Alchemy set for Cedar showdown

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The Independent Online

Jon Moulton, the head of venture capital firm Alchemy Partners, will face a showdown with shareholders in Cedar on Thursday as he forces out small investors from the software firm.

Minority shareholders owning 6 per cent of the company will get just 3p a share as Alchemy, which owns the rest, takes control after an 18-month battle.

Mr Moulton took the troubled company private early in 2002. But 30 per cent of the shareholders refused his offer. In March that year, Alchemy invested £40m in a rights issue which took its holding to 94 per cent, diluting the rebel investors' holdings.

The minority shareholders are expected to protest on Thursday at an extraordinary general meeting called to approve the final phase in the saga. Alchemy is pushing a complicated scheme in which Redac, a company it controls, will buy Cedar's businesses for a nominal amount and take on its £26m debt.

Cedar will be liquidated and minority shareholders will be given loan notes worth 3p a share, to be paid in 2006. Shareholders may be liable for income tax on the notes.

Cedar reduced its pre-tax losses from £181m to £5m last year and is forecast to turn profitable in this financial year. "I'm pretty sure that Jon Moulton is well on the way to turning the business around," said one investor.

"We are on the cusp of the company being turned round, yet we are being forced out," said another.

Cedar's directors have told shareholders that the company is not making enough cash to see it through to profitability, and that Alchemy is not prepared to fund Cedar unless it owns the entire business. The company's board said that without further funding, Cedar could go into insolvency, leaving investors with nothing.

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