The stub equity structure used in Ferrovial Group’s successful £12bn takeover of BAA appears to have become something of a trademark for the Spanish construction group’s legal adviser Freshfields Bruckhaus Deringer.
The stub equity enables BAA shareholders to retain an ongoing stake in the business by holding shares in an AIM-listed special purpose vehicle (SPV), launched specifically to facilitate the takeover. Interestingly, Freshfields deployed this innovative structure on a number of previous high-profile deals, including Brascan’s unsuccessful bid for Canary Wharf and Philip Green’s failed takeover of Marks & Spencer.
It was therefore a case of third time lucky. The Ferrovial stub equity broke new ground in that it was done under the new Prospectus Directive, which required Freshfields to get the prospectus relating to the AIM listing of the SPV to be approved by the UK Listing Authority within the constraints of a takeover timetable.