-going, any potential liability arising from it cannot currently be quantified.
On 25 September 2013, ICAP Europe Limited (''IEL''), which will be a subsidiary of IGBHL at Completion, reached settlement agreements with the FCA and the CFTC relating to the involvement of certain brokers in the attempted manipulation of Yen LIBOR by bank traders between October 2006 and January 2011. Under the terms of the settlements, IEL paid penalties of US\$65 million to the CFTC and £14 million to the FCA.
ICAP and its subsidiaries, including IGBB entities, continue to co-operate with the government agencies in Europe and in the US in relation to their investigations into the setting of Yen LIBOR. ICAP is no longer a named defendant in the US civil litigation action against various Yen LIBOR and Euroyen TIBOR setting banks. However, the plaintiff in that litigation has been given permission to add IEL as a defendant in that action, which IEL intends to defend vigorously. The plaintiff is also taking steps to appeal the dismissal of ICAP.
ICAP is also co-operating with the CFTC and other US government agencies' inquiries into the setting of USD ISDA Fix rates. ICAP Capital Markets LLC was the collection agent for ISDA Fix panel bank submissions in dollar up until January 2014, when the collection process was changed by ISDA. During the financial year ended 31 March 2015, civil lawsuits were filed in the US against USD ISDA Fix setting banks, where ICAP Capital Markets LLC is one of the named defendants. Those suits have now been consolidated into a single action. ICAP Capital Markets LLC will not be a subsidiary of IGBHL at Completion and the business of ICAP Capital Markets LLC (excluding any liability relating to the ISDA Fix investigation) will be transferred to other entities within IGBHL prior to Completion. The TP Group may nevertheless suffer financial loss either directly or as a consequence of damage to its reputation as a result of these matters.
The TP Group's reputation may also be damaged by any involvement or the involvement of any of its employees or former employees in any regulatory investigation and by any allegations or findings, even where the associated fine or penalty is not material. It may also be damaged by association where there is a regulatory investigation into, or an allegation or finding of fraud or other material misconduct which relates to one of its competitors or clients or any of their employees. If the TP Group or any of its employees were to be implicated in any misconduct uncovered by a regulatory investigation, the TP Group may be subject to the imposition of substantial fines and penalties. Any involvement of the TP Group in any such regulatory investigation and in proceedings resulting from any allegations or findings arising therefrom may place significant strain on management time and resources.
(e) The TP Group may suffer costs associated with legal action taken to defend its business, employees, rights and assets, including intellectual property, and may be adversely affected if it is not able to protect its rights. The TP Group may be subject to claims made against it which may result in significant legal costs and settlements
The TP Group may take legal action to enforce its contractual, intellectual property and other legal rights where it believes that those rights have been violated and that legal action is an appropriate remedy. The steps the TP Group has taken, may take to protect its contractual, intellectual property and other legal rights may be inadequate. Action taken to defend the TP Group's contractual, intellectual property and other legal rights may be protracted, involve the expenditure of significant financial and managerial resources, and may ultimately not be successful, which may result in an adverse impact on the TP Group's financial position.
The TP Group may also be subject to a claim of economic or reputational significance, whether by a third party or an employee. Such claims could include actions arising from acts inconsistent with employment law, health and safety laws, contractual agreements, from infringements of intellectual property rights, or from personal injury, diversity or discrimination claims. The TP Group may incur significant costs in defending any claims, or if any such action is successful, in making payments to resolve the action and may suffer reputational damage.
(f) To remain competitive the TP Group must continue to develop its business. Failure to do so successfully, including the failure to integrate acquisitions effectively could adversely impact the TP Group. Failure to realise the benefits of investments in some markets could also affect the TP Group's profitability. Changes in the risk profile of the TP Group as a result of developing the business could result in a new or increased exposure to risks that could impact the TP Group
The markets in which the TP Group operates are dynamic and to remain competitive the TP Group must invest in the development of the business to respond to changes in customer demand for its services. This business development activity may include hiring brokers, opening offices in new countries, expanding existing offices, providing broking and other services in new product markets, serving different types of customers and undertaking activities through different business models. Such activity may be achieved through the acquisition of businesses or through investment in existing businesses, and may result in changes in the risk profile of the TP Group. Failure to integrate acquisitions effectively or failure to manage changes in the TP Group's risk profile appropriately or failure to realise the benefit of investments in some markets may adversely affect the TP Group's business or result in it failing to achieve anticipated benefits. The acquisition of businesses can also give rise to unforeseen legal, regulatory, contractual, employment or other issues, or significant unexpected liabilities or contingencies.
The nature and size of the Transaction gives rise to particular risks which are discussed in more detail in paragraph 2 of Part II (Risk Factors) of the Tullett Prebon Prospectus.
The TP Group needs to maintain the computer and communications systems and networks that it currently operates. Its failure to maintain these systems and networks adequately could have a material effect on the performance and reliability of such systems and networks, which in turn could materially harm its business.
Further, the markets in which the TP Group competes are characterised by rapidly changing technology, evolving customer demand and uses of its services and the emergence of new industry standards and practices that could render its existing technology and systems obsolete. The TP Group's future success will depend in part on its ability to anticipate and adapt to technological advances, evolving customer demands and changing standards in a timely, cost-efficient and competitive manner and to upgrade and expand its systems accordingly. Any upgrades or expansions in technology and the use of technology may require significant expenditures of funds. In the longer term, the TP Group may not have sufficient funds to update and expand its systems adequately, and any upgrade or expansion attempts may not be successful and accepted by the marketplace and its customers. Any failure by the TP Group to update and expand its systems and technology adequately or to adapt its systems and technology to evolving customer demands or emerging industry standards would have a material effect on the TP Group's ability to compete effectively which could reduce its revenue and profitability.
A particular risk faced by the TP Group is the development by its competitors of new electronic trade execution or market information products that gain acceptance in the market. These products could give those competitors a ''first mover'' advantage that may be difficult for the TP Group to overcome with its own technology.
The TP Group's employees operate from premises that provide the necessary facilities and systems to enable them to carry out their roles. The loss of access to these sites or an inability to operate from these sites, due to, for example, loss of power, acts of war or terrorism, human error, natural disasters, fire, or sabotage, could limit the TP Group's ability to conduct its operations or impact the TP Group in other ways.
Whilst the TP Group has disaster recovery sites, and business continuity plans are in place and are regularly tested, these may not cover all activities within the TP Group. Further, if the TP Group's business continuity plans do not operate effectively, they may not be adequate to correct or mitigate the effects of any of the above eventualities. In addition, the business continuity plans or personnel of its third-party service providers may not be adequate to correct or mitigate any of the above eventualities or may not be implemented properly.
The TP Group is heavily dependent on the capacity and reliability of the computer and communications systems supporting its operations, whether owned and operated internally or by third parties, and on the integrity of the data held within and used by such systems. These systems include broking platforms essential to transacting business and middle office and back office systems required to record, monitor and settle transactions. These systems are concentrated at the TP Group's operating sites and are difficult to replicate.
The performance of these computer and communications systems could deteriorate or fail for any number of reasons. These could include loss of power, human error, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, intentional acts of vandalism, customer error or misuse, lack of proper maintenance or monitoring, loss of data, data disruption and similar events. If such a degradation or failure were to occur, it could cause, among other things:
• significant disruptions in service to the TP Group's customers;
Failure of the communications and computer systems and facilities on which the TP Group relies may lead to significant financial losses, litigation or arbitration claims filed by or on behalf of its customers and regulatory sanctions. Any such failure could also have a negative effect on the TP Group's reputation.
The secure transmission of confidential information over public and private networks is a critical element of the TP Group's operations. Its networks and those of the third-party service providers and counterparties with whom the TP Group trades and its customers may be vulnerable to unauthorised access, computer viruses and other security problems, including the TP Group's inadvertent dissemination of non-public information. The TP Group's activities also require the recording, storing, manipulation and dissemination of significant amounts of data. Whilst the TP Group maintains electronic and physical security measures, loss of data integrity could occur.
Any failure by the TP Group to maintain the confidentiality of information or other data security failures could impact the TP Group's ability to trade effectively and could result in significant financial losses, litigation by its customers or counterparties and regulatory sanctions as well as adverse reputational effects.
The TP Group brokers transact through three distinct broking models: the name passing model (also known as the ''name give-up'' model); the matched principal model; and the executing broker model.
The TP Group's matched principal activity, where the TP Group is the counterparty to both sides of a matching trade, may give rise to limited market risk as a result of the infrequent residual balances which result from the TP Group's inability to match client orders precisely, or through broker error. Broking illiquid instruments, such as certain emerging markets bonds, may elevate the market risk of any residual balances should they occur. The TP Group's executing broker activity, where the TP Group will execute transactions on certain regulated exchanges in accordance with client orders and then 'givesup' the trade to the relevant client or its clearing member, also gives rise to limited market risk in the event that the client or its clearing member fails to take up the position traded, or through broker error. When residual balances occur, the TP Group's policy is to close the unmatched position promptly, whether or not this results in a loss to the TP Group, reflecting the fact that the TP Group's risk management policies, and the terms of its licenses, prevent the TP Group from taking proprietary positions in financial instruments. The TP Group brokers large value transactions in volatile markets and whilst the TP Group believes it has robust operational controls errors can occur and can generate losses. Any error which gives rise to a significant loss or a series of such losses could adversely impact the TP Group's profitability and retained earnings, as well as damaging its reputation.
The TP Group's matched principal and executing broker activities also give rise to liquidity risk. The TP Group uses settlement agents, and central counterparties where appropriate, to effect the settlement of trades. Providers of these facilities generally require cash collateral or margin deposits from the TP Group and providers can call for increased cash collateral or margin deposits to be made at short notice. Such calls can be driven by volatile market conditions outside the TP Group's control, operational errors or failures by the TP Group or a customer, or by the TP Group's trading with counterparties who are not themselves members of a central counterparty. Additionally, if during the settlement process the TP Group were to receive the underlying security from a seller but were to find itself unable to deliver the security onto the purchaser, the TP Group might be required to fund the settlement balances until onward delivery could be effected. This could occur for technical or operational reasons, including due to errors in the delivery instructions. Such matters could have a significant impact on the TP Group's liquidity, and if the TP Group is unable to access sufficient liquidity to enable continued clearing and settlement, or fund the posting of collateral and margin deposits, this would severely limit the TP Group's ability to trade under the matched principal and executing broker models.
Settlement failures can also give rise to financing charges which may be recoverable from the counterparty, but sometimes are not. In instances where the failure to deliver is prolonged or widespread, there may also be regulatory capital charges required to be taken by the TP Group which, depending on their size and duration, could limit the TP Group's flexibility to transact other business, and could adversely affect the TP Group's profitability and retained earnings.
IGBB has operated, and prior to Completion will continue to operate, within its own broking and operational policies and procedures which may differ from those operated by the Tullett Prebon Group. In addition, IGBB may undertake activities that the Tullett Prebon Group does not undertake and may execute activities in ways that would be prohibited under the Tullett Prebon Group's policies and procedures. The Transaction and the transition to common policies and procedures within the TP Group may give rise to a period of heightened risk in the management and mitigation of the risks arising from matched principal broking and executing broker activities, which may have an adverse impact on the TP Group's business, operations or reputation.
Where the TP Group brokers on a matched principal basis it is exposed to the risk of loss should one of the counterparties to a transaction default prior to the settlement date, requiring the TP Group to replace the defaulted contract in the market. This is a contingent risk in that the TP Group will only suffer loss if the market price of the securities has moved adversely to the original trade price. The TP Group does undertake a limited amount of matched principal broking where a counterparty is buying its own securities and in these circumstances in the event of that counterparty defaulting prior to settlement the risk of loss due to movement in the value of the securities is heightened. The TP Group is also exposed to short term pre-settlement risk where it acts as an executing broker during the period between the execution of the trade and the client claiming the trade.
Where the TP Group brokers on a matched principal basis it is exposed to settlement risk where a counterparty defaults on its contractual obligation to deliver securities or cash after the TP Group has completed its part of the transaction. Unlike pre-settlement risk, this settlement risk exposure is to the full principal value of the transaction. The TP Group seeks to mitigate this risk by effecting settlement on a delivery-versus-payment basis. However, these procedures and controls do not eliminate settlement risk and defaults may still occur and have a significant impact on the TP Group's results and financial condition.
Where the TP Group operates on a name passing basis it is exposed to the risk that the client fails to pay the brokerage fee/commissions it is charged. The TP Group generally involves customers for its name passing activities on a monthly basis. Failure or delay in the process of collecting invoiced receivables also gives rise to liquidity risk to the TP Group.
The TP Group is also exposed to counterparty credit risk in respect of cash deposits held with financial institutions. The TP Group is also exposed to concentration risk in that it may have exposures with a counterparty arising through a number of different activities in a number of different regions and may also have cash deposits with the same counterparty.
The TP Group seeks to mitigate its credit risk through the adoption of specific credit risk management policies which include the assessment, monitoring and escalation of credit risk exposures by dedicated credit risk management teams. However, these procedures cannot eliminate all defaults, particularly those that may arise from events or circumstances that are difficult to detect or foresee. In addition, reflecting the inter-connected nature of the global financial system, concerns about, or a default by, one institution could lead to significant systemic liquidity problems, including losses or defaults by other institutions.
The TP Group's profitability and retained earnings may be materially adversely affected in the event of a significant default by any of its customers and counterparties and this could be exacerbated where it has a concentrated exposure to the counterparty or where the default arises from, or gives rise to further losses as a result of, systemic risk.
The TP Group uses various market infrastructure arrangements including settlement services, such as Euroclear and Clearstream, and central counterparties, such as the Depository Trust & Clearing Corporation (''DTCC''). Loss of access to, or restrictions on the TP Group's use of, these services, due to non-compliance with membership or participants' requirements, or due to credit or reputational issues, could impact the TP Group's ability to carry out its activities.
The TP Group requires financial liquidity to facilitate its operations. In addition to significant cash balances, the TP Group maintains credit facilities provided by the TP Group's bankers. The TP Group's existing credit facilities impose certain operating and financial restrictions on the TP Group, and contain covenants that require the TP Group to maintain specified financial ratios and satisfy specified financial tests, that may limit how the TP Group conducts its business. In the medium to longer term, the TP Group may be unable to renew existing facilities or raise additional financing and the withdrawal, non-renewal or a lack of access to credit facilities, whether as a result of market conditions, general market disruption or a failure by the TP Group itself, could severely impact the TP Group's business, results of operations or financial condition.
The TP Group's ability to operate, to attract and retain customers and employees, or to raise appropriate financing or capital may be adversely affected as a result of its reputation becoming damaged. Clients will rely on the TP Group's integrity and probity. If the TP Group fails, or appears to fail, to deal promptly and effectively with issues that may give rise to reputational risk, its reputation and in turn its business prospects may be materially harmed. These issues include, but are not limited to:
Any failure by the TP Group to address these or any other issues which could adversely affect its reputation could result in losses of front office personnel and customers, a reduced ability to compete effectively, financial losses and potential litigation and regulatory actions and penalties against the TP Group.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that (i) Tullett Prebon is unable to comply with its obligations as a company with securities admitted to the Official List or (ii) any member of the TP Group which is a supervised firm regulated by the FCA is unable to comply with its obligations as a supervised firm regulated by the FCA.
