Cookson shares hover close to rights issue price

Cookson's £277.5m rescue rights issue was under pressure yesterday as the company's share price slipped close to the heavily discounted rights price and some institutional shareholders expressed concern about backing the incumbent management.

Cookson's £277.5m rescue rights issue was under pressure yesterday as the company's share price slipped close to the heavily discounted rights price and some institutional shareholders expressed concern about backing the incumbent management.

Cookson, which has businesses in electronics, ceramics and precious metals, is seeking to raise money via a rights issue priced at 25p per share. Yesterday the share price fell a further 1.5p to 28p.

As the fund-raising is not underwritten there is the risk that it will fail if the price falls below 25p. This would leave the company struggling under a £750m debt burden built up during a £1bn acquisition spree.

Cookson says it has letters of intent from 36 per cent of its equity base to support the cash call. However, these commitments are not binding and institutions may baulk at bailing the company out when they are receiving no discount to do so.

Other shareholders, who have not yet agreed to back the fund-raising, yesterday expressed concerns about the management team, led by Stephen Howard, chief executive and Dennis Millard, finance director.

One said: "The problem here is that it is the same management. Are these guys going to run it any better after the recapitalisation than before?"

Another shareholder said the 36 per cent of shareholders who have agreed to back the issue would come under intense pressure from the company and its advisers to stick to their promise, even if the share price falls below 25p. But even this could leave the company raising just £100m. Its debts would be £650m, leaving the management limited room for manoeuvre.

It is also thought that the company's shares have come under pressure from short sellers. One position questioned yesterday whether some institutions were lending stock to short sellers and thereby exacerbating the fall.

Cookson denied its rights issue was in trouble, saying the final date for acceptances was 23 August. The company said it had received positive feedback from shareholders so far. The major shareholders include, Fidelity International, Morley Asset Management, Franklin Resources, Aegon, Axa and Standard Life.