TOGETHER WITH

Table of Contents

• EDITOR’S RAMBLE 🗣

• FEATURED REPORT 📰

• TOGETHER WITH GOWLING WLG* 🤝

• IN OTHER NEWS 🗞

• AROUND THE WEB 🌐

• STUFF THAT MIGHT HELP YOU 👌

EDITOR’S RAMBLE 🗣

My aim with LittleLaw is to help you break into a legal career.

But it’s been a while now since I was applying for vacation schemes or training contracts (around 5 years, I think).

So, instead of building LittleLaw based on what I *think* you need, I thought I’d ask you.

If you’re an aspiring commercial lawyer, please could you complete this short form?

The aim is to find out what you’re struggling with most so we can make sure we’re headed in the right direction.

It should take you less than 90 seconds to complete — but it would be a massive help to me.

- Idin 

FEATURED REPORT 📰

🍭 How FCA’s new rules sweeten deals (and boost law firm revenues)

What's going on here?

Tate & Lyle (a London-based food company known for their sugar products) plans to acquire CP Kelco (a US-based ingredient producer). CP Kelco makes ingredients that improves the texture of foods (like yogurts and sauces) to give them a richer or smoother taste.

As Tate & Lyle is a publicly listed company, it needs to follow the listing rules of the London Stock Exchange. Under the old rules, Tate & Lyle would have needed approval from its shareholders for this kind of deal.

But earlier this year, the Financial Conduct Authority (FCA), which regulates the London Stock Exchange, changed the rules. Now, shareholder approval isn’t needed for a transaction like this one.

Why does Tate & Lyle want to acquire CP Kelco?

Here are the key reasons for the merger:

• 🔬 Complementary expertise: Tate & Lyle's expertise is in sweetening and texture and CP Kelco's expertise is in pectin and specialty gums. The two combining will speed up innovation to develop new food ingredients.

• 📈 Stronger market position: The merger will make Tate & Lyle a global leader in a fast-growing $19 billion market for specialty food and drinks. They’ll also make cost savings of at least $50 million over two years from improved efficiencies.

• 🍽️ Meeting consumer demand: Tate & Lyle’s tapping into growing consumer demand for healthier, tastier, and more sustainable food and drinks. It’s trying to move away from unhealthy food and drink (for example, the company sold its shares in Primient, a corn-based food producer).

What’s the structure of the transaction?

Tate & Lyle is paying about £1.4 billion to buy CP Kelco, which is currently owned by J.M. Huber Corporation (Huber).

The £1.4 billion is made up of:

• £905 million in cash, and

• a 16% share in Tate & Lyle, valued at £510 million.

Two representatives from CP Kelco will also join Tate & Lyle’s board, becoming part of its management team. This gives them a voice in company decisions going forward.

The deal is expected to be finalised by the end of 2024 — once it’s got regulatory sign-off.

What do the London Stock Exchange’s listing rules say?

📜 The old rules: The London Stock Exchange listing rules, set by the FCA, used to categorise transactions based on size. Under these old rules, Tate & Lyle’s acquisition of CP Kelco would have been classified as a class 1 transaction because the deal amounts to more than 25% of Tate & Lyle’s pre-transaction size, measured by:

• gross assets (total value of assets before deductions), or

• profit, or

• consideration ratio (amount paid for the target company compared to Tate & Lyle's current share value).

As a class 1 transaction, Tate & Lyle would have been required to:

• make an official announcement with key details about the acquisition, and

• send an explanatory note to shareholders, and

• get shareholder approval in a general meeting before proceeding.

In Tate & Lyle’s original announcement relating to this transaction in June, the shareholders’ approval was a condition of the acquisition.

📃 The new rules: In July, the FCA updated the listing rules. Now, deals where the acquisition is more than 25% of the company’s size don’t need a shareholder vote. It’s also no longer required to send detailed information about the deal to shareholders before it’s completed.

Because of this, in an updated announcement relating to this deal, Tate & Lyle stated shareholder approval for the acquisition will no longer be needed (saving them time and reducing uncertainty).

Why were the changes made to the listing rules?

Why the changes were needed: The removal of shareholder approval for acquisitions of this size is part of broader changes introduced by the FCA to make the London Stock Exchange more attractive to companies (it’s struggled in recent years). For instance, UK-based Arm Holdings, a major chip designer, chose to list in New York instead of London last year.