The TP Group reports its financial results in sterling. However, a significant proportion of the TP Group's activity is conducted outside the UK in currencies other than sterling. For the purposes of preparing its consolidated financial statements, the TP Group converts the results of operations of its subsidiaries which account in other currencies into sterling at period average or period-end rates in accordance with International Financial Reporting Standards (''IFRS''). As a result, the TP Group's reported results of operations will be affected by movements in the exchange rates between sterling and the other currencies in which TP Group companies operate, and these movements can have a significant impact on the TP Group's results of operations and financial position. The TP Group also has an exposure to the effect of movements in foreign exchange rates on its financial assets and liabilities denominated in foreign currencies.
The TP Group is exposed to interest rate risk in that the rates of interest which it receives on its cash deposits and other interest earning assets may not match the rates which it pays on its borrowings and other interest bearing liabilities and these differences can affect its results of operations in each financial period.
The TP Group is subject to taxes in the various jurisdictions in which it operates and any failure to comply with all local tax rules and regulations may result in penalties and fines being imposed on the TP Group. The TP Group is exposed to changes in taxation rates and regimes which may result in an increased proportion of the TP Group's profit being paid in taxation, or may result in parts of the TP Group's activities becoming less profitable or unprofitable through the imposition of higher transaction taxes or indirect taxes borne by the TP Group or its customers. The TP Group has exposure to historic tax issues including through businesses that have been acquired, and the TP Group may be subject to challenge from tax authorities on these or other matters that may result in significant tax payments being required to be made in the future. In particular, certain IGBB entities have in the past received annual incentive grants from the State of New Jersey (''NJ State'') in connection with NJ State's Business Employment Incentive Program (''BEIP''). BEIP income received by these IGBB entities has been treated as non-taxable by these entities. If a relevant tax authority successfully challenges this treatment, the TP Group may incur a tax liability in respect of such BEIP income. Whilst ICAP has agreed to indemnify the TP Group in respect of such liability, the TP Group may nevertheless suffer loss if it is unable to recover amounts under such indemnity. In addition, other tax liabilities may arise in IGBB entities in excess of the amount provided, and the TP Group may suffer loss if it is unable to recover such amounts under the warranties given by ICAP to Tullett Prebon.
From time to time, the International Accounting Standards Board (the ''IASB'') and/or the European Union change the financial accounting and reporting standards that govern the preparation of the TP Group's financial statements. These changes can be difficult to predict and may materially impact how the TP Group records and reports its financial condition and results of operations. In some cases, the TP Group could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. By way of example, the IASB has issued amendments to a number of standards which, when endorsed and applicable to the TP Group, are expected to impact its financial statements. These standards include IFRS 9, which is expected to impact both the measurement and disclosures of financial instruments. IFRS 9 remains to be endorsed by the European Union and as such, it is not yet possible to quantify the precise impact of this amended standard.
The EU-endorsed amendments to IAS 19 ''Employee Benefits'' have been adopted by the TP Group from 1 January 2013 with retrospective application to prior periods. The amendments to prior periods change the measurement of various components within the defined benefit pension asset, but do not change the overall value of the TP Group's retirement benefit asset. The TP Group adopted IFRS 13 ''Fair Value Measurement'' from 1 January 2013, which impacts upon the measurement of fair value for certain assets and liabilities as well as the associated disclosures.
The IASB may make other changes to financial accounting and reporting standards that will govern the preparation of the TP Group's financial statements, which the TP Group may adopt if determined to be appropriate by its management, or which the Enlarged Tullett Prebon Group may be required to adopt. Any such change in the TP Group's accounting policies or accounting standards could materially affect its reported financial condition and results of operations.
Accounting policies and methods are fundamental to how the TP Group will record and report its financial condition and results of operations. In the application of the TP Group's accounting policies, management must make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. These judgements, estimates and assumptions are based on historical experience and other factors that are considered relevant. Judgements, estimates and assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the accounting period in which an estimate is revised. Actual results may differ from these estimates, and revisions to estimates can result in significant changes to the carrying value of assets and liabilities.
The TP Group's current management has identified that significant judgements and estimates are necessary in the application of certain accounting policies. These include:
Because of the uncertainty surrounding the TP Group's management's judgements and the estimates pertaining to these matters, the TP Group may make changes in accounting judgements or estimates that have a significant effect on the reported value of the TP Group's assets and liabilities and the TP Group's reported results of operations and financial position.
Whilst the accounting policies adopted by the ICAP Group for the financial year ended 31 March 2015 were applied in the preparation of the historical financial information for all periods relating to IGBB set out in Section B of Part XVI (Historical Financial Information of IGBB) of the Tullett Prebon Prospectus (and these accounting policies are consistent with those used by Tullett Prebon in its annual financial statements for the year ended 31 December 2015), the judgements, estimates and assumptions made by ICAP's senior management in the application of the ICAP accounting policies to IGBB may be different to those that would have been made by the Tullett Prebon Group's senior management. Accordingly, there is a risk that future carrying amounts of assets and liabilities relating to IGBB may be significantly different to those previously reported.
Following the UK general election in May 2015, the UK government has committed to hold a referendum by the end of 2017 on whether the UK will remain in the European Union, and the TP Group faces risks associated with a vote to exit the European Union. For example, because a significant proportion of the regulatory regime applicable to the TP Group in the UK and anticipated regulatory reform is derived from European Union directives and regulations, a vote in favour of the UK exiting the European Union could materially change the regulatory framework applicable to the TP Group's operations. In addition, a UK exit from the European Union could result in restrictions on the movement of capital and the mobility of personnel. Any of these risks could result in higher operating costs and could have a material adverse effect on the TP Group's business, prospects, financial condition and results of operations.
In response to the global financial crisis, regulators worldwide have been adopting an increased level of scrutiny in supervising the financial markets, and have been developing a number of new regulations and other reforms designed to strengthen the financial system and to improve the operation of the world's financial markets. Some of the detailed rules and regulations are still in the process of being finalised, and some of those that have already been agreed are being phased in over time.
These regulations and reforms may affect the TP Group's business directly, through their impact on the way in which trading in one or more OTC product markets is undertaken which may reduce the role of interdealer brokers as intermediaries in those markets, or through the introduction of requirements and rules to operate as an intermediary which the TP Group is unable to satisfactorily respond to, and indirectly through their impact on the TP Group's customers and their willingness and ability to trade.
The new regulations, including the Dodd-Frank Act in the United States, the European Markets Infrastructure Regulation (''EMIR''), the Markets in Financial Instruments Directive (''MiFID'') and the Markets in Financial Instruments Regulations (''MiFIR'') in Europe, may result in changes in the method of broking in certain product markets, and may create new types of competition between interdealer brokers and other market intermediaries for execution business.
Any inability of the TP Group to adapt or deliver services that are compliant with the new regulations could significantly adversely affect its competitive position and therefore reduce the revenue and profitability of the TP Group. To date, the TP Group has needed to incur certain costs to comply with the new regulations, and even if successful in adapting its services to new regulations, the costs of making those adaptations or otherwise complying with those regulations may significantly increase the cost base of the TP Group. There is also a possibility that further regulations and reforms affecting the OTC markets may be introduced that may adversely affect the role of interdealer brokers or may introduce requirements or rules that the TP Group is unable to meet.
Changing regulation may also impact the activities of the TP Group's customers, including through increased capital and liquidity requirements, which may cause a reduction in overall trading activity or increased costs in certain markets. This may in turn reduce the TP Group's revenue.
The TP Group has numerous current and prospective competitors, both domestic and international. Some of its competitors and potential competitors may have, in certain markets, larger customer bases, more established name recognition and greater financial, marketing, technology and personnel resources than the TP Group might have, or may be able to offer services that are disruptive to current market structures and assumptions. These resources may enable them to, among other things:
In addition, new or existing competitors could gain access to markets or products in which the TP Group currently enjoys a competitive advantage. Competitors may have a greater ability to offer new services, or existing services to more diverse customers. This may erode the TP Group's market share. Even if new or existing competitors do not significantly erode the TP Group's market share, they may offer their services at lower prices, and the TP Group may then be required to reduce its commissions to remain competitive, which could have a material adverse effect on its profitability.
The TP Group competes with other interdealer brokers for front office personnel and the level of this competition is intense. Such competition may significantly increase front office personnel costs and may result in the loss of capability, customer relationships and expertise through the loss of front office personnel to competitors. The TP Group may also suffer from predatory actions of competitors aimed at poaching large numbers of brokers. The TP Group's business, its operating results and its financial condition may be adversely affected due to such competitor activity, which may continue or intensify in the future.
In addition, consolidation among the TP Group's customers may cause revenue to be dependent on a smaller number of customers and may result in additional pricing pressure. While no single customer currently accounts for a material part of the TP Group's total revenue, if the TP Group's existing customers consolidate and new customers do not generate offsetting volumes of transactions, then the TP Group's revenue may become concentrated in a smaller number of customers. In that event, the TP Group's revenue may be dependent on its continued good relationships with those customers to a material extent and any adverse change in those relationships could materially reduce the TP Group's revenue.
(c) The TP Group operates in a regulated environment that imposes significant compliance requirements. Changes in regulations may increase the cost and complexity of doing business, or may disadvantage the TP Group relative to its competitors. The failure to comply with regulations could subject the TP Group to sanctions, force it to cease providing certain services, or oblige it to change the scope or nature of its operations
Regulatory obligations require a significant commitment of resources. The TP Group's ability to comply with applicable laws, rules and regulations will be largely dependent on its establishment and maintenance of compliance, control and reporting systems, as well as its ability to attract and retain
qualified compliance and other risk management personnel. These requirements may require the TP Group to make changes to its management and support structure that could significantly increase the cost of doing business. Failure to establish and maintain effective compliance and reporting systems or failure to attract and retain personnel who are capable of designing and operating such systems, may increase the risk that the TP Group could breach applicable laws and regulations, thereby exposing it to the risk of litigation and investigations and possible sanctions by regulatory agencies. These agencies have broad powers to investigate and enforce compliance with applicable rules and regulations and to punish non-compliance, and any investigations or actions by these agencies could adversely affect the TP Group, both in terms of its reputation, and financially to the extent that penalties are imposed. Similarly, any failure of commercial management to understand and act upon applicable laws and regulations would present a similar risk.
The TP Group's lead regulator is the FCA and the TP Group is required to meet the systems and controls requirements of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, as amended (known as the ''EU Capital Requirements Directive'' or the ''CRD''). The FCA adopts a risk-based approach to supervision which it undertakes in various ways, including through the review of prudential returns, visits to the TP Group and meetings with senior management. In the United States, the TP Group's activities are primarily regulated by, amongst others, the Financial Industry Regulatory Authority and the Securities and Exchange Commission. Under Title VII of the Dodd-Frank Act, certain activities of the TP Group relating to OTC derivatives are now regulated by the CFTC. The TP Group's operations in other countries are subject to relevant local regulatory requirements which may change from time to time.
Any significant changes in regulation, including in particular the changes in regulation in the United Kingdom and the United States discussed above, may result in rules that are more onerous than the existing rules to which the TP Group is currently subject and the TP Group may incur significant costs in establishing the necessary systems and procedures, and in training its front office personnel, to enable it to comply with any new regulations to which it becomes subject. In addition, changes in the TP Group's regulatory environment may disadvantage the Enlarged Tullett Prebon Group relative to its competitors operating under different regulatory environments which may reduce the TP Group's relative competitiveness.
The TP Group may face significant additional costs as a result of improving its risk management and in managing its culture to reflect developing best practice within the financial markets. The increased burden of responding to regulatory enquiry and supervision may require investment in management and support resource that could also increase costs further.
As a result of the Transaction and the resultant increase in scale and complexity of the Tullett Prebon Group, the Enlarged Tullett Prebon Group may be required to invest further in risk management and operational processes to meet higher regulatory standards.
The compliance requirements imposed by the regulators are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with the TP Group and are not designed to protect the TP Group's investors. Consequently, these regulations may serve to limit the TP Group's flexibility regarding its capital structure. Customer protection and market conduct requirements may also restrict the scope of the TP Group's activities.
The TP Group may develop its activities in a way that changes the nature of its customer base or the geographic markets in which it operates and this may increase the TP Group's regulatory burden and the risk of infringement of rules and regulations.
(d) The TP Group is required to maintain capital in excess of minimum levels in each of its regulated entities and in the top holding company. The amount of capital that is required to be held by a particular entity is determined by the relevant regulator, and the TP Group's capital requirements may increase in the future, which could limit the TP Group's flexibility regarding its capital structure and its ability to pay dividends. Failure to maintain excesses over the minimum levels of capital or failure to comply with the terms of the investment firm
The current regulatory regimes under which the TP Group operates require the maintenance of minimum levels of capital in each of its regulated entities. Any changes in the TP Group's regulatory environment, or the imposition of new or increased regulatory requirements on any of the TP Group's businesses in the future, could require the TP Group to increase the capital held in the top holding company of the TP Group, or in a regulated subsidiary entity. The Tullett Prebon Group is not currently required to meet the own funds requirements on a consolidated basis under CRD IV (as defined below), as it is eligible for and has obtained a derogation from the application of own funds requirements on a consolidated basis (the ''Waiver'') in accordance with Article 15 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, as amended (known as the ''EU Capital Requirements Regulation'' or ''CRR'' and, together with the CRD, ''CRD IV''). Under the terms of the Waiver Tullett Prebon, as a standalone legal entity, must maintain financial resources in excess of the sum of the solo notional capital resources requirements for each relevant firm within the Tullett Prebon Group.
To be eligible for the Waiver each investment firm within the Tullett Prebon Group must fall within either of the categories set out in Article 95(1) or Article 96(1) of the CRR and each EU investment firm in the Tullett Prebon Group must meet its own relevant funds requirements. Under the terms of the Waiver the Tullett Prebon Group must eliminate the excess of its own funds requirements compared with its own funds on a consolidated basis (''excess goodwill'') over the ten year period to 24 September 2024. The amount of the excess goodwill must not exceed the amount determined as at the date the Waiver took effect and must be reduced in line with a schedule over the ten years, with the first reduction of 25 per cent. required to be achieved by March 2017. The Waiver also sets out conditions with respect to the maintenance of financial ratios relating to leverage, debt service and debt maturity profile.
It is a condition precedent to Completion that the FCA grants, subject only to Completion, a new waiver to the relevant firms in the TP Group as from the point of Completion, in a form reasonably acceptable to Tullett Prebon (the ''Tullett Prebon Consolidation Waiver'').
