Joanne Harris dissects the most recent rankings of offshore firms’ listed clients
As a number of recent high-profile capital markets transactions have high-lighted, the use of offshore structures as holding companies for listings on the world’s main stock exchanges is common.
Offshore lawyers believe this is a trend set to accelerate, as turning to Channel Islands or Caribbean structures is accepted practice by entrepreneurs in emerging markets looking to grab a slice of the action on stock exchanges such as London.
The most recent rankings of offshore firms’ London-listed clients demonstrates clearly that they share a sizeable piece of the work generated by public companies, particularly for the Channel Islands firms, which represent five out of the top ten offshore firms in Hemscott’s May 2011 client rankings (see tables on page 26).
By number of clients, Carey Olsen remains top dog with 64 listed companies on its books. The bulk of those, like all the offshore firms’ listed rosters, are listed on Aim, although Carey Olsen also boasts nine small-cap and four FTSE250 clients.
But Mourant Ozannes is hot on its rival’s heels. The 2010 merger of Mourant du Feu & Jeune and Ozannes has turned the firm into a major player in the listed market. Unlike its competitors, Mourant’s clients are split fairly evenly between Aim, small-cap and FTSE250 companies.
Most recently, the firm acted as Jersey counsel to Glencore on its dual Hong Kong and London listing, which raised $10bn (£6.3bn). Ogier also picked up a role, acting for the global coordinators.
This means that Hemscott’s ranking of advisers by market capitalisation puts the firm solidly at the top of the list, with a value of £36bn compared with a combined market capitalisation of £32bn for Ogier’s clients and £21.7bn for Carey Olsen’s.
It is not just the big firms that appear in the Hemscott listings. In rankings by volume Jersey firm VerrasLaw comes in ninth, with five Aim clients. Fellow Jersey firm Whiteley Chambers is 6th by volume, acting for companies worth a combined £4.5bn.
But Channel Islands firms are not the only advisers of listed companies. Isle of Man firm Cains has 21 Aim clients, while Appleby says its roster of Aim clients includes companies with holding structures or other vehicles in a mixture of offshore jurisdictions.
Cains director Richard Vanderplank points to the June listing of Isle of Man company 3Legs Resources, a shale gas explorer that successfully floated on Aim, as an example of a typical piece of work.
Indeed, several firms point to the natural resources sector as a busy one when it comes to offshore vehicles choosing London as a venue for listing, although Appleby funds and investment services partner Andrew Weaver, who is based in Jersey, believes the sector has dropped away somewhat in recent months.
Given the use of offshore centres as venues for investment funds it is natural that the sector where the offshore firms really punch above their weight is financials. In Hemscott’s rankings of Aim-listed financial clients Carey Olsen leads the way with 20. Ogier (16 clients), Cains, Appleby and Maples and Calder also feature in the top 10.
List is more
More generally, Weaver says that the work generated by listed – or listing – companies forms an increasing part of offshore firms’ business.
“Listed company work is a valuable and thriving piece,” he notes. “In the past few years it has developed and the principal lines of business now are international companies with operations in several jurisdictions looking to access the depth of liquidity of various financial markets.”
The work involved is now perhaps more varied than it used to be, ranging from new listings to dealing with secondary listings, fundraising and, of course, restructuring work in the wake of the financial crisis. Redomiciliation of companies has also increased, according to Carey Olsen partner Nicholas Crocker.
The roles played by the different offshore jurisdictions varies.
“Jersey has very much become the established jurisdiction for trading groups, while Guernsey is more popular for investment funds,” explains Mourant partner James Hill. “People like following well established paths.”
This preference, adds Appleby Isle of Man partner John Melia, means that in volume terms Guernsey is probably the most popular jurisdiction for kicking off a main market listing, but Jersey takes the lion’s share of the value as the types of companies that use Jersey vehicles are more likely to slot into the FTSE350.
Melia says the Isle of Man office does have a “reasonably healthy pipeline” of pre-IPO work and is “as confident as I can be” that this will result in listings.
Apart from a herd mentality among clients, the use of offshore jurisdictions, particularly the Crown Dependencies, for London listings is built on a solid foundation of tax-neutrality and sensible regulation.
But the London Stock Exchange is having to compete increasingly with other exchanges, especially in Asia, for business, these days. Businesses listing in Hong Kong and Singapore remain more likely to use a British Virgin Islands or Cayman Islands vehicle, says Weaver, although both Guernsey and Jersey are now approved jurisdictions for the Hong Kong exchange.
The growing importance of emerging markets is proving fruitful for offshore firms’ listings business. Vanderplank points to India as a particular source of business. Several of the firm’s listed clients are Indian companies, with others coming from Africa and Brazil.
Offshore lawyers are hopeful that the growth of such companies will help their firms to pick up an increasing number of FTSE250 and FTSE100 clients.
“There’s an accelerating trend and that’s because quite recently the main market is quite happy to have a Jersey or Guernsey listed company,” says Crocker.
Offshore Clients: Market Cap