pounds 48m Azlan rights issue flops

A pounds 48.5m rights issue to fund a Dutch acquisition by computer distribution company Azlan has flopped, leaving egg on the face of SBC Warburg which arranged and underwrote the deal. Most of the 8.2 million shares issued in the cash call were left with the institutions that sub- underwrote the issue after Azlan's share price plunged below the 620p at which the rights was pitched.

Azlan's shares had been trading at 740p only days before the company said it planned to raise the money at the end of November. They fell to 577p, however, as the City voted with its feet on a deal which it worried would dilute Azlan's high margins and knock its market rating. Yesterday the shares closed unchanged at 567.5p.

The rights issue money was planned to fund the acquisition of Dutch computing company Akam and to finance general working capital needs. But it came at an awkward time for Warburg, whose electronics analysts Mark Loveland had followed Azlan since its flotation but moved in early November to join Kleinwort Benson.

Azlan, headed by Chris Martin, has grown quickly over the past few years and is widely respected in the computer industry for its knowledge of the products it sells and the provision of good after-sales service. It supplies networking equipment that allows computers to communicate with each other.

Historically this has been a high-margin business but City analysts have started to worry that as networking becomes more established those high returns will fall. Azlan's recent diversification into training added to City concerns.

The acquisition of Akam, which is a leading provider of network computer training in the Netherlands, employing 188 staff at four branches, was designed to augment that training business. Azlan already had three training sites in the UK and 10 in Europe.

Azlan's high-flying shares, which had come to the market at 230p in 1993, had already received one set-back in November when Mr Martin said he planned to sell 200,000 shares to raise pounds 1.2m.