Cash boxes explained

Q What is a cash box placing ?

A A cash box placing allows a company to issue new shares by bypassing pre-emption requirements – meaning without shareholder approval – provided they are issued for a non-cash consideration, such as the shares of another company.

Q How does the structure work?

A The listed company incorporates a new subsidiary to act as the so-called cash box. It will inject cash into the unlisted shell company and then buy that shell, paying with shares priced at whatever level it deems suitable.

Q What are the advantages of using this structure?

A The structure allows companies to raise more money than they might otherwise be allowed in a quick transaction and without seeking shareholder approval, which can be expensive and time-consuming.

Q How has the structure been used by Ocado?

A Ocado is using the vehicle to raise 10 per cent of its share capital, breaking the usual five per cent threshold allowed under pre-emption rules. It has incorporated a vehicle called Weir Developments Limited, which can then lend fund by way of redemption of the redeemable preference shares.

Q Which other companies have used the structure?

A Property developer Great Portland Estates recently raised £140.6m from a cash box placing to help fund further acquisitions in the West End. Drax also raised £190m using the mechanism last month. BAE Systems, Logica and Misys have all used cash box structures in the past.