A review during Boris Johnson’s time as Prime Minister showed that the number of listed companies in the UK has dropped by about 40% since its peak in 2008.

Not everyone’s happy with the changes: The listing rules decide which companies can list in London, affecting which shares go into tracker funds and UK pension investments. These funds often invest in the FTSE 100 or FTSE 250, which are the 100 or 250 largest companies on the London Stock Exchange based on market value.

Pension funds are concerned that the new rules limit investors' ability to hold company boards accountable during big transactions. For example, they worry they can't properly question whether a deal is good for a company. The FCA has acknowledged these concerns, admitting the new rules involve "greater risk." However, they point out that shareholder approval is still needed for major events like reverse takeovers (a quicker way for private companies to go public) and decisions to delist a company’s shares from the exchange.

Why should law firms care?

The change in the rules is generally good news for law firms because it opens up more opportunities for corporate work.

Removing the need for shareholder approval reduces obstacles that could block transactions. Michael Jacobs, a corporate partner at Herbert Smith Freehills, says this change is already impacting deals they’re working on and could lead to more mergers and acquisitions.

This means more work for law firms’ corporate teams and related departments like competition, employment, and tax, ultimately leading to more revenue for the firms.

TOGETHER WITH GOWLING WLG* 🤝

What's a sector-focused law firm? (+ why should you care?)

Gowling WLG (a leading international sector-focused law firm) is gonna give you the inside scoop.

Over the next few weeks, they're hosting a bunch of events introducing some of their different sectors.

They'll cover the importance of being industry experts, how they bring value to clients and (most importantly for you) how they provide their trainees with real responsibility.

So if you’re interested in…

• 💻 Tech

• 🍃 ESG

• ⚡️ Energy

• 🚗 Automotive

• 🏘️ Real Estate

• 🛍️ Retail & Leisure

• 🛩️ Aviation, Aerospace & Defence

… make sure you sign up.

P.S. LittleLaw’s running a commercial awareness session too (this Thursday).

* This is sponsored content

IN OTHER NEWS 🗞

• 🏙️ Skadden is opening its first Middle East office in Abu Dhabi. Abu Dhabi is becoming a hot spot for law firms, driven by sovereign wealth fund investments, energy transitions, and cross-border deals. Skadden is hiring Michael Hilton, a former Freshfields partner, to help the firm tap into the region’s growth.

• 🚗 The EU voted to introduce tariffs of up to 45% on Chinese-made electric vehicles (EVs), aiming to level the playing field. China’s EV makers often get government subsidies, which Europe sees as unfair. The tariffs could push up prices for Chinese EVs, but the bigger worry is potential retaliation from China. Since both sides do massive trade, they might prefer negotiating instead. For now, Chinese EV makers must decide whether to absorb the tariffs or pass costs onto customers. If prices rise, it could mean more inflation, complicating the European Central Bank's plans to cut interest rates.

• 📉 The pass rate for the Solicitors Qualifying Exam (SQE) has dropped to just 44%, the lowest ever. Out of 5,006 candidates who sat for SQE1 in July 2024, less than half passed, down from 56% earlier this year. This comes after an earlier mishap in April when 175 candidates were wrongly told they’d failed, leading to some losing training contracts before the error was corrected.

• 🤖 Stephenson Harwood shared a report on their use of AI tool Harvey, with positive results. Their internal survey shows users save about an hour a week using Harvey, and 80% would be disappointed if it were taken away. The main uses for Harvey include extracting data, drafting and editing text, generating ideas, summarising, and translating. The full paper provides more details on these findings.

AROUND THE WEB 🌐

• 👑 Number: An 80-year-old model, Choi Soon-hwa, narrowly missed out on the title of Miss Universe Korea

• ⌨️ Type: Have a typing race against others on the internet (in case you’re interested, my speed’s around 75 WPM)

• 🌍️ Interesting: The can sun has finally set on Britain’s African empire as the UK government agreed to give up sovereignty of the Chagos Islands to Mauritius

Credit: r/internetisbeautiful

STUFF THAT MIGHT HELP YOU 👌

• 📹️ Free application help: If you're applying to commercial law firms, check out my YouTube channel for actionable tips and an insight into the lifestyle of a commercial lawyer in London.