The Tullett Prebon Group has discussed the terms of the Tullett Prebon Consolidation Waiver with the FCA who have advised the Tullett Prebon Group that they would be minded to grant the permissions requested subject to any material changes and to Completion. The proposed Tullett Prebon Consolidation Waiver is expected to take effect on Completion with a duration of ten years. Consistent with the current Waiver, under the terms of the Tullett Prebon Consolidation Waiver, each investment firm within the TP Group must fall within either of the categories set out in Article 95(1) or Article 96(1) of the CRR, each EU investment firm in the TP Group must meet its own relevant funds requirements, and Tullett Prebon, as a standalone legal entity, must continue to maintain financial resources in excess of the sum of the solo notional capital resources requirements for each relevant firm within the TP Group. Under the proposed terms of the Tullett Prebon Consolidation Waiver, the TP Group must eliminate its excess goodwill over the ten year period following Completion. The amount of excess goodwill must not exceed the amount determined as at the date the Tullett Prebon Consolidation Waiver takes effect and must be reduced in line with a schedule over the ten years, with the first reduction of 25 per cent. required to be achieved after two and a half years following Completion. The proposed terms of the Tullett Prebon Consolidation Waiver include conditions with respect to the maintenance of financial ratios relating to leverage, debt service and debt maturity profile.
The final terms of the Tullett Prebon Consolidation Waiver may be more onerous than those discussed with the FCA to date. In order to comply with the terms of the current Waiver or the Tullett Prebon Consolidation Waiver, Tullett Prebon may need to increase the capital it holds, which may require it to reduce or suspend the payment of dividends.
Each of the TP Group's regulated entities must hold sufficient capital resources to meet their local regulatory capital requirements. These local regulatory capital requirements are subject to change either through changes to the relevant rules or their application, or through changes to the scale and nature of the underlying business or particular issues affecting the business. For the TP Group's UK legal entities regulated by the FCA, the capital resources requirement is the higher of (a) the minimum requirements calculated under Pillar 1 of Basel II plus a scalar and other add-ons imposed by the FCA, and (b) the entity's own assessment of its requirements under the Internal Capital Adequacy Assessment Process (''ICAAP''). The level of the scalar and other add-ons imposed by the FCA is subject to change and may increase in the future. An entity's own assessment of its requirements is also subject to change from time
to time and may increase in the future. Increases in any individual entity's capital requirements may restrict the ability of an entity to distribute its earnings within the TP Group or may require the TP Group to inject additional capital into an entity, which may restrict Tullett Prebon's ability to pay interest, principal and dividends, or require the TP Group to increase its indebtedness.
Tullett Prebon's share price is generally subject to fluctuation as a result of a large number of factors, including but not limited to those referred to in this paragraph 7.3 and, in addition, the market price of the Tullett Prebon Ordinary Shares could be subject to significant fluctuations due to a change in sentiment in the market specifically regarding the Transaction. Such risks depend on the market's response to the Transaction and results of operations, and business developments of the TP Group and/or its competitors. The TP Group's results of operations and prospects may, from time to time, be below the expectations of market analysts and investors. Any of these events could result in a decline in the market price of the Tullett Prebon Ordinary Shares. The value of the Tullett Prebon Ordinary Shares could also be affected by developments unrelated to the TP Group's operating performance, such as the operating and share price performance of other companies that investors may consider comparable to Tullett Prebon, speculation about Tullett Prebon in the press or the investment community, strategic actions by competitors, including acquisitions and/or restructurings, changes in market conditions and regulatory changes in any number of countries, whether or not Tullett Prebon derives significant revenue therefrom and shifts in macro-economic or geopolitical conditions generally.
As at 26 February 2016 (being the last practicable date prior to the date of the Tullett Prebon Prospectus), Tullett Prebon's 10 largest shareholders collectively held 55.4 per cent. of the voting share capital of Tullett Prebon. After Completion, Tullett Prebon's 10 largest shareholders will collectively hold 53.5 per cent. of the voting share capital of Tullett Prebon (assuming no sale of Tullett Prebon Ordinary Shares by existing shareholders between 26 February 2016 and Completion). In particular, Newco will hold 19.9 per cent. of the voting share capital of Tullett Prebon after Completion, and such holding will not be subject to any lock-up arrangement.
Subsequent sales by any of them (or any other substantial shareholders) of a substantial number of Tullett Prebon Ordinary Shares may significantly reduce the price of the Tullett Prebon Ordinary Shares. Also, any perceived view that any such shareholder might sell substantial numbers of Tullett Prebon Ordinary Shares could depress the price of Tullett Prebon Ordinary Shares for an unknown period of time.
The TP Group may seek to raise financing to fund future acquisitions and other growth opportunities. Tullett Prebon may, for these and other purposes, such as in connection with share incentive and share option plans, issue additional Tullett Prebon Ordinary Shares. As a result, the holder of New Tullett Prebon Ordinary Shares may suffer dilution in their percentage ownership of Tullett Prebon.
Under English company law, a company can only pay cash dividends to the extent that it has distributable reserves available for this purpose. As a holding company, Tullett Prebon's ability to pay dividends in the future is affected by a number of factors, including having sufficient distributable reserves and its ability to receive sufficient dividends from subsidiaries.
The ability of these subsidiaries to pay dividends and Tullett Prebon's ability to receive distributions from its investments in other entities are subject to applicable local laws and regulatory requirements and other restrictions, including, but not limited to, the existence of sufficient distributable reserves and cash and applicable tax laws. These laws and restrictions could limit the payment of dividends and distributions to Tullett Prebon by its subsidiaries, which could in future restrict Tullett Prebon's ability to
fund other operations or to pay a dividend to holders of the Tullett Prebon Ordinary Shares, which could have an adverse impact on the market price of the Tullett Prebon Ordinary Shares.
The ability of an Overseas Shareholder to bring an action against Tullett Prebon may be limited under law. Tullett Prebon is a public limited company incorporated in England. The rights of holders of Tullett Prebon Ordinary Shares are governed by English law and by the articles of association of Tullett Prebon. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. An Overseas Shareholder may not be able to enforce a judgment against some or all of the directors and executive officers of Tullett Prebon. The majority of directors and executive officers are residents of the United Kingdom. Consequently it may not be possible for an Overseas Shareholder to effect service of process upon the directors and executive officers of Tullett Prebon within the Overseas Shareholder's country of residence or to enforce against the directors and executive officers of Tullett Prebon judgments of courts of the Overseas Shareholder's country of residence based on civil liabilities under that country's securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the United Kingdom against the directors or executive officers of Tullett Prebon who are residents of the United Kingdom or countries other than those in which judgment is made. In addition, English or other courts may not impose civil liability on the directors or executive officers of Tullett Prebon in any original action based solely on foreign securities laws brought against Tullett Prebon or the directors in a court of competent jurisdiction in England or other countries.
The directors of Tullett Prebon as at the date of this document and their respective roles are set out below:
| Name | Age | Position | Date appointed |
|---|---|---|---|
| Rupert Robson | 55 | Chairman | January 2007 |
| John Phizackerley | 54 | Chief Executive Officer | September 2014 |
| Paul Mainwaring | 52 | Finance Director | October 2006 |
| Angela Knight | 65 | Senior Independent Non-executive Director |
September 2011 |
| Roger Perkin . |
67 | Independent Non-executive Director |
July 2012 |
| Stephen Pull | 59 | Independent Non-executive Director |
September 2011 |
| David Shalders | 49 | Independent Non-executive Director |
February 2014 |
| Carol Sergeant | 63 | Independent Non-executive Director |
July 2015 |
The business address of all of the directors of Tullett Prebon is Tower 42, Level 37, 25 Old Broad Street, London EC2N 1HQ.
The management expertise and experience of each of the directors of Tullett Prebon is set out below.
Rupert Robson was appointed to the board of Tullett Prebon in January 2007 and to Chairman on 6 March 2013. He is Chairman of the Nominations Committee and a trustee of Tullett Prebon's UK defined benefit pension scheme. He has held a number of senior roles in financial institutions, most recently Chairman of Charles Taylor plc, Non-executive Director of London Metal Exchange Holdings Ltd and Non-executive Director of OJSC Nomos Bank, Global Head, Financial Institutions Group, Corporate Investment Banking and Markets at HSBC and Head of European Insurance, Investment Banking at Citigroup Global Markets. Currently he is Chairman of EMF Capital Partners and Sanne Group plc. He is also a Non-executive Director of Savills plc.
John Phizackerley was appointed to the board of Tullett Prebon and as Chief Executive in September 2014. From 1986 to 2009 he held various positions in Lehman Brothers including Head of Equity Research, head of Equity Sales in Europe, Global Head of Pan-European Cash Equities, Co-Head of European Equities and Chief Administrative Officer, Europe and Middle East. He remained with the firm post the Nomura acquisition in 2009 and held a number of positions, including Chief Operating Officer of Nomura International and Chief Executive Officer of Nomura Bank International, becoming Chief Executive officer of Nomura International plc in 2011.
Paul Mainwaring qualified as a chartered accountant with Price Waterhouse in 1987, and obtained an MBA from Cranfield School of Management in 1991. From 1993 to 2000, he worked for Caradon plc in a number of financial roles, including three years as Finance Director of MK Electric. In 2000, he was appointed as Group Finance Director of TDG plc. He was appointed as Group Finance Director of Mowlem plc in 2005. He was appointed to the Collins Stewart Tullett plc Board in October 2006, and has been Finance Director of Tullett Prebon since December 2006. He is also a trustee of Tullett Prebon's UK defined benefit pension scheme.
Angela Knight was appointed as a non-executive director of Tullett Prebon in September 2011. She is a member of the Audit, Remuneration and Nominations Committees. Angela Knight is the senior independent director on Brewin Dolphin Plc and a non-executive director of Transport for London. She was formerly the Chief Executive of Energy UK until 31 December 2014, the Chief Executive of the British Bankers' Association from 2007 to 2012 and the Chief Executive of the Association of Private Client Investment Managers and Stockbrokers from 1997 to 2006. She was also formerly the Member of Parliament for Erewash from 1992 to 1997, serving as a Treasury Minister from 1995 to 1997. Her previous non-executive director appointments include the Financial Skills Partnership, Lloyds TSB plc, Scottish Widows and LogicaCMG plc.
Roger Perkin joined the board of Tullett Prebon on 1 July 2012. He is Chairman of the Audit Committee and a member of the Risk and Nominations Committees. He is a former partner at Ernst & Young LLP and spent 40 years in the accounting profession before retiring from the firm in 2009. He is a non-executive director and Chairman of the Audit Committee for Nationwide Building Society and Electra Private Equity plc. He was formerly a non-executive director at The Evolution Group plc until its acquisition in December 2011 and of Friends Life Group Limited until its acquisition in 2015. He is a trustee of two charities, Chiddingstone Castle and Crime Reduction Initiatives.
Stephen Pull was appointed as a non-executive director of Tullett Prebon in September 2011. He is Chairman of the Remuneration Committee and a member of the Nominations Committee and a trustee of Tullett Prebon's UK defined benefit pension scheme. Stephen Pull was Chairman of Corporate Broking at Nomura between 2008 and 2011 following their acquisition of Lehman Brothers Europe for whom Stephen worked from 2002 as Head of Corporate Broking, and then as Chairman of Corporate Broking. He has also held a number of other senior roles in the City, including Managing Director of Corporate Broking at Merrill Lynch and Head of UK Equity Sales at Barclays de Zoete Wedd.
David Shalders joined the board of Tullett Prebon on 27 February 2014 and is a member of the Remuneration and Risk Committees. David Shalders is Group Operations & Technology Director at Willis Towers Watson, responsible for information technology, operations, real estate and change management functions. David Shalders joined Willis from the Royal Bank of Scotland Group where he served for over a decade in senior operations and IT roles, most recently as Global Chief Operating Officer for Global Banking and Markets. He also led the division's regulatory response to Basel 3. Prior to that, David led the integration with ABN Amro and held roles as Head of London and Asia Operations and Head of Derivative Operations for NatWest.
Carol Sergeant CBE was appointed as a non-executive director in July 2015. She chairs the Board's Risk Committee and is also a member of the Audit Committee. She is currently a non-executive director at Danske Bank Group as well as being Chair of the Standards Policy and Strategy Committee of the British Standards Institute, Trustee of the Lloyds Register Foundation and Chair of the UK whistle blowing charity, Public Concern at Work. Carol Sergeant has enjoyed a distinguished City career, holding various senior positions, including Head of Major Banks' Supervision at the Bank of England, Managing Director at the Financial Services Authority and Chief Risk Officer at Lloyds Banking Group. She was formerly a non-executive director of Secure Trust Bank plc until 31 December 2015.
The proposed director will become a director of Tullett Prebon following Completion (subject to regulatory approval):
| Name | Age | Proposed position | Date appointed |
|---|---|---|---|
| Ken Pigaga . |
61 | Chief Operating Officer | N/A |
Ken Pigaga has been Group Chief Operating Officer of ICAP since November 2013. He joined ICAP in 2006 and served as Chief Operating Officer for ICAP Americas until becoming Chief Operating Officer of the ICAP Group. Prior to joining ICAP, Ken was a managing director at J.P. Morgan in the Investment Bank focused on e-commerce activities. From 1991 to 2001, he held a variety of roles at Goldman Sachs in emerging markets trading, portfolio structuring and e-commerce.
The following is a summary of each material contract, other than contracts entered into in the ordinary course of business, to which Tullett Prebon or any member of the Tullett Prebon Group is a party, for the two years immediately preceding the date of publication of this document and a summary of any other contract (not being a contract entered into in the ordinary course of business) entered into by any member of the Tullett Prebon Group which contains any provision under which any member of the Tullett Prebon Group has any obligation or entitlement which is material to the Tullett Prebon Group as at 26 February 2016 (being the last practicable date prior to the date of this document):
ICAP and Tullett Prebon entered into the Sale and Purchase Agreement dated 11 November 2015 governing the terms and conditions of the Transaction.
Please refer to paragraph 1 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' for an overview of the key provisions of the Sale and Purchase Agreement.
Tullett Prebon entered into a £150,000,000 multicurrency revolving credit facility (the ''RCF'') and a £50,000,000 swingline facility (the ''Swingline Loans'') dated 2 April 2015 as borrower with (i) TP Holdings Limited as guarantor, (ii) Bank of America Securities Limited, HSBC Bank plc, Lloyds Bank plc (previously known as Lloyds TSB Bank plc) and the Royal Bank of Scotland plc as mandated lead arrangers, (iii) Banc of America Securities Limited as facility agent, (iv) Bank of America, N.A. as swingline facility agent, and (vi) Bank of America, N.A., HSBC Bank plc, Lloyds Bank plc and National Westminster Bank plc, acting through its agent the Royal Bank of Scotland plc, as original lenders (the ''Facilities Agreement'').
