Deputy City Editor
Roxspur, the specialist engineer, was locked in discussions with its main shareholders last night, trying to persuade them to inject extra capital into the business following the suspension of its shares at 6.5p. The company blamed the ambitious acquisition in April of Wills, a pumps and valves company four times its size and in a much worse financial state than expected.
A statement yesterday said: "Following the offer for the Wills Group it has become clear that the trading position of that company when it was acquired had deteriorated to a level that was substantially worse than anticipated.
"As a direct result, Roxspur has been experiencing and continues to experience severe short-term cash-flow difficulties." A deal to sell one of Wills' principal trading subsidiaries floundered although it is understood that the putative buyer has not withdrawn completely.
Roxspur acquired Wills largely to get hold of Platon International, an engineering company acquired in a hostile takeover in 1993. The problems occurred elsewhere in the Wills group. At the time of the deal, Ian Orrock, Roxspur's chairman, was heralded as the company's saviour. A former divisional head at Racal, he had been parachuted in by bankers who hoped he would build Roxspur up into a large group.
The result of negotiations with shareholders to raise working capital for the troubled group will be known by the end of the week and Roxspur is expected to return from suspension on Monday. At the current level, the shares have lost almost three quarters of their value over the past year.
Back in March, with a remit to "dramatically enhance" prospects over the next two or three years, Mr Orrock said he was preparing to "roll up our sleeves and get into the factories and stay there until they are going well".
Margins of 5 per cent were talked about on the enlarged group's pounds 60m sales thanks to a cutting out of duplicated costs and growing demand for the specialist pumps the company supplied to the water and oil industries.
Roxspur raised pounds 11.5m via a placing and open offer to fund the 16p a share partial cash offer that accompanied the deal.Reuse content