Tanfield receives $1m for merger exclusivity

Commercial electric vehicles manufacturer Tanfield says that its US associate company Smith Electric Vehicles US (SEV US) has paid $1m in return for an exclusivity period of 60 days to complete its merger with the UK-based Smith Electric Vehicles.Heads of Terms were agreed in August and Kansas City-based SEV US is hoping to arrange a listing on Nasdaq as part of the merger. Tanfield would retain a stake in the merged entity. Tanfield currently owns 49% of SEV US. The merger deal reportedly includes Tanfield licensing the technology to SEV US for a 1% per vehicle royalty. The cash is non-refundable but it would be subtracted from any payment made for the UK business. Earlier this week, AIM-quoted Tanfield directors rejected a proposal from UK-based Liberty Electric Cars to combine their businesses. If SEV US does merge with the UK-based Smith Electric vehicles then Liberty would not be able to do a satisfactory deal. That is why it appealed directly to Tanfield shareholders. Liberty proposes a share swap which would give it a majority interest in Tanfield and leave the AIM-quoted company owning a minority stake in Liberty. However, it appears that it effectively wants to reverse into Tanfield. A £15m loan would be provided to Tanfield by Liberty to help with working capital. The interest rate would be Libor plus 8.5%.Tanfield is short of cash so the $1m will come in handy. Tanfield recently raised £1.8m after expenses from an open offer to shareholders at 10p a share. Even when these latest cash injections are added to the cash in the bank at the end of June 2010 the cash pile won't necessarily take Tanfield very far into 2011 unless it slashes its cash outflow.