The Facilities Agreement contains an accordion option which, when exercised by Tullett Prebon, allows Tullett Prebon to increase the RCF and the Swingline Loans. Such an option was exercised by Tullett Prebon on 11 November 2015 pursuant to which the RCF was increased to £250,000,000 and the swingline facility was increased to £100,000,000, in each case on 16 December 2015.
The RCF is made available for (i) general corporate purposes of the Tullett Prebon Group, including acquisitions and to refinance, repay and/or prepay any outstanding amounts under a previous (now repaid) facilities agreement and (ii) refinancing the Swingline Loans.
Each Swingline Loan is made available only to fund margin calls and cannot be applied towards the repayment or prepayment of another Swingline Loan.
(ii) Interest and fees
The rate of interest payable on borrowings under the RCF is the aggregate of LIBOR (or, in relation to any loan denominated in euro, EURIBOR) and the applicable margin. Tullett Prebon may select interest periods for each loan of one, two, three or six months or any other period agreed with the lenders.
The rate of interest payable on each Swingline Loan for each day is the higher of, the prime commercial lending rate in US dollars announced by the swingline agent in force on that day, and the applicable margin over the rate per annum determined by the swingline agent to be the federal funds rate (weighted average of the rates on overnight Federal funds transactions with members of the US Federal Reserve System, published by Federal Reserve Bank of New York, or if a rate is not published, the average quotation for that day on those transactions received by the swingline agent from three Federal funds). Tullett Prebon may select the interest period for a Swingline Loan in the relevant request for than loan.
Certain fees and expenses, including, facility agent's fee, swingline agent's fee, arrangement fee, RCF commitment fee and RCF utilisation fee, are also payable.
(iii) Repayment
Each loan made under the RCF is repayable on the last day of its interest period but, subject to the terms of the Facilities Agreement, may be re-borrowed.
Each Swingline Loan is repaid by drawing down a loan under the RCF.
(iv) Mandatory and voluntary prepayment
The Facilities Agreement allows for voluntary prepayments and requires mandatory prepayments in full in certain circumstances, including on a change of control of Tullett Prebon. The Transaction will not be a change of control for the purposes of the Facilities Agreement.
(v) Representations, warranties and undertakings
The Facilities Agreement contains certain customary representations and warranties.
It requires Tullett Prebon to comply with certain negative covenants, including covenants relating to creation of security, financial indebtedness, disposals, acquisitions and change in business.
In addition, the Facilities Agreement requires Tullett Prebon to maintain specified financial ratios in relation to consolidated total net borrowings to consolidated EBITDA, and consolidated EBIT to consolidated net interest payable.
The Facilities Agreement also contains certain customary affirmative undertakings including, amongst others, undertakings in relation to delivery of financial statements, compliance with laws, insuring the business and assets and pari passu ranking.
(vi) Final maturity
The final date of the Facilities Agreement is 2 April 2018.
(vii) Events of default
The Facilities Agreement contains certain customary events of default including, amongst others, events relating to failure to pay, misrepresentation, cross default, breach of financial covenants, insolvency, insolvency proceedings and material adverse change.
Tullett Prebon must indemnify each lender against any loss or liability which that lender incurs as a consequence of receiving an amount in respect of the obligor's liability or that liability being converted into a claim, proof, judgement or order in a currency other than the currency in which the amount is expressed to be payable.
Tullett Prebon is also required to pay break costs if a loan or an overdue amount is repaid / prepaid otherwise than on the last day of any term applicable to it.
Tullett Prebon entered into a £470,000,000 term loan facility agreement (the ''Bridge Facility'') dated 11 November 2015 as borrower with (i) TP Holdings Limited as guarantor, (ii) Bank of America Merrill Lynch International Limited, HSBC Bank plc, Lloyds Bank plc and The Royal Bank of Scotland plc as mandated lead arrangers and original lenders, and (iii) Bank of America Merrill Lynch International Limited HSBC Bank plc, as facility agent (the ''Bridge Facility Agreement'').
(i) Purpose
The Bridge Facility is made available for (i) the payment of acquisition costs of the acquisition of IGBHL, to refinance the debt of the IGBHL and its subsidiaries, to repay amounts due in respect of certain notes issued by Tullett Prebon Group Holdings plc and Tullett Prebon and amounts outstanding under Tullett Prebon's existing revolving facilities.
(ii) Interest and fees
The rate of interest payable on borrowings under the Bridge Facility is the aggregate of LIBOR and the applicable margin. Tullett Prebon may select interest periods for each loan of one, two, three or six months or any other period agreed with the lenders.
Certain fees and expenses, including, facility agent's fee, upfront fee, commitment fee and extension fee (if applicable), are also payable.
(iii) Repayment
Each loan made under the Bridge Facility is repayable on the last day of its interest period.
The Bridge Facility Agreement allows for voluntary prepayments and requires mandatory prepayments in full in certain circumstances, including on a change of control of Tullett Prebon.
(v) Representations, warranties and undertakings
The Bridge Facility Agreement contains certain customary representations and warranties.
It requires Tullett Prebon to comply with certain negative covenants, including covenants relating to creation of security, financial indebtedness, disposals, acquisitions and change in business.
In addition, the Bridge Facility Agreement requires Tullett Prebon to maintain specified financial ratios in relation to consolidated total net borrowings to consolidated EBITDA, and consolidated EBIT to consolidated net interest payable.
The Bridge Facility Agreement also contains certain customary affirmative undertakings including, amongst others, undertakings in relation to delivery of financial statements, compliance with laws, insuring the business and assets and pari passu ranking.
(vi) Final maturity
The initial term of the Bridge Facility Agreement expires on 31 December 2016. Tullett Prebon may submit an initial extension notice between 30 days and 10 days before 31 December 2016. If submitted within this time period, the term of the Bridge Facility Agreement will be extended by 6 months, to 31 June 2017. If Tullett Prebon wishes to extend the term of the Bridge Facility Agreement for a further 6 months, it may submit another extension notice. If submitted between 30 days and 10 days before the 31 June 2017, the term of the Bridge Facility Agreement will be further extended to 6 months after 31 June 2017, being 31 December 2017. Each extension is at Tullett Prebon's option.
(vii) Events of default
The Bridge Facility Agreement contains certain customary events of default including, amongst others, events relating to failure to pay, misrepresentation, cross default, breach of financial covenants, insolvency, insolvency proceedings and material adverse change.
(viii) Miscellaneous
Tullett Prebon must indemnify each lender against any loss or liability which that lender incurs as a consequence of receiving an amount in respect of the obligor's liability or that liability being converted into a claim, proof, judgement or order in a currency other than the currency in which the amount is expressed to be payable.
Tullett Prebon is also required to pay break costs if a loan or an overdue amount is repaid / prepaid otherwise than on the last day of any term applicable to it.
On Option Completion, as a result of the issue of New Tullett Prebon Shares to Newco, Newco will hold 19.9 per cent. of the issued share capital of Enlarged Tullett Prebon. The Relationship Agreement will be entered into between Tullett Prebon and Newco on Initial Completion, effective from the Tullett Prebon Admission, to govern the relationship between Tullett Prebon and Newco as a shareholder of Enlarged Tullett Prebon following Completion. The principal purpose of the Relationship Agreement is to ensure that Enlarged Tullett Prebon is capable of carrying on its business independently of Newco and its associates.
Please refer to paragraph 2 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' for an overview of the key provisions of the Relationship Agreement.
(e) The Transitional Services Agreements
On or before Initial Completion, IGBB and ICAP will enter into two Transitional Services Agreements pursuant to which (i) ICAP will provide IGBB with the use of or access to certain resources that will be retained by the Retained Group as at Initial Completion (the ''Transitional Services Agreement'' or ''TSA''), and (ii) IGBB will provide the Retained Group with the use of or access to certain resources that will be owned or controlled by IGBB as at Initial Completion (the ''Reverse Transitional Services Agreement'' or ''RTSA'').
Please refer to paragraph 3 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' for an overview of the key provisions of the Transitional Services Agreement and the Reverse Transitional Services Agreement.
(f) Tax Deed
On Initial Completion, a Tax Deed will be entered into pursuant to which Newco will indemnify Tullett Prebon for any tax liabilities of IGBHL and its subsidiaries relating to the period on or before Initial Completion (grossed up for any tax thereon).
Please refer to paragraph 9(a)(viii) of Part VIII ''Additional Information—ICAP'' for an overview of the key provisions of the Tax Deed.
On 1 March 2016, Tullett Prebon and NM Rothschild & Sons Limited (the ''Tullett Prebon Sponsor'') entered into a sponsor agreement, pursuant to which the Tullett Prebon Sponsor agreed to act as sponsor to Tullett Prebon in connection with the applications for the Tullett Prebon Admission and the publication of the Tullett Prebon Prospectus (the ''Tullett Prebon Sponsor Agreement''). Under the terms of the Tullett Prebon Sponsor Agreement, Tullett Prebon has agreed to provide the Tullett Prebon Sponsor with certain customary indemnities, undertakings, representations and warranties. The indemnities provided by Tullett Prebon indemnify the Tullett Prebon Sponsor and its affiliates against, inter alia, claims made against them or losses incurred by them, subject to certain exemptions. In addition, the Tullett Prebon Sponsor Agreement provides the Tullett Prebon Sponsor with the right to terminate the Tullett Prebon Sponsor Agreement before the Tullett Prebon Admission in certain specified circumstances typical for a sponsor agreement of this nature. If such right is exercised by the Tullett Prebon Sponsor, the Tullett Prebon Sponsor Agreement will lapse.
Save as set out below, there are no government, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Tullett Prebon is aware) during the previous 12 months which may have, or have had in the recent past, significant effects on the financial position or profitability of Tullett Prebon or the Tullett Prebon Group.
Tullett Prebon is currently under investigation by the FCA in relation to certain trades undertaken between 2008 and 2011, including trades which are risk free, with no commercial rationale or economic purpose, on which brokerage is paid and trades on which brokerage may have been improperly charged. As part of its investigation the FCA is considering the extent to which during the relevant period (i) Tullett Prebon's systems and controls were adequate to manage the risks associated with such trades and (ii) whether certain of Tullett Prebon's managers were aware of, and/or managed appropriately the risks associated with, the trades. The FCA is also reviewing the circumstances surrounding a failure in 2011 to discover certain audio files and produce them to the FCA in a timely manner. As the investigation is on-going, any potential liability arising from it cannot currently be quantified.
Tullett Prebon's revenue is dependent, in the short term, on the level of activity in the markets it serves. Revenue in the first two months of 2016 was 3 per cent. lower than in the same period in 2015 at constant exchange rates. Revenue from Tullett Prebon Information Sales Business and Tullett Prebon Risk Management Services Business, and broking revenue in energy and equities, was higher than in the prior year, offset by lower broking revenue in the traditional interdealer product areas of treasury products, interest rate derivatives and fixed income securities.
It is not possible to predict when the structural and cyclical factors currently adversely affecting the interdealer broker industry will ease, or when the level of activity in the wholesale OTC financial markets may increase. Tullett Prebon's recent performance has benefited from the buoyant level of activity in the energy and commodities markets, particularly in oil and oil related financial instruments, and this level of activity may not persist. Tullett Prebon has taken further cost improvement action and will continue to actively manage its cost base to reflect market conditions.
The New Tullett Prebon Shares will be issued as fully paid and will rank pari passu in all respects with the existing Tullett Prebon Ordinary Shares in issue at the time the New Tullett Prebon Shares are issued pursuant to the Transaction, including in relation to any dividends or other distributions with a record date falling after the issue of the New Tullett Prebon Shares.
On the assumption that no Tullett Prebon Ordinary Shares are issued by Tullett Prebon between 26 February 2016 (the latest practicable date prior to publication of this document) and admission of the New Tullett Prebon Shares (other than the New Tullett Prebon Shares and 302,148 Tullett Prebon Ordinary Shares that may be issued as a result of the exercise of a vested share option award under Tullett Prebon's long term incentive plan), it is expected that, in aggregate, 310,314,296 New Tullett Prebon Shares will be issued on Completion in connection with the Transaction. This will result in Tullett Prebon's issued ordinary share capital increasing by approximately 127 per cent. Existing Tullett Prebon Shareholders will suffer an immediate dilution as a result of the Transaction, following which they will hold approximately 44 per cent. of the issued share capital of Enlarged Tullett Prebon.
The existing Tullett Prebon Ordinary Shares are currently admitted to trading on the London Stock Exchange's main market for listed securities.
As the Transaction is classified as a reverse takeover in respect of Tullett Prebon for the purpose of the Listing Rules, upon Initial Completion, the listing of the existing Tullett Prebon Ordinary Shares to the premium listing segment of the Official List will be cancelled. Simultaneously, application will also be made for the re-admission of the existing Tullett Prebon Ordinary Shares and the admission of the New Tullett Prebon Shares which will be issued at Initial Completion to the premium listing segment of the Official List maintained by the FCA and to trading on the London Stock Exchange's main market for listed securities. On Option Completion, application will be made for the admission of the New Tullett Prebon Shares which will be issued at Option Completion to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities.
It is expected that Completion of the Transaction (including admission of the New Tullett Prebon Shares) will take place in 2016.
ICAP Shareholders should consider fully and carefully the Tullett Prebon Prospectus and, in particular, the risk factors associated with the Enlarged Tullett Prebon Group and the Transaction set out in Part II (Risk Factors) of the Tullett Prebon Prospectus.
The following is a summary of certain United Kingdom tax considerations relating to the Proposals.
The statements set out below are based on current United Kingdom tax law and published HMRC practice (which is not binding on HMRC), as at the date of this document, and which may be subject to change at any time, possibly with retroactive effect. They are intended as a general guide and apply only to ICAP Shareholders resident and, in the case of an individual, domiciled in (and only in) the United Kingdom for United Kingdom tax purposes (except insofar as express reference is made to the treatment of non-United Kingdom residents), who hold Scheme Shares as an investment (other than under an individual savings account or a self-invested personal pension) and who are the absolute beneficial owners of the Scheme Shares. (In particular, shareholders holding their Scheme Shares via a depositary receipt system or clearance service should note that they may not always be regarded as the absolute beneficial owners thereof.) The discussion does not address all possible tax consequences relating to an investment in the Scheme Shares. The statements are not addressed to: (i) special classes of shareholders such as, for example, dealers in securities, broker-dealers, intermediaries, insurance companies and collective investment schemes; (ii) shareholders who hold Scheme Shares as part of hedging transactions; (iii) shareholders who have (or are deemed to have) acquired their Scheme Shares by virtue of an office or employment; and (iv) shareholders who hold Scheme Shares in connection with a trade, profession or vocation carried on in the United Kingdom through a branch or agency (or, in the case of a corporate shareholder, in connection with a trade in the UK carried on through a permanent establishment or otherwise). ICAP Shareholders who are or have been officers or employees of ICAP or a company forming part of the ICAP Group may be subject to special rules and this summary does not apply to such shareholders.
