DLC benefits set to remain despite takeover regulation

The attractiveness of dual listed companies mergers (DLC) should not be affected by the Takeover Panel amending its rules to give it jurisdiction over such deals, solicitors said this week.

The panel is considering whether it should change its rules in relation to DLCs, which is a synthetic merger structure created through contractual arrangements and constitutional amendments whereby both merging companies remain separate.

Among various other benefits, this gives shareholders the same economic interest in the combined group, and also has tax advantages as there is no transfer of shares and assets.

Linklaters partner Charlie Jacobs said: 'Structuring a deal by way of a DLC is not usually done to side-step the code.

There are many benefits attached to DLCs, but there are also disadvantages and the market will need to be persuaded of the benefits of a DLC, whether the code applies or not.

'We doubt very much that the decision will hamper DLCs in the future.

Our bet is that we will see more of these structures, with time in Europe and in the US.'