FSP7 Apr 2021 17:41
Something I found regarding an fsp from March this year! Not a great success rate but hopefully we can buck the trend!! Interesting read if you have a balanced view!!
Companies often provide multiple reasons for proceeding down the FSP route in their announcements. However, by far the most popular reason given since 2011 is to "maximise shareholder value", used in over 50% of launch announcements, according to our analysis.
"Maximising shareholder value" is often accompanied by an explanation from the target company that it is undertaking the FSP for "strategic reasons". A number of companies have also launched a strategic review alongside the FSP, as was the case in the announcement launching the process by sub-prime lender Amigo Holdings in February 2020. Although an FSP is a distinct process under the Code, a strategic review announcement issued by a target company may also include an announcement of an FSP under Rule 2.6.
Other common reasons given for undertaking an FSP include as a consequence of encountering issues relating to financing matters and as a result of expressions of interest in the target or its assets.
The outlook in terms of the success of the FSP has been mixed, with 21% of FSPs announced to date having been successfully completed. A number of companies subsequently completed sales of substantial assets outside the ambit of the FSP. A small number of companies that launched an FSP subsequently became insolvent, such as Utilitywise Group plc, which announced the commencement of its process in January 2019.
Of the 15 FSPs announced in 2020, three have resulted in a formal offer announcement. Volga Gas launched an FSP on 7 April 2020, having previously explored this option in 2014. GEM Capital Holdings (CY) Ltd launched its offer for Volga Gas on 16 November 2020. Collagen Solutions plc announced the commencement of an FSP on 16 April 2020, with Rosen's Diversified Inc. announcing a recommended cash offer for the company on 27 August 2020. ADVANZ Pharma Corp Ltd launched an FSP on 23 October 2020 and Cidron Aida Bidco Limited announced a recommended cash offer for the company on 27 January 2021.
The very public nature of a formal sale process means that a company is seen as being ‘in play', as such, boards of directors may not wish to give this impression. One should not, however, discount the possibility in the coming months of opportunistic bidders seeking to take advantage of the commencement of a formal sale process to launch an offer which the target company may consider to undervalue it fundamentally.
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