ICAP Shareholders or prospective shareholders who are in any doubt about their tax position, or who are resident or otherwise subject to taxation in a jurisdiction outside the United Kingdom, should consult their own professional advisers immediately.
ICAP Shareholders are also referred to the Tullett Prebon Prospectus which contains further considerations as to the UK tax consequences of owning and disposing of the New Tullett Prebon Shares.
For the purposes of UK tax on chargeable gains, it is expected that the Scheme will constitute a scheme of reconstruction, subject to obtaining clearance under section 138 Taxation of Chargeable Gains Act 1992 in respect of UK tax resident ICAP Shareholders who hold more than 5 per cent. of the Scheme Shares. UK tax resident ICAP Shareholders should not therefore be treated as making a disposal or part disposal of their Scheme Shares as a result of receiving Newco Ordinary Shares in exchange for their Scheme Shares pursuant to the Scheme, and so no chargeable gain or allowable loss should arise for the UK tax resident ICAP Shareholders from the Scheme. Newco Ordinary Shares should be treated as the same asset, and having been acquired at the same time and for the same consideration, as those Scheme Shares which they represent.
For the purposes of UK tax on chargeable gains, clearance has been obtained from HMRC that the Demerger and Newco Reduction of Capital will constitute a scheme of reconstruction, subject to obtaining clearance under section 138 Taxation of Chargeable Gains Act 1992 in respect of Newco Shareholders who hold more than 5 per cent. of the Newco Ordinary Shares. Newco Shareholders should not therefore be treated as making a disposal or part disposal of their Newco Ordinary Shares as a result of the Newco Reduction of Capital or the issue of New Tullett Prebon Shares pursuant to the Demerger, and so no chargeable gain or allowable loss should arise. The New Tullett Prebon Shares and the Newco Ordinary Shares that will be held by a shareholder following the Demerger should collectively be treated as the same asset, and on having been acquired at the same time and for the same consideration, as those Scheme Shares which they represent.
For the purposes of UK tax on chargeable gains, the Share Consolidation should constitute a reorganisation of Newco's share capital within the meaning of section 126 of the Taxation of Chargeable Gains Act 1992. UK tax resident Newco Shareholders should not therefore be treated as making a disposal or part disposal of their Newco Ordinary Shares as a result of the Share Consolidation, and so no chargeable gain or allowable loss should arise for the UK tax resident Newco Shareholders from the Share Consolidation. The Newco Ordinary Shares held by such Newco Shareholders after the Share Consolidation should be treated as the same asset, and as having been acquired at the same time and for the same consideration, as the Newco Ordinary Shares held by such Newco Shareholders before the Share Consolidation.
In summary, the New Tullett Prebon Shares and the Newco Ordinary Shares that will be held by a Scheme Shareholder following the Demerger should collectively be treated as the same asset, and as having been acquired at the same time and for the same consideration, as those Scheme Shares which they represent. Therefore, following the Demerger and the Share Consolidation, a Scheme Shareholder's original base cost in their Scheme Shares should be divided between its New Tullett Prebon Shares and its Newco Ordinary Shares in proportion to the respective market values of New Tullett Prebon Shares and Newco Ordinary Shares on the date of the Demerger.
Application has been made to HMRC for clearance under section 138 of the Taxation of Chargeable Gains Act 1992 that they are satisfied that the Proposals are being effected for bona fide commercial reasons and do not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is an avoidance of liability to UK capital gains tax or corporation tax.
A UK resident shareholder who receives cash from the Company in lieu of a fractional share of Newco Ordinary Shares (following the Share Consolidation) or New Tullett Prebon Shares will be treated as having made a part disposal of their holding of Newco Ordinary Shares or New Tullett Prebon Shares. This may, depending on individual circumstances (including the availability of exemptions and reliefs), give rise to a chargeable gain or allowable loss for the purposes of UK taxation on chargeable gains.
However, provided the amount of cash received is ''small'' as compared to the value of the shareholder's holding of Newco Ordinary Shares or New Tullett Prebon Shares (as applicable), the shareholder may treat the cash received as a deduction from the base cost of the shareholder's holding of Newco Ordinary Shares or New Tullett Prebon Shares (as applicable), rather than as a part disposal of such holding. HMRC's current practice is to consider the amount of cash received to be ''small'' when such amount is five per cent. or less of the value of such holding or is less than £3,000.
A subsequent disposal or deemed disposal of New Tullett Prebon Shares or Newco Ordinary Shares by a shareholder who is resident in the United Kingdom for tax purposes may, depending on individual circumstances (including the availability of exemptions and reliefs), give rise to a chargeable gain or an allowable loss for the purposes of United Kingdom taxation on chargeable gains.
No stamp duty or SDRT should be payable by the ICAP Shareholders (i) as a result of the cancellation of Scheme Shares and the issue of Newco Ordinary Shares under the Scheme; or (ii) as a result of the Demerger and the issue of New Tullett Prebon Shares pursuant to the Demerger.
The above comments do not apply, in particular, to shares held in or issued or transferred into depositary receipts or clearance arrangements to which special rules apply.
In certain circumstances, Part 15 of the Corporation Tax Act 2010 (''CTA 2010'') and Chapter 1 of Part 13 of the Income Tax Act 2007 (''ITA 2007'') may apply where a person obtains a tax advantage as a consequence of a ''transaction in securities''. An application has been made to HMRC for clearance under section 748 CTA 2010 and section 701 ITA 2007 that they are satisfied that no notice under section 746 CTA 2010 or section 698 ITA 2007, respectively, should be served in respect of the Proposals.
Neither the Scheme, the Newco Reduction of Capital, the Demerger nor the Share Consolidation should give rise to taxable income in the hands of ICAP Shareholders.
The following discussion is a summary of certain U.S. federal income tax consequences to a U.S. Shareholder (as described below) of the transactions that are the subject of the Proposals. The following summary applies only to U.S. Shareholders that hold ICAP Ordinary Shares as capital assets for U.S. federal income tax purposes (generally, property held for investment).
This summary is addressed to ICAP Shareholders that are citizens or residents of the United States, corporations created or organised in or under the laws of the United States or any state therein or the District of Columbia, estates the income of which is subject to U.S. federal income taxation regardless of its source, or trusts if: (a) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) the trust has a valid election in effect under applicable U.S. treasury regulations to be treated as a U.S. person (''U.S. Shareholders''). If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds the Scheme Shares, the U.S. federal income tax treatment of the partnership and a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax adviser as to the U.S. federal income tax consequences of the transactions that are the subject of the Proposals.
This summary is not a complete analysis of all U.S. federal income tax consequences that may be relevant to a U.S. Shareholder. In particular, this summary does not attempt to address the U.S. federal income tax consequences that apply to U.S. Shareholders subject to special tax rules, including, among others, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, dealers or traders in securities or currencies, tax-exempt entities, investors that hold ICAP Ordinary Shares as part of an ''integrated,'' ''hedging'' or ''conversion'' transaction or as a position in a ''straddle'' for U.S. federal income tax purposes, grantor trusts, investors that have a ''functional currency'' other than the U.S. dollar, or any investor that owns (directly or by attribution) 5 per cent. or more of ICAP's share capital by voting power or value, certain U.S. expatriates and investors subject to the alternative minimum tax. This summary does not describe any U.S. federal estate, gift, alternative minimum tax or net investment income tax considerations or any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the United States.
The summary is based upon the U.S. Internal Revenue Code of 1986, as amended (the ''Code'') and U.S. treasury regulations thereunder as in effect on the date of this offering memorandum, as well as judicial and administrative interpretations thereof (in final or proposed form) available on or before such date. All of the foregoing are subject to change, which change could apply retroactively. ICAP has not sought any ruling from the U.S. Internal Revenue Service (the ''IRS'') with respect to the tax consequences described below, and ICAP cannot assure you that the IRS will not take contrary positions. Investors should consult their own tax advisers with respect to the U.S. federal, state, local and non-U.S. tax consequences to them of the transactions that are the subject of the Proposals and ownership of the Newco Ordinary Shares and New Tullett Prebon Shares.
The remainder of this discussion assumes that Newco is not, and ICAP has not been during any time in which a U.S. Shareholder has held its ICAP Ordinary Shares, a passive foreign investment company (a ''PFIC''). If the U.S. Shareholder's Newco Ordinary Shares were classified as shares in a PFIC, such U.S. Shareholder could be subject to adverse U.S. federal income tax consequences as a result of the transactions that are the subject of the Proposals. U.S. Shareholders should consult their tax advisers about the possibility that ICAP might have been, or Newco might be, classified as being a PFIC and the consequences if ICAP were, or Newco is, so classified.
The rules relating to the U.S. federal income tax treatment of the transactions that are the subject of the Proposals are complex, and the application of those rules to such transactions is not entirely clear. On balance, it is likely that (i) the cancellation of the ICAP Ordinary Shares and the receipt of Newco Ordinary Shares on the Scheme Effective Date, (ii) the receipt of the New Tullett Prebon Shares upon the Initial Completion, and (iii) the exchange of Newco Ordinary Shares for a smaller number of Newco Ordinary Shares pursuant to the Share Consolidation, should be treated as a transaction in which U.S. Shareholders contribute their ICAP Ordinary Shares to Newco in exchange for Newco Ordinary Shares and New Tullett Prebon Shares. Under the treatment just described, U.S. Shareholders should have the following U.S. federal income tax consequences from such transactions.
It is likely that U.S. Shareholders should be treated as receiving their Newco Ordinary Shares in a transaction that does not cause them to recognise gain or loss for U.S. federal income tax purposes. U.S. Shareholders' basis in their Newco Ordinary Shares should equal their basis in their ICAP Ordinary Shares before the exchange, and U.S. Shareholders' holding period of their Newco Ordinary Shares should include the holding period of their ICAP Ordinary Shares in respect of which the Newco Ordinary Shares.
It is likely that U.S. Shareholders' receipt of New Tullett Prebon Shares (including fractional entitlements) pursuant to the Demerger should be treated as a taxable distribution received by them with respect to their Newco Ordinary Shares. The amount of such distribution should be equal to the USD fair market value (as of the date of Initial Completion) of the New Tullett Prebon Shares (including the fractional entitlements to such shares) received.
Such distribution should likely be treated as a dividend, to the extent made out of current or accumulated earnings and profits, as calculated for U.S. federal income tax purposes. In this regard, neither Newco nor ICAP maintains calculations of its earnings and profits under U.S. federal income tax principles. U.S. Shareholders should therefore assume that the entire amount of the distribution of New Tullett Prebon Shares (including fractional entitlements to such shares) constitutes foreign source ordinary dividend income. Such dividend should not be eligible for the dividends received deduction provided for certain dividends received by U.S. corporate shareholders. Such dividend paid to non-corporate U.S. Shareholders should be subject to U.S. federal income tax at lower rates than other types of ordinary income, provided that ICAP qualifies for the benefits of the income tax treaty between the United States and the United Kingdom and certain other requirements are met.
A U.S. Shareholder should have a tax basis in the New Tullett Prebon Shares (including the fractional entitlements to such shares) equal to the USD fair market value of such shares on the date of Initial Completion. U.S. Shareholders' holding period in the New Tullett Prebon Shares will not include the holding period of their ICAP Ordinary Shares.
A U.S. Shareholder will recognise capital gain or loss upon the sale of fractional entitlements to New Tullett Prebon Shares in an amount equal to the difference between the USD value of the amount realised upon the disposition of such entitlements by a distribution agent appointed by Tullett Prebon and the USD fair market value of such fractional entitlements on the date of Initial Completion. Such gain or loss will generally be U.S. source gain or loss, and will be short-term capital gain or loss.
Although the Proposals should likely have the U.S. federal income tax consequences described above for U.S. Shareholders, the proper treatment of such transactions is not entirely certain. U.S. Shareholders should consult their own tax advisers regarding the U.S. federal income tax consequences to them of such transactions.
U.S. Shareholders should not recognise gain or loss for U.S. federal income tax purposes as a result of the Share Consolidation, except to the extent of cash received in lieu of fractional entitlements, as described below. U.S. Shareholders' basis in their Newco Ordinary Shares after the Share Consolidation should equal their basis in their Newco Ordinary Shares before the Share Consolidation (excluding the portion of basis allocable to fractional entitlements), and U.S. Shareholders' holding period of their Newco Ordinary Shares after the Share Consolidation should include the holding period of their Newco Ordinary Shares before the Share Consolidation. U.S. Shareholders who are treated as having acquired their shares of Newco Ordinary Shares on different dates and at different prices should consult their tax advisers regarding the allocation of the tax basis and holding period of such shares.
A U.S. Shareholder will recognise capital gain or loss upon the sale of fractional entitlements to Newco Ordinary Shares following the Share Consolidation in an amount equal to the difference between the USD value of the amount realised upon the sale and the U.S. Shareholder's tax basis allocable to such fractional shares. Such gain or loss will generally be U.S. source gain or loss, and will be long-term capital gain or loss if the U.S. Shareholder's holding period of such fractional entitlement exceeds one year. Certain non-corporate U.S. Shareholders, including individuals, are eligible for reduced rates of tax on long-term capital gains.
The receipt by an ICAP Shareholder that is a U.S. Shareholder (or that meets certain other criteria, including having a U.S. mailing address or holding its ICAP Ordinary Shares through an account maintained in the U.S.) of the New Tullett Prebon Shares and any cash in respect of fractional entitlements as a result of the transactions that are the subject of the Proposals may be subject to information reporting, unless such ICAP Shareholder establishes that it is exempt from these rules. If a U.S. Shareholder or other ICAP Shareholder does not establish that it is exempt from these rules, it may be subject to backup withholding on the New Tullett Prebon Shares and cash received unless it provides a taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. If an ICAP Shareholder is subject to backup withholding, such backup withholding may be satisfied by selling an amount of the ICAP Shareholder's New Tullett Prebon Shares otherwise distributable to such ICAP Shareholder. Any remaining proceeds from such a sale after deduction of such backup withholding will be paid to the ICAP Shareholder. Backup withholding is not an additional tax and the amount of any backup withholding from the New Tullett Prebon Shares and any cash that is received will be allowed as a credit against an ICAP Shareholder's U.S. federal income tax liability (if any) and may entitle such ICAP Shareholder to a refund, provided that the required information is timely furnished to the IRS.
U.S. Shareholders should consult their own tax advisers about any additional reporting obligations that may apply as a result of the Transaction. Failure to comply with applicable reporting obligations could result in the imposition of substantial penalties.
