Invensys plans rights issue as part of £1bn fund-raising

The news came as the group revealed it had put itself back in the black for the first time in four years in 2005, generating a pre-tax profit of £22m, compared to a loss of £106m, last year.

The group said it plans to raise £341m through a two-for-five rights issue, as well as an additional £700m via a new bank facility. It also said it had raised a further £157m via the sale of its US and Asian building systems operations to a French company, Schneider Electric.

Shares in the rights issue are to be offered at 15p, a discount of just under 25 per cent to yesterday's opening price of 19.75p.

The company said it plans to use the proceeds mostly to pay down its existing expensive debt facilities.

"The additional flexibility and financial strength arising from this refinancing will enable Invensys to compete on a more equal footing with our competitors," said Ulf Henriksson, the chief executive.

"This positive momentum will enable us to have conversations about growth with employees, customers and suppliers.

"It will increase customer confidence, leading to higher growth potential, and will provide the means to reduce risk and lower costs through joint venturing, particularly in controls. It will also increase our ability to attract and retain key staff and will underpin our existing and future plans."

Although the refinancing was unexpected, investors reacted positively to the news yesterday, sending the shares as much as 10.1 per cent higher in early trading. The stock eventually closed up a little under 9 per cent at 21.5p, giving the company a market value of £1.22bn.

While the group's overall results were strong, the company conceded it had had a difficult year in its controls division, where operating profits fell by a quarter.

However, overall operating profits were up 11 per cent at constant exchange rates. The group said it was confident that the controls division was now stabilising after a difficult couple of years.