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Ashtead Plans to Move Primary Listing to US in Blow to London

(Bloomberg, MSCI)

(Bloomberg) -- Construction equipment rental company Ashtead Group Plc delivered the latest setback to the UK stock market as it proposed moving its primary listing from London to the US.

The US is “the natural long-term listing venue for the group,” according to a statement from the firm, which reports in dollars and gets almost all its operating profit from North America. 

Ashtead shares fell as much as 12% after it also cut its full-year forecast for rental revenue as a result of commercial construction market dynamics in the US, and announced plans for a buyback program of up to $1.5 billion over the next 18 months.

The plan to move its main listing follows a string of high-profile defections by London-listed companies to New York — including CRH Plc and Flutter Entertainment Plc — in search of deeper liquidity and higher valuations. Last year, chipmaker Arm Holdings Plc also decided to go public in New York rather than London.

Such moves have hurt the UK’s reputation as a listing location for international companies at a time when its stock market is shrinking at the fastest pace in more than a decade. Chancellor of the Exchequer Rachel Reeves has sought to “revolutionize” capital markets in Britain and revive flagging listings activity.

“It is just another blow” to London, said Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin. She added, however, that the move is unlikely to unlock “material value” in the stock given it doesn’t trade at a discount to peers. 

A FTSE 100 constituent, Ashtead has been taking steps since the summer to prepare shareholders. In September, it named an American to replace its British chief financial officer. The company generates over 90% of its revenue from North America, according to data compiled by Bloomberg, and has the majority of its employees in the region.

The company will discuss the proposal with shareholders in “coming weeks,” before putting forward a formal resolution for approval at a general meeting. It expects the process to take 12 to 18 months.

While UK companies that move their listing to New York tend to see improved valuations, according to an analysis by JPMorgan Chase & Co published earlier this year, the valuation argument is less clear for Ashtead given it doesn’t trade at a discount to rivals. 

Still, “having US-listed stock could make it easier to reward staff with stock and options, as there are fewer complications with tax, or use shares as a currency for making acquisitions,” said Russ Mould, investment director at AJ Bell Plc.

Activist investors have also been pushing UK companies to list overseas. Earlier this year, Dan Loeb’s hedge fund Third Point urged a range of large British businesses to move their listings to New York. He joined the likes of Cevian Capital AB, which last year pressured CRH to move to the US, and has said education publisher Pearson Plc should follow.

The London stock market has also been shrinking because of a wave of takeovers this year. About 45 companies have delisted from the London market this year due to mergers and acquisitions, up 10% from the tally for all of last year, according to data compiled by Bloomberg. That’s the highest number of firms to leave the market since 2010.

--With assistance from Paul Jarvis.

(Updates throughout)

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