Small Talk: Cash in question: Langbar risks wrath of investors

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The Independent Online

Its now a month since Langbar International, AIM's biggest cash shell, asked for its shares to be suspended. The company sought once and for all to confirm it really has £370m of assets, but its shareholders are understandably getting impatient.

Chief among them must be the fund manager Gartmore and Merrill Lynch. The duo lead the list of City institutions who spent £16m on building substantial stakes in Langbar before the group's shares were suspended. They paid between 40p and 60p for stock, convinced Langbar had more than 220p a share in bank accounts in Brazil and the Netherlands.

But this was suddenly thrown into doubt last month when Langbar's founder, the Canadian businessman Mariusz Rybak, disclosed the sale of 4.2 million shares at prices between 55p and 65p. In the wake of the disposal, shareholders wanted to know why Mr Rybak was selling at these low prices when the company was supposed to have more than 220p a share in cash. Did he know something they didn't?

Langbar's chief executive, Stuart Pearson, was forced to call in a firm of forensic accountants to make sure all was as it should be. Mr Pearson, who was a corporate financier with Baker Tilly in northern England for 20 years, came out of retirement to take the helm of the company this year. He had been called in by Mr Rybak, who wanted him to tidy up the group's complicated affairs and restore its share price.

After a series of curious strategic U-turns, investors lost faith in the company, and its shares were languishing at just 13p. And understandably so. The company had floated on AIM in 2003 at 360p. Called Crown Corporation at the time, it promised to make money from investing in North American enterprises. Instead, it secured construction contracts in Argentina worth £360m. In June last year it sold them to Lambert Financial Investment, its partner in the region, and also a substantial Crown shareholder at the time.

Another U-turn took place shortly. The profit the group made was to be used to fund a move into the Russian oil and gas business. But after talks with MOS International, the small AIM-listed oil industry consultant where Mr Pearson was a non-executive director, this was abandoned. Mr Pearson was called at this point to take over at Crown. Before taking the chief executive's position he wisely conducted extensive due diligence. This included trips to Brazil where, after the Lambert Financial deal, Crown held the bulk of its assets in interest-bearing promissory notes.

Satisfied that all was as it should be, Mr Pearson became chief executive in June this year and set about moving the company's cash out of Brazil and to Europe's safer shores. Soon after, Mr Rybak quit the board and the group's nominated advi-sor, Nabarro Wells, was replaced by Arden Partners. In August, Arden raised £4.3m via a placing of new shares at 48p and the company's name was changed to Langbar International.

In September, Mr Pearson succeeded in transferring £160m of the group's cash from Banco do Brasil to ABN Amro in the Netherlands and earmarked it for acquisitions. Some £210m remained in Brazil. It is at this point the likes of Merrill Lynch and Gartmore piled into the group's shares, still valued at a quarter of the company's net asset value. All seemed to be going well until Mr Rybak started selling and question marks emerged about the company's cash pile.

All now depends on the report of the independent forensic accountants, who Small Talk is told work for a high-profile international firm. But should it turn out there has been some horrible mistake and Langbar is not as cash-rich as originally thought, there will be red faces all round at Merrill Lynch and Gartmore, while Mr Pearson will be wishing he had remained in retirement.

Going for broker

The fast expansion of Hichens, Harrison will continue this week when the City's oldest broker announces it has hired Robyn Harte-Bunting as a technology analyst. Hichens has been focused on the financial services and mining sectors but is now looking to cash in on the growing number of techs wanting to float in London. Last week it announced it is in talks to buy its rival Astaire & Partners, a deal that will cost it about £5m.

Sunny Bema

Analysts at Merrill Lynch say investors should not be surprised if Bema Gold is targeted for takeover by one of the mining sector's major players. The group is well on its way to becoming a mid-tier operator and should produce 1 million ounces of gold a year by 2009. The analysts see its Kupol project in Russia as particularly exciting. Located in Chukotka province, of which Chelsea's Roman Abramovich is governor, it boasts 5 million ounces.

Agog about MOG

Mediterranean Oil & Gas (MOG) comes to AIM on Wednesday, having raised £12m via a placing at 100p. The London-based group has offshore assets in Italy and Malta but unlike most AIM exploration floats, already generates revenues.MOG's chief executive, Giovanni Catalano, has more than 20 years of oil and gas industry experience under his belt, as does his fellow executive director Tony Trevisan. The group will use the cash that is raised to bring its remaining prospects to production.

Cyan takes AIM for £27m market value

Cyan, a Cambridge-based semiconductor company, is hoping to emulate the success of its industry peer and neighbour Cambridge Silicon Radio with a flotation on AIM. The company has designed a range of low-power chips and a clever support tool that can automatically write the necessary configuration software for the chip. It has outsourced all its manufacturing since foundation in 2002.

Collins Stewart has been appointed broker to raise funds in the float. It is hoping to bring in £6m to fund new product development and marketing offices in the Far East. Cyan is aiming for a market value of £27m.