Small Talk: Cash shell minnows to be squeezed out of AIM

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The Independent Online

Up to fifty companies listed on London's junior market face having their shares suspended at the end of the month. By the 1 April deadline, all remaining AIM-listed cash shells with less than £3m in the bank must complete an acquisition. Otherwise trading of their shares will be halted and, at a later date, de-listed.

The London Stock Exchange, which runs AIM, decided last March that it wanted to stem the steady stream of tiny shell company floats on the junior market by giving them only a small window in which to make an acquisition. Of the fifty remaining shells - most of which have less than £1m on their balance sheet - a good number are likely to be working on deals ahead of the cut-off point. If they can demonstrate to the Exchange that they are in the middle of a deal they will avoid suspension. But those companies that have left it too late to comply with the rules face an uphill struggle. As the deadline approaches the value of their shares is likely to decline. Further, any target company they are in talks to buy will be aware of the looming deadline and will certainly push for a better deal for its own shareholders. The biggest risk of all for cash shell investors is that their boards rush into an acquisition that they subsequently regret, wiping out shareholder value in the process.

Of the options for those companies that are de-listed, the best one is probably to join the lightly regulated Ofex exchange. Although moving onto Ofex will hit the company's value, it is better than the alternative: shareholders left stranded in a wholly private company with virtually zero chance of an exit.

IMD to sharpen up

This week International Medical Devices (IMD) will announce that production of its ClipOn "safe" needle has begun for delivery into the NHS and South Africa. Trials of the group's product are due later this month and the needle buyer for the NHS - the Purchasing Supply Agency - has agreed to support the fast track launch of IMD's products into the UK.

The NHS buys 140 million needles per year. IMD hopes to carve itself a piece of the £6m market with its ClipOn safe needle, which the company claims can prevent the injuries and even deaths caused by needle stick injuries because of its retractable design. Of the 40,000 such injuries last year cited in a recent NHS report, nine hospital workers contracted hepatitis C and four contracted HIV.

If IMD is going to make money from its new design it will need to find an efficient way of selling to the various NHS trusts up and down the country. To this end, the group is believed to be preparing the £4m purchase of an existing medical devices distributor. It will fund the deal via an equity issue. IMD's target is already profitable and should help the combined company register a profit of around £500,000 in the first year of its existence. Further such acquisitions are likely on the Continent as IMD looks to sell its offering into France and Germany.

Ant secures key deals

Look out for today's annual results from Ant. The headline profit figure is unlikely to excite - in fact it will probably show that the company registered a small loss for 2005. But more important will be news that Ant has secured key deals with the likes of Siemens and LG Electronics for its technology during the fourth quarter, taking the total number of such deals to 29 for the year.

The group's software helps power IPTV, that is the digital TV and video services increasingly on offer across the globe over the internet from telecom companies and others. In the past, IPTV, which allows the user to watch whatever programme or movie he or she wants at any time of day or night, has been nearly impossible to deliver into people's homes because traditional internet connections have been too slow. However, it should start to boom in the coming years because of the increasing availability of high-speed broadband internet.

Ant hopes to cash in from this trend. The company simply sells a one-off licence for its software to set-top-box makers such as Siemens, LG or Pace Micro (which enable consumers to receive IPTV) and then gets a royalty from the sale of each device. As the rollout of IPTV kicks off in the coming years, both licence sales and royalties should start to generate serious revenues for Ant. At Friday's closing price of 82.5p the company is valued at £20m. Half of this is Ant's cash. The shares are worth tucking away.

Merson takes the rail and air route to market

The UK's leading provider of technical staff for key infrastructure projects such as the construction of Heathrow Terminal 5, the Joint Striker Fighter, and various upgrades to Network Rail and Metronet is planning to float on AIM before the end of the month.

Morson Group hopes to raise £35m of new cash and will use the money to reduce debt and help it fund future acquisition.

The group was founded in 1969. Trading in Morson shares is due to start on 30 March and observers are expecting it to achieve a market capitalisation of £70m. In 2005 it made a profit of £6.9m on sales of £266m. Since 1999, the group has managed to grow its revenues in every year - even during times of economic slowdown.

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