Cash-strapped Ofex looks set to secure £3m rescue

London's third-tier stock market Ofex, which was running out of cash, has been saved, according to market sources. Ofex said yesterday that it had been approached by several possible bidders after the investment company Zyzygy said it might make an offer.

Ofex was in danger of running out of money in November but Numis, its broker, is understood to have raised the required £3m through a share placing at 5p apiece. Numis declined to comment last night.

St Helen's Capital, the corporate finance boutique and one of the main sponsors of Ofex, had provisionally put aside £2m to rescue Ofex in case Numis failed to raise the funds. Another Ofex user, the market maker Winterflood, had pledged £500,000.

Zyzygy, which is a cash shell whose largest shareholder is Billam, a Swiss investment group, is thought to have only £300,000 on its balance sheet, not enough to fund Ofex . The other possible bidders are thought to include Luke Johnson, the chairman of Channel 4, and a consortium of investors.

Mr Johnson paid £340,000 for a 6 per cent stake last December when Ofex shares were trading at 25p. The stock closed unchanged at 7.75p yesterday , valuing the company at £1.67m. The fringe market is home to a range of niche or growth companies, including the football clubs Glasgow Rangers and Arsenal.

The City's third market came into being when the London Stock Exchange abandoned the old matched-bargains facility to accommodate companies that could not, or did not want to, join the main market. So in 1995 Ofex (Off Exchange) and its rival, the Alternative Investment Market, were founded. The costs of entry are lower and the rules more lax on Ofex, but it has failed to attract as many companies as AIM this year. It is more difficult to raise money on Ofex.

Ironically, Ofex is listed on AIM - the flotation raised £1.7m last year - but the number of companies trading on its market has declined from 170 then to about 136. Many have moved to AIM or withdrawn their shares. Ofex lost its biggest member, Weetabix, after it was taken over last year.

One of the main stumbling blocks in the negotiations with possible bidders was the role of the Jenkins family, who created and managed Ofex, market sources said. John Jenkins, the chairman and founder of Ofex who owns a 55 per cent stake in the company, signalled last month that he plans to retire soon. Mr Jenkins said that losses in the first half of this year rose to £533,000 from £273,000 in the same period last year. The market is run by his children, Jonathan and Emma. Bidders want them to be replaced, market sources said.