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LONDON (Alliance News) - Tanfield Group PLC Tuesday said it had decided to support the capital restructuring and listing plans of Smith Electric Vehicles US, even though the deal will dilute its shareholding in Smith.
In a statement, the investment company said it had signed a deal which conditionally binds it to sign consents to allow Smith to raise up to USD30 million in funding and to restructure its capital.
The news comes after Tanfield last week said that Smith, one of the two companies it is invested in, had reached a deal which would see battery technology company Sinopoly Battery Ltd make a strategic investment in the firm, and has also signed a letter of intent that would see it list on an over-the-counter bulletin board and then on a national exchange in the US.
At that time, Tanfield had said it thought there was a "very high level of risk" that the planned listing isn't successful. Smith Electric Vehicles would need to restructure its capital as part of the process, a move that would need the approval of a number of significant investors, which may not be forthcoming, Tanfield said.
In its statement Tuesday, Tanfield said the Smith Board plans to convert all debt into common stock prior to listing on the over-the-counter bulletin board and simultaneously raise up to USD30 million. It is then proposed that Smith seeks a full listing on a US national exchange.
"The Tanfield Board has evaluated the balance of risk and reward associated with the Smith restructuring plan. On balance it remains positive that supporting this plan represents the best possible outcome for all stakeholders of Smith, including Tanfield," the company said in a statement.
"The Tanfield Board considers that in entering this agreement it has sought to fulfil its obligation to its shareholders in seeking to optimise the value on its investment in Smith," it added.
It said it estimates that after the Smith merger and listing on the over-the-counter bulletin board, Tanfield will hold between 4% and 5% of Smith shares, excluding warrants. The ultimate holding post the public listing on a US National exchange will depend on price at which any money is raised at that point, it said.
It expects that it will hold Smith warrants representing just under 2% of its share capital when it lists on the bulletin board.
In March, Tanfield had said it had a 24% stake in Smith, but had realised that the fund raising and debt conversion would be "markedly" dilutive. At that time, it said Smith has consolidated various accumulated debt instruments, including a further USD7.6 million since end of June 2013, into a convertible instrument. The full value of this instrument post full conversion was USD98 million.
Tanfield shares were down 1.4% at 16.02 pence Tuesday.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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