Cobham, the aerospace and defence engineering company, yesterday became the latest buy story in the stock market, when investors rushed to pile in to a £105m share issue.
The placing of 9.1 million shares at 1,160p sold out within two hours of its announcement yesterday morning. The offer was only 1.7 per cent below its closing price on Tuesday and was heavily oversubscribed. Shares in Cobham raced up through the day as investors fought to get their hands on the stock, and closed 12.5p up at 1,192.5p.
The successful share placing follows a number of similar moves by companies keen to tap in to the growing confidence in equity markets. GW Pharmaceuticals raised £20m last month and WPP raised £100m through a share placing to fund its £266m bid for Cordiant.
Cobham, which pioneered air-to-air refuelling techniques in the 1930s, wanted the extra capital to restore its balance sheet after a £100m spending spree last year. It also plans to use the capital to re-arm itself for further acquisitions.
Alan Cook, the chief executive of Cobham, said: "We've been delighted by how successful the placing was." "We've put a lot of work in to preparing the ground for this deal with our shareholders over the past couple of weeks and we came to the City with a very strong story - that tells you something about the market at the moment and they have rewarded us." He said the placing had been in the "right place at the right time".
The issue will halve Cobham's borrowings to only 35 per cent of its balance sheet. It has bought eight companies in the past eight months.
Mr Cook said yesterday that Cobham's next acquisition would be imminent and would be a "bolt-on" deal valued at less than £50m. He said the company did not, however, plan to come back to shareholders for more capital in the short term.
A huge spending budget of up to $400bn by the US government on defence has boosted sales and opened up acquisition possibilities.
Mr Cook said Cobham was performing better over the past five months to the end of May than last year.
Trading is expected to improve in the second half. Analysts expect Cobham to make profits of around the £126m level this year.
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