Norman link sends Knutsford on rollercoaster

FORTUNES WERE made and lost yesterday as the City gambled on the talents of Archie Norman, chairman of the Asda supermarket group, and his three business partners.

Shares in Knutsford, the Manchester-based leather firm that is the target of a reverse takeover bid for Mr Norman's new company, Maybeat, opened at 72.5p. That price was 684 per cent higher than the value of 9.25p at which the stock was suspended on Tuesday pending the acquisition announcement. The shares then soared another 248 per cent to a high of 252.5p but fell by 40 per cent to eventually close at 150p.

At the highest price, the theoretical value placed by the market on the company, assuming that the proposed acquisition goes through, was nearly pounds 700m.

Knutsford, which is listed on the Alternative Investment Market, was forced to put out an announcement in response to the orbital share movement, which is almost certain to be investigated by the London Stock Exchange.

Speculation was rife that Knutsford, which is to be used as an acquisition vehicle, could swallow up big name retailers such as Allders, Storehouse or Marks & Spencer. But Knutsford said "no specific acquisition acquisition target has yet been identified". It also stated that the assets of the company on completion of the deal would be about pounds 5.42m.

Nick Leslau, who runs the Prestbury property group and who is one of Maybeat's four directors, said: "Today was a complete shock.... However highly we think of ourselves, we don't think that much."

He said he did not expect the price to remain at these levels. But he said: "It is for the market to decide what value to put on the company."

One analyst described yesterday's pricing as "way out of reality" and accused the stock's market-maker, Winterflood Securities, of "winding up the price". He said that, prior to yesterday, expectations had been closer to between 40p and 50p and that the unusual level of demand was stimulated by the big names backing the venture.

Mr Norman teamed up with Mr Leslau, Nigel Wray, the chairman of property firm Burford Holdings, and Julian Richer, the founder of hi-fi company Richer Sounds, to form Maybeat, a private company. On Tuesday they announced plans to be bought by Knutsford for a total consideration of pounds 4.95m, to be satisfied by the issue of 247.5 million ordinary shares priced at 2p a share. There are currently only 27.5 million shares being traded in the company.

If the deal is approved at Knutsford's egm on 26 November, the Maybeat directors will together own 90 per cent of the leather firm and will join its board. Mr Norman will hold a 9 per cent stake, or 24.75 million shares and the remaining Maybeat directors will each own 27 per cent. Taking yesterday's highest price, their combined stake would be worth pounds 625m.

Dealers said the rise inKnutsford shares was one of the biggest in the recent history. About 500 deals were struck during the day and well over 1 million shares changed hands.