Small Talk: Leading AIM group hit as Pandit fund pulls out of talks

Click to follow
The Independent Online

The tremors from the credit crunch continue to hit companies listed on the Alternative Investment Market. The latest group to feel the after-shocks is a company that was fêted last year as the top international group on AIM. Leadcom Integrated Solutions suffered last week as a Citigroup-backed hedge fund walked away from providing a $15m (£7.6m) cash injection after two months of talks, blaming the state of the market.

The Israeli telecoms company said on Friday that Old Lane, the hedge fund set up by the recently appointed Citigroup chief executive, Vikram Pandit, had pulled out of talks. It was the second time this year the group had lost potential financing partners.

In a statement, Leadcom said it and Old Lane had "mutually agreed to terminate the process by Old Lane, due to current market conditions".

Old Lane first approached Leadcom in February, and made a "non-binding offer for an investment" in early March. At the time, the hedge fund had a 4.15 per cent holding in the telecoms firm. The initial plan was to subscribe to a further 24.6 million shares at 31p each, to raise its stake to 18.9 per cent.

The reasons for Leadcom to encourage the investment were clear. "The injection of funds into Leadcom will improve the company's balance sheet," the group said. The investment would allow it to fund "additional opportunities in the Indian market," a particular focus for the group in the past year. Old Lane was also to provide two directors to the board.

The collapse of the talks will be a blow; especially given Old Lane's approach helped to kill a rival offer of a cash injection. In February, Leadcom signed an agreement with the Israeli group Electra. Leadcom was to issue 28 million shares for £7.8m, which would bring Electra's holding to 18 per cent of the share register. The talks collapsed at the end of March, with Electra blaming the fall in Leadcom's share price, its belief that Leadcom's shareholders would not approve the deal, and the emergence of Old Lane.

Leadcom was set up in Hod Hasharon in 1982, and was listed on AIM in 2005. It provides fixed mobile and transmission networks and has working agreements with brands including Nokia-Siemens and Ericsson. It enjoyed a strong 2007, including signing a $9m five-year agreement with an Indian mobile phone operator, culminating in being named the AIM International Company of the Year in October, an award presented by AIM to companies incorporated outside the UK.

A month later and the wheels began to fall off, as the company was forced to warn that losses from its discontinued operations in the Caribbean and Latin America would leave it as much as $6m down for 2007.

Last week, it reported that the performance in the first quarter had fallen into a loss from a profitable position last year, and added that Stewart Millman had stepped down as executive chairman. The group's shares slipped below its 32p listing price in February to hit 16.5p last week.

A spokeswoman said that, after a profit warning last year, the group had launched a turnaround plan which was progressing well. The strategy is to cut costs and headcount, shut down subsidiaries abroad and phase out loss-making projects.

She said losing Old Lane's investment would not be a blow. "We don't need the money to carry on – we are in a good position," she said.

Limitless speculation lifts Minerva on hopes of £322m Dubai World bid

The property sector has proved pretty barren ground for investors over the past year and a half. The small caps are no exception, although several have seen their stocks bouncing recently on takeover chat, as predators judge whether the assets are now cheap enough to take out.

There has been much talk of Middle East interest in some of the big players, including British Land and Liberty International, but last month the sovereign wealth fund Dubai World was compelled to reveal, much to its annoyance and everyone else's surprise, an interest in Minerva.

Limitless, a division of the fund, said it was in the "very preliminary stages" of considering a bid, with analysts predicting a price of up to £322m. Since then, it had gone quiet. Until Friday, when the shares spiked wildly on rumours that a bid was set to be lodged.

In Dubai on Friday, Limitless was still saying their scrutiny of the company was at a "very early stage" and no final decision had been made. Interestingly, the same day, a regulatory news announcement said it had bought a further 7,029 shares in Minerva through its broker UBS. This bolstered rumours a bid for the company would emerge today.

Investors will be holding their breath as, according to one analyst, many would be willing to accept a cash exit after the troubled times in property stock prices.

Comments