Small Talk: Investors in internet service group fail to block chairman's deal

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The Independent Online

Shareholders in NetB2B2 have been unhappy over the handling of the internet business-to-business services group's fundraising plans, but failed to hijack the extraordinary general meeting last week.

The company sent out a circular earlier this month detailing its plans to raise 500,000 by placing 5 million shares with its chairman, Keith Young.

NetB2B2 has had a tough time in the past three years, with its shares plunging from 80p to 10p, and funding issues have become pressing over the past year. While shareholders are aware of the need for additional capital, some were unhappy about the proposed method to raise it. The investor Matthew Scherba set up NetB2B Shareholder Action Group and set about corralling support. The shareholder group felt the circular failed to adequately explain the reasons for the placing, and was unhappy with the proposed size of Mr Young's holding.

The move would bring the chairman's holding up to 57 per cent. Despite breaching the 30 per cent threshold that automatically triggers a full bid under UK takeover law, he has received a waiver to proceed from the takeover panel. He will have "effective control over this company, to the possible prejudice of other shareholders", the shareholder group complained.

It believes there were other potential ways to secure the financing that were not considered.

The group also slammed the share price fall in a buoyant period for the market, adding that peer companies have prospered.

"Allowing Keith Young to acquire a 57 per cent stake in the group at a relatively low price appears to be rewarding failure," it said.

Andy Gannon, group managing director of NetB2B2, said: "We have set about trying to resolve challenges at the group in an open way. We considered several options and settled on this as the best. At the end of the day, though, we were driven by our nominated advisers."

The shareholder group gathered support after the UK Shareholders' Association threw its weight behind the action. The nationwide association said: "We have considerable concerns about the sequence of events at this company and the actions of the directors."

The EGM was held at the offices of Smith & Williamson, the group's nominated adviser, in Moorgate last Thursday, and surprisingly Mr Young was not present. He sent his apologies, but his failure to show up riled several shareholders.

At the meeting, the management had to field awkward questions from shareholders. Mr Gannon said: "The shareholders posed perfectly legitimate questions, which was their right, and we tried to answer them. We believe we followed due process".

At the vote the motion was passed 576,000 to 359,000. What upset Mr Scherba most was that 681,000 of the shares were not voted on, especially as he had spent the past few weeks building support. He said he has the intention of filing a complaint, but doesn't think it will get anywhere. The company has not been guilty of any wrongdoing, said Mr Scherba, but he wasn't happy about the way the process was carried out.

Mr Gannon countered: "It is my responsibility to look after all shareholders, I can assure you this was all transparent; there were no cover tactics."

As for NetbB2B2, it reported widening full-year pre-tax losses on Friday, but said it would look to next year with "reasonable confidence".

Tough times for ADL

Tough times ahead for the care homes operator ADL. The group reported on Friday that it had fallen from profits of 199,000 in the first half of 2006 to losses of 78,000 this year, adding that trading in the second half was showing a similar performance to the first.

There are other issues over the company's future which seems to have stopped the chance of a quick turnaround in its fortunes. In September, the directors Jeremy Davies and Pearl Jackson were charged with wilful neglect under the Mental Health Act after police inquiries. This followed a raid on Newsham House in July 2005.

The company said that while it is strenuously defending the charges "this action effectively places an embargo on the further development of the company generally".

It has also hit its proposed acquisition of a group of five homes in Bradford, which it had nearly completed. The board said it had to write off 310,000 in corporate finance costs.

Things could get even worse. Sir William Wells, the group's chairman, said that while trading is satisfactory, "the future of the business is difficult to predict".

Pub gaming firm hopes to hit jackpot

Where now for Inspired Gaming Group? Its shares plunged last week as the Icelandic investment company FL Group pulled out of takeover talks, but it believes it is well placed to grow as a standalone company.

FL, which has a 10 per cent stake in Inspired, pulled out of the deal last Wednesday, blaming the turbulent credit markets. The groups had been in talks since the Icelanders launched a 385p-per-share offer in September, and last week's news sent Inspired's shares down 14 per cent.

The company provides entertainment machines for pubs, including quiz machines and jukeboxes. Its machines work on a "server-based" system, in which it can send new games to its machines directly via a broadband cable. It hopes to replace the existing analogue machines and believes that the business model of providing new games on a regular basis will keep punters coming back for more.

The group listed in June 2006, raising 108m when Evolution Securities brought it to AIM. It enjoyed steady growth until September with the offer, when its shares started zig-zagging before it spiralled in early December on fears the deal would fall apart. It updated the market earlier this month, saying talks were ongoing, which strengthened sentiment, before last week's news had it down at 234p.

It dominates its market, with its main challenge to replace the existing analogue machines in pubs around the country. Its next stage of development, after it has picked up the pieces in the wake of the bid's collapse, is to expand overseas. It plans to continue its strategy of partnering local companies and expand, especially into Asia. If successful, it might well become the focus of takeover interest again before long.