Exclusive: Investor’s offer for Cosalt labelled ‘derisory’

Robert Legget, whose firm Progressive AIM Realisation Ltd manages a 10.25 per cent stake in the Grimsby-based group, said the multi-millionaire chairman’s approach falls way short of a fair price.

Mr Ross, who has 15 per cent of Cosalt, is due to make a formal offer of 0.1p per share in the next couple of days.

Mr Legget was speaking after Cosalt warned it only has enough cash to trade until the end of the month – £900,000 of bank facilities – and is appointing advisers around a possible restructuring.

“David Ross came in as chairman in October 2009 when the market cap at that point was about £40m,” said Mr Legget, who manages the stake for Guernsey investment fund Brookwell Ltd.

“He’s now offering for the bit he does not own £340,000.

“Wearing his other hat he’s a significant shareholder in Carphone Warehouse. They’ve just done a deal with Best Buy – he will be receiving at least £100m.

“I would say that the offer is insulting. It’s a derisory offer. Okay, things have gone wrong but it takes an awful lot to move from £40m to £400,000.

“Is it right? I don’t think so.”

Earlier this month Carphone Warehouse announced it was returning £838m in cash to shareholders after selling its stake in a successful US venture. Mr Ross owns about 14 per cent of Carphone Warehouse.

Mr Ross has admitted his offer is “not a happy price” but last week told the Yorkshire Post the company’s equity has been “effectively wiped out”. “My primary preoccupation is to safeguard jobs in communities that matter to me,” said Mr Ross yesterday.

“In the current economic environment I believe the absolute priority here is to safeguard and indeed build job opportunities in some economically challenged areas.”

Cosalt employs 361 staff, with 11 of these in Grimsby.

Further detail of Cosalt’s precarious financial position yesterday sent its shares plunging another 40 per cent, to close at just 0.25p per share.

“The company’s cash flow position has continued to deteriorate such that the company now has only £900,000 of bank facilities available, which represents sufficient working capital only until November 30, 2011,” said Cosalt in a brief statement. “The company is therefore now in urgent discussions with its major shareholders and banking partners.

“The board is also in the process of appointing restructuring advisers to assist management in assessing options available to the company for realisation of assets or refinancing.”

Cosalt last week warned it was likely to use its available facilities of £14.9m by the end of the year. It is being propped up by loans from major shareholders, including Mr Ross, as well as Royal Bank of Scotland and HSBC.

In a second statement yesterday, Cosalt said it has been in further talks with its funding partners around getting extra working capital, and plans to update the market today.

The company declined to say whether it will recommend Mr Ross’s offer.

Mr Legget added he has not spoken to Mr Ross, nor has Brookwell decided what to do if Mr Ross’s offer is backed by Cosalt’s independent directors.

“We’ve not made a final decision on that,” he said.

The company had hoped the £31m sale of its marine division to private equity-owned Survitec earlier this year would provide sufficient funds, but continued tough trading squeezed working capital more than expected.

Mr Ross, whose father John and grandfather John Carl Ross were directors of the company before him, was yesterday confirmed as vice-chairman of the Humber Local Enterprise Partnership.

He will work alongside former Northern Foods chairman Lord Haskins, the Humber LEP chair, in promoting business across the Humber region.

Life on the ocean waves

Cosalt was founded in 1873 as The Great Grimsby Coal, Salt and Tanning Company by a co-operative of ship owners to supply marine safety equipment and ships’ supplies.

The company expanded in the 20th century and floated on the London Stock Exchange in 1971, shortening its name to Cosalt. A mini conglomerate, it began simplifying at the turn of the century, selling its lighting and yarns businesses. It also offloaded its caravan and schoolwear businesses.

David Ross joined Cosalt’s board in 2005 and appointed chairman in June 2008. He stepped down later that year due to a share scandal, but was re-appointed in October 2009.