LONDON (Alliance News) - Elektron Technology PLC shares rose early Friday after the company said it had ended its strategic review and formal sale process after key shareholders rejected the biggest of the takeover offers it received, and it had instead decided to proceed with its own GBP3.5 million fund raising.
The technology company had said in early April that it was mulling a possible sale of the company or a fund-raising, after debt rose and it started running out of cash when trading deteriorated last year. It said it had headroom on its working capital facilities of GBP1.1 million at the end of January, but the position was under pressure after sales fell in May. It has now agreed with lender HSBC to maintain a minimum headroom of GBP1 million from June 30, meaning it's under pressure to bolster its financial position quickly.
In May, Microgen PLC said it was interested in making a five pence-a-share takeover off for Elektron, but then walked away when it was rebuffed.
In its statement Friday, Elektron said it had received "various" approaches during its strategic review, the best of which was a 10 pence-a-share offer. However, John Kinder and Executive Chairman Keith Daley, who hold a combined stake of about 25.95% in Elektron, said they wouldn't accept a bid at 10 pence a share. It also received proposals for equity fundraising to be supported by shareholders or third parties.
Given Daley, Kinder and Chief Executive John Wilson were part of a so-called "concert party" that could have been involved in any solution for the company, Elektron formed an independent committee of directors to consider the options. The committee comprised Non-Executive Directors Tony Harris and Ric Pipe, and Chief Financial Officer Andy Weatherstone.
That committee, mindful of the company's financial situation, its new banking arrangements and the fact that a takeover might not have been done in time, has decided that an equity fundraising is the "appropriate solution at this time".
Elektron said it is advanced talks to raise up to about GBP2.3 million before expenses by placing shares with existing investors at 5 pence each, and it intends to raise about GBP1.2 million more through an open offer at the same price. Kinder and Daley could buy some of the open offer shares if they aren't taken up by other existing shareholders, it said.
"If successful in its intention to raise the new funds, the company intends to use the net proceeds of the placing and open offer to reduce its borrowings with the bank, to fund working capital requirements and to invest in new product development and marketing," the company said in a statement.
It said it had confirmed that none of the parties who had expressed a takeover interest in the company were considering an offer any more.
Elektron Technology shares were up 5.9% at 4.5 pence early Friday.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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