PART XI:
CR—2016—631
(under Part 26 of the Companies Act 2006)
between ICAP plc and the Scheme Shareholders (as hereinafter defined)
In this Scheme, unless inconsistent with the subject or context, the following expressions shall bear the following meanings:
| ''£'' or ''sterling'' . |
the lawful currency of the United Kingdom; |
|---|---|
| ''Admission'' | admission of the Newco Ordinary Shares by the UK Listing Authority to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities; |
| ''Business Day'' | a day (other than a Saturday, Sunday, public or bank holiday) on which banks are generally open for business in London; |
| ''certificated'' or ''in certificated | |
| form'' | a share which is not in uncertificated form (that is, not in CREST); |
| ''Companies Act'' . |
the UK Companies Act 2006 as amended from time to time; |
| ''Court'' | the High Court of Justice of England and Wales; |
| ''Court Order'' | the order of the Court sanctioning the Scheme under Part 26 of the Companies Act and confirming the ICAP reduction of share capital; |
| ''CREST'' | the UK-based system for the paperless settlement of trades in listed securities, of which Euroclear is the operator; |
| ''CREST Regulations'' | the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755) as amended from time to time; |
| ''Euroclear'' | Euroclear UK & Ireland Limited, the operator of CREST; |
| ''FCA'' | the UK Financial Conduct Authority; |
| ''Holder'' | a registered holder, including any person entitled by transmission; |
| ''ICAP'' . |
ICAP plc, a public limited company incorporated in England and Wales with registered number 03611426, whose registered office is at 2 Broadgate, London EC2M 7UR; |
|---|---|
| ''ICAP Ordinary Shares'' | ordinary shares of £0.10 each in the capital of ICAP in issue prior to the Scheme Effective Date; |
| ''ICAP R Share'' | a redeemable preference share of £0.10 in the capital of ICAP to be issued and allotted to Newco prior to the Scheme Effective Date; |
| ''ICAP Shareholder'' . |
a Holder of ICAP Ordinary Shares and, from the Scheme Effective Date, a Holder of Newco Ordinary Shares; |
| ''London Stock Exchange'' . |
the London Stock Exchange plc or its successor; |
| ''Long-stop Date'' . |
28 July 2017; |
| ''members'' | members of ICAP on the register of members at any relevant date; |
| ''New ICAP Ordinary Share'' | an ordinary share with a nominal value of £0.10 in the capital of ICAP to be issued to Newco pursuant to the Scheme; |
| ''Newco'' | ICAP Newco plc, a public limited company incorporated in England and Wales with registered number 10013770, whose registered office is at 2 Broadgate, London EC2M 7UR; |
| ''Newco Director'' . |
a director of Newco; |
| ''Newco Ordinary Share'' | an ordinary share in the capital of Newco with a nominal value to be determined by the Newco Directors on or prior to the date on which the Court is asked to sanction the Scheme; |
| ''Newco Redeemable Preference | |
| Share'' | a redeemable subscriber preference share of £0.10 in the capital of Newco; |
| ''Newco Shareholder'' | a Holder of Newco Ordinary Shares and, prior to the Scheme Effective Date, the Holder of the Newco Subscriber Ordinary Share; |
| ''Newco Subscriber Ordinary | |
| Share'' | a subscriber ordinary share of £0.10 in the capital of Newco; |
| ''Official List'' . |
the official list of the FCA; |
| ''Overseas Shareholder'' | an ICAP Shareholder who is a citizen, resident or national of any jurisdiction outside the United Kingdom; |
| ''Registrar of Companies'' | the Registrar of Companies in England and Wales; |
| ''Scheme'' | this scheme of arrangement in its present form or with any modification thereof or addition thereto or condition approved or imposed by the Court and agreed to by ICAP and Newco; |
| ''Scheme Effective Date'' | the date on which the Scheme becomes effective in accordance with its terms; |
| ''Scheme Effective Time'' | the time at which the Scheme becomes effective on the Scheme Effective Date; |
| ''Scheme Record Time'' | 6.00 p.m. on the Business Day immediately preceding the Scheme Effective Date; |
| (ii) | all additional (if any) ICAP Ordinary Shares in issue 48 hours prior to the Court Meeting at which the Scheme is approved and remaining in issue at the Scheme Record Time; and |
|
|---|---|---|
| (iii) | all further (if any) ICAP Ordinary Shares which may be in issue immediately prior to confirmation by the Court of the reduction of capital provided for under the Scheme (as further described in clause 1 below) in respect of which the original or any subsequent Holders thereof are, or shall have agreed in writing to be, bound by the Scheme and remaining in issue at the Scheme Record Time, |
|
| and excluding, for the avoidance of doubt, the ICAP R Share; | ||
| ''uncertificated'' or ''in | ||
| uncertificated form'' | in relation to a share, a share which is recorded on the relevant register as in uncertificated form, being held in uncertificated form in CREST and title to which by virtue of the CREST Regulations may be transferred by means of CREST; and |
''United Kingdom'' or ''UK'' . . . . . . the United Kingdom of Great Britain and Northern Ireland,
and where the context so admits or requires, the plural includes the singular and vice versa.
2.1 In consideration of the cancellation of the Scheme Shares and the allotment and issue of the New ICAP Ordinary Shares to Newco pursuant to clause 1 above, Newco shall (subject to, and in accordance with, the remaining provisions in this Scheme), at the Scheme Effective Time, allot and issue (credited as fully paid) Newco Ordinary Shares to the ICAP Shareholders (as appearing in the register of members of ICAP at the Scheme Record Time) on the following basis:
With effect from and including the Scheme Effective Date, all certificates representing holdings of Scheme Shares shall cease to have effect as documents of title to the Scheme Shares comprised therein and every Holder of Scheme Shares should destroy such certificates at the Scheme Effective Date.
Each mandate in force and duly notified to ICAP at the Scheme Record Time relating to the payment of dividends and bonus share issues on Scheme Shares and each instruction, election and communication preference then in force as to notices and other communications (including electronic communications) from ICAP shall, unless and until varied or revoked, be deemed, from and including the Scheme Effective Date, to be a valid and effective mandate or instruction to Newco in relation to the corresponding Newco Ordinary Shares to be allotted and issued pursuant to this Scheme.
ICAP and Newco may jointly consent on behalf of all persons concerned to any modification of, or addition to, the Scheme or to any condition which the Court may think fit to approve or impose.
Notwithstanding the articles of association of ICAP, ICAP is authorised and permitted to pay all the costs and expenses relating to the negotiation, preparation and implementation of the Scheme and to Admission.
Dated: 1 March 2016
The following definitions apply throughout this document unless the context otherwise requires:
| ''£'', ''sterling'', ''GBP'' or ''pence'' . | the lawful currency of the United Kingdom |
|---|---|
| ''US\$'', ''US Dollar'' or ''USD'' . |
the lawful currency of the United States |
| ''2018 Notes'' . |
GBP 125,000,000 notes due 31 July 2018 with a 5.5 per cent. of interest issued by ICAP on 31 July 2012, further details of which are set out in paragraph 9(a)(iii) of Part VIII ''Additional Information—ICAP'' of this document |
| ''2019 Notes'' . |
EUR 350,000,000 3.125 per cent. fixed rate notes due 2019 issued by ICAP Group Holdings plc on 6 March 2014, further details of which are set out in paragraph 9(a)(iv) of Part VIII ''Additional Information—ICAP'' of this document |
| ''2023 Notes'' . |
EUR 15,000,000 4.30 per cent. fixed rate notes due 2023 issued by ICAP on 30 May 2013, further details of which are set out in paragraph 9(a)(v) of Part VIII ''Additional Information— ICAP'' of this document |
| ''Admission'' | the admission of the Newco Ordinary Shares by the UK Listing Authority to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities |
| ''ADRs'' | American depositary receipts |
| ''APAC'' | Asia Pacific |
| ''Business Day'' | a day (other than a Saturday, Sunday, public or bank holiday) on which banks are generally open for business in London |
| ''CFTC'' | the United States Commodity Futures Trading Commission |
| ''Closing Price'' | the closing middle market price of a relevant share as derived from the Daily Official List on any particular date |
| ''Companies Act'' . |
the UK Companies Act 2006 as amended from time to time |
| ''Company'' or ''ICAP'' | ICAP plc, a company registered in England and Wales with registered number 03611426, whose registered office is at 2 Broadgate, London EC2M 7UR |
| ''Completion'' . |
completion of the Transaction (following both Initial Completion and Option Completion) |
| ''Court'' | the High Court of Justice of England and Wales |
| ''Court Meeting'' . |
the meeting of ICAP Shareholders to be held at 11.30 a.m. on 24 March 2016 at the Company's registered office at 2 Broadgate, London EC2M 7UR (and any adjournment thereof) convened at the direction of the Court pursuant to Part 26 of the Companies Act at which a resolution will be proposed to approve the Scheme |
| ''CRD IV'' | the Capital Requirements Directive IV package which transpose, via a regulation and a directive, the new global standards on bank capital (the Basel III agreement) into EU law |
| ''CREST'' | the UK-based system for the paperless settlement of trades in listed securities, of which Euroclear is the operator |
| ''CREST Proxy Instruction'' | a properly authenticated CREST message appointing and instructing a proxy to attend and vote in place of an ICAP Shareholder at the Court Meeting and the General Meeting and containing the information required to be contained in the CREST Manual |
|---|---|
| ''CTA 2010'' | the Corporation Tax Act 2010 |
| ''Daily Official List'' | the daily official list of the London Stock Exchange |
| ''Demerger'' | those parts of the Transaction comprising the Newco Reduction of Capital, the acquisition by Tullett Prebon of approximately 64.5 per cent. of the issued share capital of IGBHL and the issue of New Tullett Prebon Shares to the holders of Newco Ordinary Shares equal to, in aggregate, approximately 45.07 per cent. of the issued share capital of Tullett Prebon (calculated on a fully diluted basis and immediately following such issuance), further details of which are set out in Part II ''Explanatory Statement'' of this document |
| ''Demerger Effective Date'' . |
the date on which the Reduction Court Order has been delivered to and, if ordered by the Court, registered by, the Registrar of Companies and the Newco Reduction of Capital becomes effective |
| ''Demerger Effective Time'' . |
the time at which the Newco Reduction of Capital becomes effective, being the time at which the Reduction Court Order is delivered to and, if ordered by the Court, registered by the Registrar of Companies |
| ''Depositary'' | the Bank of New York Mellon |
| ''Director'' | a director of ICAP |
| ''Disclosure Rules and Transparency Rules'' |
the disclosure rules and transparency rules made by the FCA under section 73A of FSMA |
| ''DSBP'' | the ICAP 2015 Deferred Share Bonus Plan |
| ''EBITDA'' . |
earnings before interest, tax, depreciation and amortisation |
| ''Enlarged Tullett Prebon'' | Tullett Prebon, as enlarged following Completion |
| ''Enlarged Tullett Prebon Group'' | |
| the Tullett Prebon Group as enlarged by the acquisition of IGBB following Completion |
|
| ''EPS'' | earnings per share |
| ''EU Capital Requirement Directive'' or ''CRD'' |
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, as amended |
| ''EU Capital Requirements | |
| Regulation'' or ''CRR'' . |
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, as amended |
| ''EURIBOR'' | Euro Interbank Offered Rate |
| ''Euro'' or ''EUR'' | the lawful currency of the European Union (as adopted by certain member states) |
| ''Euroclear'' | Euroclear UK & Ireland Limited, the operator of CREST |
| ''FCA'' | the UK Financial Conduct Authority |
|---|---|
| ''FCA Handbook'' . |
the FCA's handbook of rules and guidance, as amended from time to time |
| ''Fitch'' . |
Fitch Ratings Limited |
| ''Forms of Proxy'' . |
the blue form of proxy for use at the Court Meeting and the pink form of proxy for use at the General Meeting both of which accompany this document and a ''Form of Proxy'' means either of them as the context requires |
| ''FSMA'' | the UK Financial Services and Markets Act 2000 |
| ''General Meeting'' . |
the general meeting of ICAP to be held at 11.40 a.m. (or as soon thereafter as the Court Meeting has been concluded or adjourned) on 24 March 2016 at the Company's registered office at 2 Broadgate, London EC2M 7UR (and any adjournment thereof) for the purposes of considering and, if thought fit, approving the Resolutions |
| ''HMRC'' | Her Majesty's Revenue and Customs |
| ''IASB'' . |
the International Accounting Standards Board |
| ''ICAAP'' | the Internal Capital Adequacy Assessment Process |
| ''ICAP'' or ''Company'' | ICAP plc, a public limited company incorporated in England and Wales with registered number 03611426, whose registered office is at 2 Broadgate, London, EC2M 7UR |
| ''ICAP ADR Holders'' | holders of ICAP ADRs |
| ''ICAP ADRs'' . |
American depositary shares issued pursuant to a depositary agreement entered into between ICAP, the Depositary and the ICAP ADR Holders, each representing two ICAP Ordinary Shares or American depositary receipts evidencing the same, as the context requires |
| ''ICAP Articles'' | the articles of association of ICAP |
| ''ICAP Board'' | the board of directors of ICAP |
| ''ICAP Director'' | a director of ICAP, whose name is set out on page 5 of this document |
| ''ICAP Employee Share Plans'' . |
the ICAP 2015 Performance Share Plan, the ICAP 2015 Deferred Share Bonus Plan, the ICAP Senior Management Long Term Incentive Plan, the ICAP 2013 Bonus Share Matching Plan, the ICAP Unapproved Company Share Option Plan 2011, the ICAP 2008 Senior Executive Equity Participation Plan, the ICAP 2008 Sharesave Scheme, the ICAP 2003 Bonus Share Matching Plan, the ICAP 2001 Unapproved Company Share Option Plan, the ICAP Senior Executive Equity Participation Plan and the Traiana Plan |
| ''ICAP Group'' | (i) prior to the Scheme Effective Time, ICAP and its subsidiaries and subsidiary undertakings; and |
| (ii) after the Scheme Effective Time, the Newco Group |
|
| ''ICAP Group Bonds'' . |
the 2018 Notes, the 2019 Notes and the 2023 Notes |
| ''ICAP Ordinary Shares'' | ordinary shares of £0.10 each in the capital of ICAP |
| ''ICAP R Share'' | a redeemable preference share of £0.10 in the capital of ICAP to be issued and allotted to Newco prior to the Scheme Effective Date |
| ''ICAP Reduction of Capital'' | the reduction of ICAP's share capital associated with the cancellation and extinguishing of the Scheme Shares provided for by the Scheme under section 648 of the Companies Act |
|---|---|
| ''ICAP Register'' . |
the register of members of ICAP |
| ''ICAP Shareholder'' . |
a holder of ICAP Ordinary Shares and, from the Scheme Effective Date, a holder of Newco Ordinary Shares |
| ''ICAP's 2015 Annual Report'' . |
the annual report and accounts of ICAP plc for the year ended 31 March 2015 |
| ''ICAP's Registrars'' or ''Capita | |
| Asset Services'' | Capita Asset Services, a trading name of Capita Registrars Limited, whose registered office is at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU |
| ''IFRS'' . |
International Financial Reporting Standards |
| ''IGBB'' | ICAP's global hybrid voice-broking and information business, including ICAP's associated technology and broking platforms (including iSwap and Fusion) and certain of ICAP's joint ventures and associates |
| ''IGBB Global Broking'' | ICAP's three regionally managed hybrid voice-broking businesses in EMEA, the Americas and APAC, including all e-trading products and services developed by ICAP's e-Commerce team (including Fusion) |
| ''IGBB Group'' | IGBHL and its subsidiaries and subsidiary undertakings |
