Linklaters leads Investec into new DLC structure

Linklaters has advised niche investment bank Investec on a new dual-listed structure. It will allow the South African company access to the London Stock Exchange (LSE) and new sources of international finance.
Although Linklaters has worked on several dual-listed mergers this year, this particular one is groundbreaking. Previously, dual-listed company (DLC) structures have been used when companies which are listed in different jurisdictions have merged. This is the first time that a DLC has been used as a restructuring tool by a single company.
Investec approached Linklaters when it became obvious that the South African government would not let it move its primary listing from Johannesburg to London. In a climate of increasing political risk in South Africa, and with the rand plummeting against the dollar, a series of high-profile domestic companies moved their primary listings out of South Africa. Having seen five major South African companies redomicile, the government was reluctant to let Investec go for fear of further capital outflows and irreparable damage to the country's national identity.
Linklaters has also handled the London listing of Billiton, South African Breweries, Old Mutual, Anglo-American and Dimension Data. Corporate partner Charlie Jacobs, who has worked on all of Linklaters' South African dual listings, led the team on the Investec deal. Also on the team was tax partner Mark Livingstone. The South African aspects of the deal were handled by Donn Jowell, senior partner of Investec's long-term corporate advisers Jowell Glyn & Marais. David Nurek and Sue Swatton-Seymour headed the Investec legal team.
Investec Group and Investec Holdings has been split into two companies. Investec plc will hold assets in the UK, Ireland, Israel, Australia and the US, with a primary listing on the LSE. Investec Southern Africa will hold assets in South Africa, Botswana, Namibia and Mauritius. The two companies will be linked by sharing agreements and will have a single board and management structure.
Unlike on previous DLCs, there will be no cross-guarantees between the two arms of the company. This suits UK banking regulators and overcomes South African concerns on exchange control. According to Jacobs, the result is “the optimal structure in the current political and economic climate”.
Around 40 per cent of the assets will go to Investec SA, with the plc holding the remaining 60 per cent. Although the share issue ratio has yet to be finalised, current shareholders in Investec will receive new shares in both Investec SA and Investec plc and will be able to trade them separately.
From Investec's perspective, the rationale behind the DLC is to increase access to finance. Institutional investors have restrictions on emerging market investments, but with a listing in London, Investec plc will have access to funds that target developed countries. The main downside to the DLC is that with only 60 per cent of the assets held by the plc, the bank will be small fry on the LSE.
Although Linklaters has by no means cornered the market, it has certainly had its fair share of DLCs in the past. Jacobs said: “We've been inundated with calls about DLCs since October.”
Internal DLCs along the lines of Investec have mileage in emerging markets and Jacobs said that Linklaters has had several new enquiries.
The better-established merger DLC market is also flourishing and has come up on high-profile deals, such as the contested P&O Princess-Royal Caribbean merger .
DLCs address merger problems in several territories – companies listed in the US and the UK tend to be concerned about share flowback. In other European jurisdictions, image is a major issue for national champions, particularly in industries such as utilities and defence, where the public expects domestic ownership. With traditional merger work thin on the ground, demand for legal advice on complex DLCs will be a boost for quiet corporate departments in firms that can handle this type of work.