THE chairman of struggling offshore services group Cosalt is considering buying the company outright for just £404,000, sending its shares diving.
The cash-strapped Grimsby-based group yesterday revealed David Ross, the Carphone Warehouse co-founder, wants to take the business private.
He now has until December 15 to make a firm bid for the company, of which he already owns 15 per cent.
Shares in the company crashed almost 40 per cent to 0.48p. Mr Ross’s offer is likely to be worth only 0.1p per share, the company said.
Cosalt was a £100m turnover business until the recent sale of its marine safety business, a deal which saw it offload 60 per cent of its revenues to pay off debt and avoid administration.
“In the context of the continuing difficulties facing the company and the challenging funding environment, Mr Ross believes that the company may be more readily recapitalised and moved forward as a private business and has indicated that he would be prepared to pay 0.1p for each ordinary share in issue,” said Cosalt in a statement.
Mr Ross’s family links with the company stretch back more than 50 years – his father and grandfather were directors before him.
“Mr Ross has also indicated that should an offer be put forward and he acquire control of Cosalt, it is his intention to provide additional capital investment to expand the group’s existing businesses for the benefit of the group’s customers and other stakeholders,” added the company.
Mr Ross and other shareholders have been propping up the company with loans, and yesterday Cosalt said continued tough trading has squeezed its cashflow and financial position.
Cosalt said it has net debt of £12.3m – formed of bank debt of £8.8m and shareholder and other loans of £3.5m.
The group said while it is in talks with its lenders, which include Royal Bank of Scotland and HSBC, it may use up its current facilities of £14.9m before the end of the year.
The group added the squeeze on working capital had also hampered its ability to capitalise on improving markets in offshore and workwear.
Mr Ross is thought to have been in talks with other shareholders about his buyout plans.
“This company clearly needs more money,” said Roger Hardman, analyst at Hardman & Co stockbrokers. “It has only just had a fundraising and that clearly wasn’t enough.”
He added the company is “good in its markets”.
Small shareholders reacted with fury to the possible takeover offer. “It (is) more like a slaughter than a takeover action,” said one.
“The arrogance of the ‘offer’ is astounding,” said another.
Cosalt inspects and manages safety equipment such as portable lifting equipment for the offshore oil and gas industry.
Cosalt said it had agreed Mr Ross, its non-executive chairman, should not be involved in its talks around the possible offer. It has set up a board of independent directors, comprising Maurice White, Kenneth Murray and Yarom Ophir.
“The independent directors are considering Mr Ross’ approach in the context of the company’s current financial condition, expected future trading and the feasibility of other available options,” said the company.
The board is still progressing with a review of Cosalt’s operations and future funding needs.
In September the the company reported a £10m pre-tax loss for the 26 weeks to May 2. At the time Mr Ross insisted the sale of the marine division marked a fresh start. “Together, we will seek to create a long-term solution for the business and deliver sustainable shareholder value,” he said.
Cosalt is still locked in a costly legal battle with former management of its offshore division over alleged fraud.
Name shortened as firm grew
Cosalt was founded in 1873 as The Great Grimsby Coal, Salt and Tanning Company. The company expanded in the 20th century, both organically and by buying manufacturing businesses.
Before its flotation on the London Stock Exchange in 1971 it shortened its name to Cosalt. In 1972 it received the Queen’s Award for export. A mini conglomerate, it began simplifying at the turn of the century, selling its lighting and yarns businesses.
In 2007 it bought marine services company GTC for £30m, as it focused on the safety industry. The Ross family have had links with the Grimsby firm for more than 50 years.
Chairman David Ross is a major donor to the Conservative party.