| ''IGBB Information Services'' | the part of IGBB's business in relation to the sale of information services products directly attributable to IGBB Global Broking and iSwap |
| ''IGBHL'' | ICAP Global Broking Holdings Limited, a private limited company incorporated in England and Wales with registered number 09080531, whose registered office is at 2 Broadgate, London EC2M 7UR |
| ''IGBHL Debt'' | a £330 million loan due from IGBHL to ICAP Group Holdings plc |
| ''Initial Completion'' | the completion of the acquisition by Tullett Prebon of approximately 64.5 per cent. of the issued share capital of IGBHL in consideration for the issue of New Tullett Prebon Shares comprising approximately 45.07 per cent. of the issued share capital of Tullett Prebon (calculated on a fully diluted basis and immediately following such issuance) to the holders of Newco Ordinary Shares |
| ''iSwap'' . |
iSwap Limited |
| ''ITA 2007'' . |
the Income Tax Act 2007 |
| ''J.P. Morgan Cazenove'' | J.P. Morgan Limited (which conducts its UK investment banking activities as J.P. Morgan Cazenove) |
| ''LIBOR'' | London Interbank Offered Rate |
| ''Listing Rules'' | the listing rules made by the FCA under section 73A of FSMA |
| ''London Stock Exchange'' . |
the London Stock Exchange plc or its successor |
| ''Long-stop Date'' . |
28 July 2017 |
| ''LTIP'' | the ICAP Senior Management Long Term Incentive Plan |
| ''Meetings'' | the Court Meeting and the General Meeting |
| ''MOAB'' . |
MOAB Oil, Inc. |
|---|---|
| ''Moody's'' | Moody's Investors Service Ltd. |
| ''New ICAP Ordinary Shares'' . |
the ordinary shares of £0.10 each in the capital of ICAP to be issued to Newco pursuant to the Scheme |
| ''New Tullett Prebon Shares'' | the Tullett Prebon Ordinary Shares to be issued to holders of Newco Ordinary Shares pursuant to the Demerger and to be issued to Newco should the Newco Put/Call Option be exercised |
| ''New York Business Day'' | a day (other than a Saturday, Sunday, public or bank holiday) on which banks are generally open for business in New York |
| ''Newco'' | ICAP Newco plc, a public limited company incorporated in England and Wales with registered number 10013770, whose registered office is at 2 Broadgate, London EC2M 7UR |
| ''Newco ADRs'' | American depositary shares to be issued pursuant to a depositary agreement proposed to be entered into between Newco, the Depositary and the holders of the Newco ADRs to be issued thereunder or American depositary receipts evidencing the same, as the context requires |
| ''Newco Articles'' | the articles of association of Newco proposed to be adopted with effect from the Scheme Effective Date |
| ''Newco Director'' . |
a director of Newco |
| ''Newco DSBP'' | the Newco 2016 Deferred Share Bonus Plan |
| ''Newco Employee Share Plans'' | the Newco 2016 Performance Share Plan, the Newco 2016 Long Term Incentive Plan, the Newco 2016 Deferred Share Bonus Plan, the Newco 2016 Unapproved Company Share Option Plan and the Newco 2016 Sharesave Plan |
| ''Newco Group'' | Newco and its subsidiaries and subsidiary undertakings |
| ''Newco LTIP'' | the Newco 2016 Long Term Incentive Plan |
| ''Newco Ordinary Shares'' | (i) prior to the Demerger Effective Time, the ordinary shares (with a nominal value to be determined by the Newco Directors prior to the Scheme Court Hearing) in the capital of Newco to be allotted and issued pursuant to the Scheme; |
| (ii) subsequent to the Demerger Effective Time, the ordinary shares (with a nominal value of £0.10 or such other amount as is determined by the Newco Directors prior to the date of the Reduction Court Hearing) in the capital of Newco; and |
|
| (iii) subsequent to the Share Consolidation Effective Time, the ordinary shares (with a nominal value to be determined by the Newco Directors prior to the Reduction Court Hearing) in the capital of Newco |
|
| ''Newco Preference Share'' | a preference share of £0.10 in the capital of Newco (excluding any Newco Redeemable Preference Shares) |
| ''Newco Prospectus'' | the prospectus relating to the Newco Ordinary Shares to be approved by the FCA in accordance with the Listing Rules and the Prospectus Rules and published and made available to ICAP Shareholders in the manner specified in the Listing Rules and the Prospectus Rules in connection with the Admission |
| ''Newco PSP'' | the Newco 2016 Performance Share Plan |
| ''Newco Put/Call Option'' | a put/call option set out in the Sale and Purchase Agreement in respect of the remaining approximately 35.5 per cent. shares in IGBHL not transferred at Initial Completion, exercisable by ICAP or Tullett Prebon, further details of which are set out in Part II ''Explanatory Statement'' of this document |
|---|---|
| ''Newco Redeemable Preference Shares'' |
redeemable subscriber preference shares of £0.10 each in the capital of Newco |
| ''Newco Reduction of Capital'' | the proposed reduction of Newco's share capital, further details of which are set out in Part II ''Explanatory Statement'' of this document |
| ''Newco Reduction of Capital | |
| Record Time'' | 6.00 p.m. on the Business Day immediately preceding the Demerger Effective Date |
| ''Newco Register'' | the register of members of Newco |
| ''Newco Reserve Share'' | a preference share in the capital of Newco with a nominal amount to be determined by the Newco Directors and which is expected to be issued to the Newco Subscriber Shareholder in order to capitalise reserves of Newco following the Scheme Effective Date |
| ''Newco Shareholder'' | a holder of Newco Ordinary Shares |
| ''Newco Shares'' | the Newco Ordinary Shares, Newco Redeemable Preference Shares, Newco Preference Shares and Newco Reserve Share |
| ''Newco Sharesave'' . |
the Newco 2016 Sharesave Plan |
| ''Newco Subscriber Ordinary | |
| Share'' | a subscriber ordinary share of £0.10 in the capital of Newco (including the Newco Preference Share into which it is proposed that the share is reclassified) |
| ''Newco Subscriber Shareholder'' . | Charles Gregson, the chairman of ICAP, in the capacity as holder of the Newco Subscriber Shares |
| ''Newco Subscriber Shares'' | the Newco Subscriber Ordinary Share and the Newco Redeemable Preference Shares |
| ''Newco UCSOP'' | the Newco 2016 Unapproved Company Share Option Plan |
| ''Notice of Court Meeting'' | the notice of the Court Meeting contained in this document |
| ''Notice of General Meeting'' | the notice of the General Meeting contained in this document |
| ''Notices'' . |
Notice of Court Meeting and Notice of General Meeting, and ''Notice'' means either of them as the context requires |
| ''Official List'' . |
the official list of the FCA |
| ''Option Completion'' | the completion of the acquisition by Tullett Prebon of the remaining approximately 35.5 per cent. of the issued share capital of IGBHL not transferred at Initial Completion in consideration for the issue of New Tullett Prebon Shares comprising approximately 19.9 per cent. of the issued share capital of Tullett Prebon (calculated on a diluted basis and immediately following such issuance) to Newco |
| ''Option Shares'' | has the meaning given to it in paragraph 1 of Part IV ''Summary |
| of the Principal Terms and Conditions of the Transaction Agreements'' |
| ''Overseas Shareholder'' | an ICAP Shareholder or Tullett Prebon Shareholder, as the case may be, who is a citizen, resident or national of any jurisdiction outside the United Kingdom |
|---|---|
| ''Proposals'' . |
the Scheme, the Demerger and the Share Consolidation |
| ''Prospectus Rules'' | the rules for the purposes of Part IV FSMA in relation to the offers of securities to the public and the admission of securities to trading on a regulated market |
| ''PSP'' | the ICAP 2015 Performance Share Plan |
| ''PVM'' | PVM Oil Associates Limited and its subsidiaries |
| ''PwC'' | PricewaterhouseCoopers LLP |
| ''Reduction Court Hearing'' | the hearing by the Court to confirm the Newco Reduction of Capital under section 648 of the Companies Act at which the Reduction Court Order will be sought |
| ''Reduction Court Order'' | the order of the Court confirming the Newco Reduction of Capital under section 648 of the Companies Act |
| ''Registrar of Companies'' | the Registrar of Companies in England and Wales |
| ''Regulatory Information Service'' | a regulatory information service as defined in the FCA Handbook |
| ''Relationship Agreement'' | a relationship agreement to be entered into between Newco and Tullett Prebon which will be effective from the Tullett Prebon Admission to govern the relationship between Tullett Prebon and Newco as a shareholder of Enlarged Tullett Prebon following Completion |
| ''Reorganisation'' | the reorganisation of the ICAP Group to ensure that businesses and subsidiaries relating to IGBB (and not those businesses and subsidiaries unrelated to IGBB) are held by a single holding company, IGBHL |
| ''Resolutions'' | the ordinary resolutions and special resolutions to be proposed at the General Meeting (and set out in the Notice of General Meeting contained in this document) |
| ''Retained Group'' | the Newco Group following Completion |
| ''Reverse Transitional Services Agreement'' or ''RTSA'' |
the transitional services agreement to be entered into between ICAP and IGBB pursuant to which IGBB will provide the Retained Group with the use of or access to certain resources that will be owned or controlled by IGBB as at Initial Completion pursuant to the Sale and Purchase Agreement |
| ''Sale and Purchase Agreement'' | the conditional sale and purchase agreement dated 11 November 2015 entered into between ICAP and Tullett Prebon governing the terms and conditions of the Transaction |
| ''Sale Shares'' | has the meaning given to it in paragraph 1 of Part IV ''Summary of the Principal Terms and Conditions of the Transaction Agreements'' |
| ''Scheme'' | the scheme of arrangement proposed to be made under Part 26 of the Companies Act between ICAP and the Scheme Shareholders, as set out in Part XI ''The Scheme of Arrangement'' of this document with or subject to any modification, addition or condition approved or imposed by the Court and agreed by ICAP and Newco |
| ''Scheme Court Hearing'' | the hearing by the Court to sanction the Scheme and confirm the ICAP Reduction of Capital at which the Scheme Court Order will be sought |
|---|---|
| ''Scheme Court Order'' . |
the order of the Court sanctioning the Scheme under Part 26 of the Companies Act and confirming the ICAP Reduction of Capital |
| ''Scheme Effective Date'' | the date on which the Scheme Court Order is delivered to and, if ordered by the Court, has been registered by the Registrar of Companies and the Scheme becomes effective in accordance with its terms |
| ''Scheme Effective Time'' | the time at which the Scheme becomes effective, being the time at which the Scheme Court Order is delivered to and, if ordered by the Court, registered by the Registrar of Companies |
| ''Scheme Record Time'' | 6.00 p.m. on the Business Day immediately preceding the Scheme Effective Date |
| ''Scheme Shareholder'' | a holder of Scheme Shares |
| ''Scheme Shares'' | (i) all ICAP Ordinary Shares in issue at the date of the Scheme and remaining in issue at the Scheme Record Time; |
| (ii) all additional (if any) ICAP Ordinary Shares in issue 48 hours prior to the Court Meeting at which the Scheme is approved and remaining in issue at the Scheme Record Time; and |
|
| (iii) all further (if any) ICAP Ordinary Shares which may be in issue immediately prior to the confirmation by the Court of the reduction of capital provided for under the Scheme in respect of which the original or any subsequent holders thereof are, or shall have agreed in writing to be, bound by the Scheme and remaining in issue at the Scheme Record Time, |
|
| and excluding, for the avoidance of doubt, the ICAP R Share | |
| ''SEC'' | the US Securities and Exchange Commission |
| ''Securities Act'' . |
the US Securities Act of 1933, as amended |
| ''SEF'' | swap execution facility |
| ''Share Consolidation'' . |
the consolidation and subdivision of Newco Ordinary Shares, further details of which are set out in Part II ''Explanatory Statement'' of this document |
| ''Share Consolidation Effective | |
| Time'' | the date and time on which the Share Consolidation becomes effective |
| ''Sharesave'' | the ICAP 2008 Sharesave Scheme |
| ''Tax Deed'' | the tax deed to be entered into between Newco and Tullett Prebon |
| ''TIBOR'' | Tokyo Interbank Offered Rate |
| ''TP Group'' | prior to Completion, the Tullett Prebon Group and, following Completion, the Enlarged Tullett Prebon Group |
| ''Transaction'' . |
the proposed disposal of IGBB by the ICAP Group to Tullett Prebon, including the Scheme and the Demerger and, if exercised, the disposal of the shares of IGBHL subject to the Newco Put/Call Option to Tullett Prebon, and the issue of New Tullett Prebon Shares to Newco in consideration |
|---|---|
| ''Transaction Agreements'' | the Sale and Purchase Agreement, the Relationship Agreement and the Transitional Services Agreements |
| ''Transitional Services Agreement'' | |
| or ''TSA'' . |
the transitional services agreement to be entered into between ICAP and IGBB pursuant to which ICAP will provide IGBB with the use of or access to certain resources that will be retained by the Retained Group as at Initial Completion, pursuant to the Sale and Purchase Agreement |
| ''Transitional Services Agreements'' |
the Transitional Services Agreement and the Reverse Transitional Services Agreement |
| ''Tullett Prebon'' . |
Tullett Prebon plc, a company registered in England and Wales with registered number 05807599, whose registered office is at Tower 42, Level 37, 25 Old Broad Street, London EC2N 1HQ |
| ''Tullett Prebon Admission'' | (i) the re-admission of the Tullett Prebon Ordinary Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities; and |
| (ii) the admission of the New Tullett Prebon Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities, |
|
| ''Tullett Prebon Consolidation | |
| Waiver'' | the grant by the FCA, subject only to Completion, of a permission in the exercise of the discretion afforded to the FCA under Article 15 of the CRR to waive the application of Part Three of the CRR and Title VII, Chapter 4 of Directive No. 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, on a consolidated basis in relation to relevant firms in the TP Group as from the point of Completion, in a form reasonably acceptable to Tullett Prebon |
| ''Tullett Prebon Group'' | Tullett Prebon and its subsidiaries and subsidiary undertakings prior to Completion |
| ''Tullett Prebon Information Sales | |
| Business'' . |
Tullett Prebon's information sales business which collects, cleanses, collates and distributes real-time information to data providers |
| ''Tullett Prebon Ordinary Shares'' | ordinary shares of £0.25 each in the capital of Tullett Prebon |
| ''Tullett Prebon Prospectus'' . |
the document dated 1 March 2016 comprising: |
| (i) a circular prepared in accordance with the Listing Rules in connection with the general meeting of Tullett Prebon Shareholders convened for the purpose of approving the Transaction; and |
|
(ii) a prospectus relating to the Tullett Prebon Ordinary Shares prepared in accordance with the Prospectus Rules
| ''Tullett Prebon Risk Management Services business'' . |
Tullett Prebon's risk management services business which provides clients with post-trade, multi-product matching services |
|---|---|
| ''Tullett Prebon Shareholder'' | a holder of shares in Tullett Prebon, including a holder of New Tullett Prebon Shares |
| ''Tullett Prebon Sponsor'' . |
NM Rothschild & Sons Limited |
| ''Tullett Prebon Sponsor Agreement'' |
a sponsor agreement entered into between Tullett Prebon and the Tullett Prebon Sponsor on 1 March 2016 |
| ''UK'' or ''United Kingdom'' . |
the United Kingdom of Great Britain and Northern Ireland |
| ''UK Listing Authority'' | the United Kingdom Listing Authority |
| ''US'' or ''United States'' . |
the United States of America (including the states of the United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction |
| ''VAT'' | value added tax |
For the purpose of this document, ''subsidiary'', ''subsidiary undertaking'' and ''undertaking'' have the meanings given by the Companies Act.
