Share Centre Takeover and Holding Unlisted Shares

This morning it was announced that the Share Centre (Share Plc: SHRE) were recommending a takeover bid from Antler Holdco, the holding company of Interactive Investor and the ii Group. This has two very negative consequences for private investors:

1. The Share Centre is one of the favourite platforms for many private investors with an efficient and low-cost trading service and also a simple system to enable one to vote the shares you hold in their nominee accounts. There may well be some rationalistion of systems so the downside is that Share Centre clients may have to learn a new software platform.

2. The other negative is for holders of Share Plc shares, which many clients of the Share Centre probably are because there is a discount on trading costs if you held shares. The share price has risen this morning, perhaps on the hope of a counter-bid, but the terms of the offer appear very unattractive. The offer is for 4.1 pence in cash, but the equivalent of 90% of the offer value is in shares in ii (that’s assuming you accept their valuation). The ii business is an unlisted company incorporated in Guernsey and is majority owned by J.C.Flowers IV L.P.

3. The new ii shares to be issued as part of the offer will be definitely unlisted and hence holders of Share Plc shares will have no idea of when or how they will be able to sell them and they will lack almost all protection from being minority shareholders. Any investor who understands the legal position of holding unlisted securities with no shareholder agreement in place will realise this is a very invidious position to be in and I suggest shareholders will need to seriously consider whether they should sell the Share Plc shares in the market while they can. If in doubt take legal or other professional advice on the matter!

4. Could the takeover bid be defeated? That seems very unlikely as they already have 70% of acceptances via irrevocable undertakings, including the holdings of Gavin Oldham and his family who was the founder. Winning a required 75% vote of shareholders (by number of shareholders) to defeat it at the Court Meeting (this is a Scheme of Arrangement proposal) would be very tricky as with many shareholders in nominee accounts they might only be counted as holding the “one share” held by the nominee operator as a pooled account. And that share would be in the power of the Share Centre and its management. Many people hate takeover bids via schemes of arrangement as they undermine the normal democratic process that applies to more normal takeovers.

Just to give readers some understanding of the problem of holding unlisted shares, I received some bad news this morning. I have been holding some shares in an unlisted company for 20 years. I was one of the founder investors as part of an EIS scheme and although I have sold some of the shares to other investors over the years I hoped to finally get out as it has been somewhat of a rocky road. That looked like it might happen after the business received an offer a couple of months ago but the bad news today is that the deal of off.

I’ll have to live in hope a bit longer it seems.

P.S. The offer document actually says that the Share Centre clients will be migrated to the Interactive Investor Services platform. Let us hope it goes smoothly.

Note that some investors might have held Share Plc shares as clients of the company so that they could easily monitor the financial position of their broker. That is somewhat critical because of the danger of holding shares in any broker that gets into financial difficulties where your shares are held in nominee accounts. That will no longer be easily possible after this takeover.

The author has no shareholding in companies mentioned in this article.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )