Translating business press releases...

November 11, 2009 2:55 PM

What's the exact meaning of one company "acquiring all of the issued share capital" of another?

From a press release: "In 2004 Latimer Group Limited, a company incorporated by Lion Capital, acquired all of the issued share capital of Weetabix Limited."

For someone who's ill-versed in business and economics: what does "acquired all of the issued share capital" mean? I would guess it means "bought all the stock of", except that Weetabix is privately-held. Anyway, what are the business implications of this? Would Latimer Group have complete say over the behavior of Weetabix? Or simply a seat on the board of directors?

My amateur interpretation is: Latimer saw that Weetabix was doing well, so thought, 'I want a piece of the action. I'll pay out a bunch of money in exchange for nominal ownership of the company, but probably won't bother intervening unless they're doing something dumb.' Does that sound reasonable?

This all happened in the UK, if that matters.

posted by molybdenum to work & money (6 comments total)

Privately held companies can issue equity (stock shares) to people. That equity is just not publicly traded.

Capital means one of the two soures of financing for a company: either equity (stocks) or debt (bonds, or liabilities.)

note that this is simplified. Many large companies also have preferred shares, convertible preferred, etc and the classification of these securities into debt or equity is rather complex.
posted by dfriedman at 3:17 PM on November 11

As for the other questions: that would depend on UK law (about which I am ignorant) and the deal terms (about which I am also ignorant).
posted by dfriedman at 3:28 PM on November 11

L bought all the shares of W, rather than a partial (minority or majority) stake or the acquisition of its assets. The original shareholders are no longer direct owners, and W is now a subsidiary of L. The original shareholders may or may not still be there. They may have received money, or shares in L; most likely some combination.

L has the right to change directors, and the directors have the right to change officers. L may well leave it alone, as the OP suggests, but does not have to.
posted by megatherium at 5:13 PM on November 11

Buying the share capital simply means buying the equity of the company, most likely in the form of common stock. Being public vs. private is irrelevant.

In fact, from a quick google, it looks like Lion Capital is a private equity firm. Latimer Group is the name of the consumer entity that owns Weetabix and other brands. It's likely Weetabix Limited was the prior holding company, and Latimer Group Limited was a new holding company formed by Lion to effect this acquisition. (Just my guess, too lazy to research further.)

In any case, that's what private equity firms do: buy private companies. Typically (historically, as private equity has been dormant recently) it is to achieve liquidity for the previous owners, provide growth capital, or takeout a public company. Sometimes private equity firms replace management and slash costs if it is a struggling or "distressed" acquisition (ie, a turnaround story), but more often than not private equity firms just take some board representation, restructuring the capital structure and govern management from a far to make sure things are running smoothly.

UK doesn't have much to do with anything, except maybe some overly fancy language.
posted by jameslavelle3 at 5:15 PM on November 11

I would guess it means "bought all the stock of", except that Weetabix is privately-held

Privately-held corporations are also joint stock corporations. Any time you see the word "corporation" it essentially means the it has shares in the ownership interest of the firm. To be privately-held means that the shares are not publically-traded on an open exchange.

To purchase all of the capital shares of a corporation is to purchase all stock of any kind issued by the corporation. A corporation may issue several different kinds of kinds of securities. One is stock which was sold by the company as a capital interest. A share denotes a portion of the ownership interest in the corporation. Corporations may issue different kinds of shares. So when one sees the phrase all of the issued share capital, it means all stock currently issued by the corporation.

"In 2004 Latimer Group Limited, a company incorporated by Lion Capital, acquired all of the issued share capital of Weetabix Limited." simply means Lion Capital formed Latimer Group. Latimer Group bought Weetabix.

To clarify above: the other type of security a corporation issues are debt securities. This is a bond or other note representing the lendor's interest in the payoff of a loan it gave a corporation.
posted by Ironmouth at 6:00 PM on November 11

I would like to add that the answers above are also all correct both in their explanation of the transaction and the likely real-world nature of the acquisition.
posted by Ironmouth at 6:04 PM on November 11