All times referred to are London time unless otherwise stated.
All references to legislation in this document are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.
Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.
Dated: 1 March 2016
(Incorporated and registered in England and Wales with registered number 03611426)
IN THE HIGH COURT OF JUSTICE CR-2016-631 CHANCERY DIVISION COMPANIES COURT
Registrar Briggs
NOTICE IS HEREBY GIVEN that by an Order dated 29 February 2016 made in the above matters, the Court has directed a meeting (the ''Court Meeting'') to be convened of the holders of ICAP Ordinary Shares (as defined in the Scheme of Arrangement hereinafter mentioned) for the purpose of considering and, if thought fit, approving (with or without modification) a scheme of arrangement (the ''Scheme of Arrangement'') proposed to be made between ICAP plc (registered in England and Wales with registered number 03611426) (hereinafter the ''Company'') and the holders of Scheme Shares (as defined in the Scheme of Arrangement) and that the Court Meeting will be held at the registered office of the Company at 2 Broadgate, London EC2M 7UR at 11.30 a.m. on 24 March 2016 at which place and time all ICAP Shareholders (as defined in the Scheme of Arrangement) are requested to attend.
A copy of the Scheme of Arrangement and a copy of the explanatory statement required to be furnished pursuant to Part 26 of the Companies Act 2006 are incorporated in the document of which this Notice forms part.
A blue form of proxy for use at the Court Meeting is enclosed with this Notice.
Completion and return of the blue form of proxy will not prevent an ICAP Shareholder from attending and voting at the Court Meeting (or any adjournment thereof) in person.
In the case of joint holders of an ICAP Ordinary Share (as defined in the Scheme of Arrangement), the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holder(s) and for this purpose seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
It is requested that the blue forms of proxy (together with any power of attorney or other authority under which the form is signed, or a notarially certified copy of such power or authority) be returned by post or (during normal business hours only) by hand to the Company's Registrars, Capita Asset Services at PXS-1, 34 Beckenham Road, Beckenham, BR3 4ZF, no later than 11.30 a.m. on 22 March 2016 or, if the Court Meeting is adjourned, by not less than 48 hours before the time for the adjourned Court Meeting, but if forms are not so returned, they may be handed to the Company's Registrars, Capita Asset Services, on behalf of the Chairman of the Court Meeting, at the Court Meeting before the taking of the poll.
Shareholders who would prefer to register the appointment of their proxy electronically via the internet can do so by visiting www.icap-shares.com and following the instructions provided. In order for a proxy appointment made electronically to be valid it must be sent to www.icap-shares.com and received not later than 11.30 a.m. on 22 March 2016. Any communication found to contain a computer virus will not be accepted.
CREST members who wish to appoint a proxy or proxies for the Court Meeting, including any adjournment(s) thereof, through the CREST electronic proxy appointment service, may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must contain the information required for such instructions, as described in the CREST Manual (available via www.euroclear.com/en/ about/our-rules.html). The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given for a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the Company's Registrars, Capita Asset Services (CREST participant ID RA10) by 11.30 a.m. on 22 March 2016.
For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which Capita Asset Services are able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that their CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
In order to have the right to attend and vote at the Court Meeting (and also for the purpose of calculating how many votes a person entitled to attend and vote may cast) a person must be entered on the register of holders of the ordinary shares of the Company by not later than 6.00 p.m. on 22 March 2016 being two Business Days before the time fixed for the meeting. Changes to entries on the register after this time shall be disregarded in determining the rights of any person to attend or vote at the Court Meeting and the number of shares on which they can vote.
Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a ''Nominated Person'') may, under an agreement between him and the shareholder by whom he was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Court Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. The statement of the rights of shareholders in relation to the appointment of proxies above does not apply to Nominated Persons. The rights described in these paragraphs can be exercised only by shareholders of the Company.
Any corporation which is a shareholder of the Company may appoint one or more corporate representatives who may exercise, on its behalf, all of its powers as a shareholder, provided that not more than one corporate representative exercises powers over the same share.
By the said order, the Court has appointed Charles Gregson or, failing him, Stuart Bridges or, failing him, Robert Standing to act as Chairman of the Court Meeting and has directed the Chairman to report the result of the Court Meeting to the Court.
The Scheme of Arrangement will be subject to the subsequent approval of the Court.
DATED: 1 March 2016
10 Upper Bank Street London E14 5JJ United Kingdom
Solicitors for the Company
NOTICE IS HEREBY GIVEN that a GENERAL MEETING of ICAP plc (the ''Company'') will be held at the registered office of the Company at 2 Broadgate, London EC2M 7UR at 11.40 a.m. on 24 March 2016 (or as soon thereafter as the meeting of holders of the ordinary shares in the Company convened by direction of the Court for the same place and date shall have been concluded or adjourned) for the purpose of considering and, if thought fit, passing the following resolutions, of which resolutions 4, 6, 7, 8, 9, 10, 11 and 12 (inclusive) will be proposed as ordinary resolutions and resolutions 1, 2, 3 and 5 (inclusive) will be proposed as special resolutions.
THAT, conditional upon the passing of Resolution 2 (Articles of Association Resolution) and Resolution 3 (Authority to Allot ICAP R Share Resolution) and subject to the allotment of the ICAP R Share by the Company for the purpose of giving effect to the scheme of arrangement dated 1 March 2016 between the Company and the holders of the Scheme Shares (as defined in the said scheme), a print of which has been produced to this meeting and for the purposes of identification signed by the Chairman hereof, in its original form or subject to such modification, addition or condition agreed by the Company and ICAP Newco plc (''Newco'') and approved or imposed by the Court (the ''Scheme''):
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution), the articles of association of the Company be amended as follows:
By including the following new article as Article 164 immediately following the existing Article 163:
By including the following new article as Article 165 immediately following the new Article 164 inserted above:
holder of any share to be transferred pursuant to this Article 165, Newco shall be empowered to appoint a person nominated by the directors to act as attorney on behalf of any holder of such share in accordance with such directions as Newco may give in relation to any dealing with or demerger of such share (or any interest therein), exercising any rights attached thereto or receiving any distribution or other benefit accruing or payable in respect thereof and any holder of such shares shall exercise all rights attached thereto in accordance with the directions of Newco but not otherwise.
165.7 If the Scheme shall not have become effective by the Long-stop Date, this Article 165 shall be of no effect.''
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and Resolution 2 (Articles of Association Resolution), in addition to all existing powers and authorities:
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and subject to the Scheme becoming effective, the Transaction, on the terms set out in the Sale and Purchase Agreement (both terms as defined in the circular to shareholders dated 1 March 2016 (the ''Circular'')), be and is hereby approved and the directors (or a committee of the directors) be and are hereby authorised to waive, amend, vary or extend non-material terms of the Transaction Agreements (as defined in the Circular) and to do all things as they may consider at their sole discretion to be necessary or desirable to implement and give effect to, or otherwise in connection with, the Transaction and any matters incidental to the Transaction.
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and Resolution 4 (Approval of Transaction Resolution) and subject to the Scheme becoming effective:
appropriate) and in connection therewith the directors of the Company and Newco be and are hereby authorised and instructed to do or procure to be done all such acts and things as they consider necessary or expedient for the purpose of giving effect to the Newco Reduction of Capital and the Share Consolidation.
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and subject to the Scheme becoming effective, the rules of the Newco 2016 Performance Share Plan (the ''Newco PSP''), the main features of which are summarised in paragraph 7 of Part VIII ''Additional Information— ICAP'' of the Circular and produced in draft to this meeting and, for the purposes of identification initialled by the Chairman be and are hereby approved.
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and subject to the Scheme becoming effective, the rules of the Newco 2016 Long Term Incentive Plan (the ''Newco LTIP''), the main features of which are summarised in paragraph 7 of Part VIII ''Additional Information— ICAP'' of the Circular and produced in draft to this meeting and, for the purposes of identification initialled by the Chairman be and are hereby approved.
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and subject to the Scheme becoming effective, the rules of the Newco 2016 Deferred Share Bonus Plan (the ''Newco DSBP''), the main features of which are summarised in paragraph 7 of Part VIII ''Additional Information— ICAP'' of the Circular and produced in draft to this meeting and, for the purposes of identification initialled by the Chairman be and are hereby approved.
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and subject to the Scheme becoming effective, the rules of the Newco 2016 Unapproved Company Share Option Plan (the ''Newco UCSOP''), the main features of which are summarised in paragraph 7 of Part VIII ''Additional Information—ICAP'' of the Circular and produced in draft to this meeting and, for the purposes of identification initialled by the Chairman be and are hereby approved.
THAT, conditional upon the passing of Resolution 1 (Scheme of Arrangement Resolution) and subject to the Scheme becoming effective, the rules of the Newco 2016 Sharesave Plan (the ''Newco Sharesave''), the main features of which are summarised in paragraph 7 of Part VIII ''Additional Information—ICAP'' of the Circular and produced in draft to this meeting and, for the purposes of identification initialled by the Chairman be and are hereby approved.
THAT, the directors of Newco, or a duly authorised committee of them, be and are hereby authorised to make such modifications to each of the Newco PSP, the Newco LTIP, the Newco DSBP, the Newco UCSOP and the Newco Sharesave as they may consider appropriate to take account of the requirements of best practice and for the implementation of the Newco PSP, the Newco LTIP, the Newco DSBP, the Newco UCSOP and the Newco Sharesave (including, in relation to the Newco Sharesave, making any amendments required in order to satisfy the requirements of Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003) and to adopt the Newco PSP, the Newco LTIP, the Newco DSBP, the Newco UCSOP and the Newco Sharesave as so modified and to do all such other acts and things as they may consider appropriate to implement the Newco PSP, the Newco LTIP, the Newco DSBP, the Newco UCSOP and the Newco Sharesave.
THAT, the directors of Newco, or a duly authorised committee of them, be and are hereby authorised to establish further plans based on the Newco PSP, the Newco LTIP, the Newco DSBP, the Newco UCSOP and/or the Newco Sharesave but modified to take account of local tax, exchange control or securities laws in overseas territories, provided that any shares made available under such further plans are treated as counting against the limits on individual or overall participation in the Newco PSP, the Newco LTIP, the Newco DSBP, the Newco UCSOP and/or the Newco Sharesave.
Deborah Abrehart Group Company Secretary ICAP plc 2 Broadgate London EC2M 7UR
1 March 2016
If you have sold or transferred all your ordinary shares in the Company, you should forward this document and the accompanying form of proxy to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was made, so that they can pass them to the person who now holds the shares.
A shareholder entitled to attend, to speak and to vote at the meeting may appoint a proxy or proxies (who need not be a shareholder of the Company) to attend, to speak and to vote at the meeting on their behalf. A form of proxy for shareholders which may be used to make such appointment and give proxy instructions accompanies this Notice.
A shareholder may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. Forms of proxy must be returned so as to be received by the Company's share registrar at Capita Asset Services, PXS-1, 34 Beckenham Road, Beckenham, BR3 4ZF, not later than 11.40 a.m. on 22 March 2016. Appointing a proxy will not preclude a shareholder attending and voting in person at the meeting.
Shareholders who would prefer to register the appointment of their proxy electronically via the internet can do so by visiting www.icap-shares.com and following the instructions provided. In order for a proxy appointment made electronically to be valid it must be sent to www.icap-shares.com and received not later than 11.40 a.m. on 22 March 2016. Any communication found to contain a computer virus will not be accepted.
Alternatively, if you are a member of CREST, you may register the appointment of a proxy by using the CREST electronic proxy appointment service. Further details are given below.
CREST members who wish to appoint a proxy or proxies for the meeting, including any adjournment(s) thereof, through the CREST electronic proxy appointment service, may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must contain the information required for such instructions, as described in the CREST Manual (available via www.euroclear.com/en/about/our-rules.html). The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given for a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by Capita Asset Services (CREST participant ID RA10) by the latest time for receipt of proxy appointments specified above.
For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which Capita Asset Services are able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that their CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001 and section 360B of the Act, the Company specifies that in order to have the right to attend and vote at the meeting (and also for the purpose of calculating how many votes a person entitled to attend and vote may cast) a person must be entered on the register of holders of the ordinary shares of the Company by not later than 6.00 p.m. on 22 March 2016 being two Business Days before the time fixed for the meeting. Changes to entries on the register after this time shall be disregarded in determining the rights of any person to attend or vote at the meeting and the number of shares on which they can vote.
Shareholders attending the meeting have the right to ask questions relating to the business of the meeting and the Company has the obligation to answer such questions unless to do so would fall within one of the statutory exceptions. Therefore, no answer will be given if:
Any person to whom this Notice is sent who is a person nominated under section 146 of the Act to enjoy information rights (a Nominated Person) may, under an agreement between him and the shareholder by whom he was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. The statement of the rights of shareholders in relation to the appointment of proxies above does not apply to Nominated Persons. The rights described in these paragraphs can be exercised only by shareholders of the Company.
Any corporation which is a shareholder of the Company may appoint one or more corporate representatives who may exercise, on its behalf, all of its powers as a shareholder, provided that not more than one corporate representative exercises powers over the same share.
The following documents will be available for inspection at the Company's registered office during normal business hours on weekdays (Saturdays, Sundays and public holidays excepted) from the date of this Notice until the date of the meeting and at the place of the meeting from 15 minutes prior to and up until the close of the meeting:
As at 26 February 2016, being the latest practicable date before publication of this Notice, the Company's issued share capital consisted of 664,537,006 ordinary shares including 12,989,487 treasury shares, which represents 1.95 per cent. of the total issued share capital of the Company. Therefore, the total voting rights in the Company at that date were 651,547,519.
A copy of this Notice and other information required by section 311A of the Act can be found at www.icap.com.
You may not use any electronic address (within the meaning of section 333(4) of the Act) provided in this Notice (or in any related documents including the Chairman's letter and form of proxy) to communicate with the Company for any purposes other than those expressly stated.
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Merrill Corporation Ltd, London 16ZAL14901
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