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Expert Corporate Governance Service (ECGS)
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Ferguson - EGM 29 April 2019

The Proposals are being implemented by way of a Jersey scheme of arrangement which requires two shareholder meetings to be held: a Court Meeting and the subsequent Scheme General Meeting. This report addresses the General Meeting.

At the Court meeting held immediately prior to this General Meeting, shareholders were asked to approve a scheme of arrangement. Under the scheme, shares held in the Company will be exchanged for shares in New Ferguson at a one to one ratio. The shares in New Ferguson will have the same rights as shares in the Company. Shareholders will, thus, become shareholders of New Ferguson with the same percentage shareholding as they have in the Company.  The Company will be delisted.  It will be a wholly-owned subsidiary of New Ferguson.

New Ferguson will become the holding company of the Company and the Group.  It will be incorporated in Jersey and, as such, it will be a UK tax-resident company listed on the LSE’s main market. 

The Company has been incorporated in Switzerland since 2010 when the Company moved its headquarters there to take advantage of lower taxes, which have not been realized. The reduction in the benefits of the Group being tax-resident in Switzerland has motivated the Board to propose the scheme.  The purpose of the scheme is to simplify the Group’s corporate structure and take advantage of the UK’s competitive tax environment for international businesses.  The Company states that the proposed move is not related to Brexit. 

Shareholders should note that institutional arbitrage, or moving the operations of the company in the attempt to take advantage of national differences such as tax regimes, does not always work out in practice and may also raise ethical concerns over tax avoidance. Nevertheless, no adverse affects for shareholders have been identified with the proposed scheme.

The items proposed in this general meeting are intended to implement the scheme.  While support has been recommended for the scheme and most of the proposals, concerns have been identified with item 5, to Approve the Articles of Association of New Ferguson. 

Underlying
Ferguson

Ferguson is a holding company. Through its subsidiaries, Co. is a distributor of plumbing and heating products in the U.S. Co. operates nationally serving the residential, commercial, civil and industrial markets. Co. operates seven business units in the U.S.: Blended Branches, which provides plumbing and heating solutions ; Waterworks standalone, which distributes pipe, valves and fittings, hydrants, meters and related water management products; B2C e-commerce, which sells directly to consumers via websites using the product range and distribution network of the Blended Branches business; as well as Other, which comprises industrial standalone, fire and fabrication, and facilities supply.

Provider
Proxinvest
Proxinvest

Founded in 1995, Proxinvest is an independent proxy firm supporting the engagement and proxy analysis processes of investors. Proxinvest mission is to analyse corporate governance practices and resolutions proposed at general meetings of listed firms.

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Analysts
Expert Corporate Governance Service (ECGS)

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