Tanfield issues 10p offer on shares (From The Northern Echo)

Tanfield issues 10p offer on shares

8:59am Thursday 9th September 2010 in

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AN electric van manufacturer aims to address a sharp fall in its cash reserves with £2m of new shares, as it awaits completion of a deal with its US partner.

The Tanfield Group said yesterday it would release 20 million new shares at 10p each, a discount of about 31 per cent on their closing price on Tuesday.

The Wearside firm is to receive a significant injection of working capital when an expected merger of its Smith Electric Vehicles division with a US partner goes through, possibly next month.

But interim results for the group, released to the Stock Exchange last month, showed its net cash had declined by £3.2m during the first six months of the year to £2.2m.

At the time, chief executive Darren Kell said the business was not at risk and yesterday an industry source said: “It is a safety net in case there are any delays with the US deal. It is just prudent housekeeping.”

The company said the new shares would “provide funding for a short period within which to complete the consolidation of the company’s electric vehicle businesses”.

Three directors of the company, Mr Kell, Roy Stanley and Jon Pither, have agreed to underwrite the share offer and will subscribe to more than 90 per cent of the new shares between them if they are not bought by other shareholders.

In the meantime, the directors have agreed to make a standby loan of £750,000 available to the company, ahead of a shareholders’ vote on the proposals on September 30.

Yesterday, Tanfield’s deputy chairman Jerry Wooding said: “The board believes that this fundraising represents the best solution to Tanfield’s immediate working capital requirements and the high proportion of underwriting gives us certainty of success of the open offer.

“It is imperative that shareholders support this initiative, whether or not they are planning to take up their entitlement.”

The company has been operating at a loss over the past year due to the recession’s effects on its key markets.

Tanfield announced in March that Smith Electric Vehicles US (Sevus), in which it owns a 49 per cent stake, had offered to buy its Smith Electric Vehicles division for £37m.

But following a combination of the US electric vehicle market taking off more quickly than expected and Sevus winning the support of US President Barack Obama, Tanfield announced last month that the companies were to merge and it would retain a significant stake.