We kick off this month with two more takeovers, or attempted takeovers, of UK small-cap firms.
On 21 May Singapore-based but UK-listed specialist engineer XP Power (XPP) rejected a bid from Denver, Colorado-based rival Advanced Energy Industries (AEIS:NASDAQ).
The firm said it had received a series of ‘highly conditional, opportunistic, indicative proposals’ from the US company, the latest at £19.50 per share, which it turned down as it ‘fundamentally undervalued’ XPP and its prospects.
Considering XPP shares were trading at £11.64 a few weeks ago, saying no to a 67% premium might seem somewhat hubristic, but in fairness to management prior to the approach the stock was trading not far off its 10-year lows, and not that long ago (2021) it was trading at over £55, so AEI’s bid was indeed opportunistic.
In April, XPP posted first-quarter results showing a 17% drop in revenue and a 29% drop in orders and warned second-quarter revenue was likely to be lower still due to customer destocking.
However, it said it expected second-half trading to improve as channel stock levels even out and demand for semiconductor manufacturing equipment picks up again, a key test of which will be the level of orders, so watch this space.
MISSION IMPROBABLE
In the media sector, digital advertising and technology tiddler Brave Bison (BBSN:AIM) revealed it had made an all-share offer for its even smaller rival The Mission Group (TMG:AIM).
The combination could have created a business with pro-forma combined 2023 revenue of £120 million and EBITDA (earnings before interest, tax, depreciation and amortisation) of £14 million, excluding any potential cost synergies, and presented ‘a more attractive investment opportunity to institutional shareholders than either standalone company’ leading to the possibility of the enlarged group trading at a higher multiple of earnings.
It was not to be, however, after major TMG shareholder DBAY Advisors dissed the offer saying while it recognised the attraction of cash offers at significant premia, especially given the tiny trading volumes in TMG shares, the all-share proposal by Brave Bison was ‘highly unattractive’ and undervalued the marketing services company.
There was happier news in the pharmaceutical sector, where cash shell company Amur Minerals Corporation (AMC:AIM) announced it had agreed to acquire Extruded Pharmaceuticals (EPL:AIM) for £5.5 million in a reverse takeover and rename the business CRISM Therapeutics Corporation.
The deal provides support and funding for EPL’s innovative drug delivery technology to improve the clinical performance of cancer drugs as treatments for solid tumours.
ChemoSeed, the firm’s lead product, can be implanted directly into a tumour or the resection margin following the removal of a tumour, ensuring that effective therapeutic concentrations of chemotherapy drugs directly reach the tumour tissue.
‘Innovation in the UK requires support and funding, which this transaction will bring’, said EPL chief executive Andrew Webb. ‘I am looking forward to leading a public company and delivering on our strategy for the benefit of Amur shareholders and affected patients.’
A WING AND A PRAYER
In the media sector, marketing and data services firm Jaywing (JWNG:AIM) said it was taking down the ‘For Sale’ sign after the board decided that trying to crystallise value through a disposal of the company was ‘not in the interests of stakeholders at this time’.
‘The very tough trading conditions over the last two to three years have begun to ease somewhat and the hard decisions on cost cutting coupled with increased business confidence give us some cause for optimism’, said the directors, so while it was too early to predict any sustained recovery they would soldier on, minus chief executive Andrew Fryatt who resigned with immediate effect.
BRINGING SOME GALLIC FLAIR TO GAUL
There was a small flurry of excitement at Caerphilly-based EV (electric vehicle) battery and motor technology firm DG Innovate (DGI) as it announced ex-Tesla (TSLA:NASDAQ) motor design guru Pierre Pellerey was joining as a consultant.
Pellerey brings over 15 years of experience to the start-up firm and his designs are in more than three million Tesla vehicles, from the Model 3 to the Model S, Model Y and Semi, as well as in 10 million Dyson home appliances.
Steered by another former Tesla alumnus, Peter Bardenfleth-Hansen, DGI recently signed a memorandum of understanding with EVage Motors to set up an Indian joint venture to develop its proprietary drive system.
JAM TOMORROW?
Finally, we come to the ‘good news story’ of a small-cap engineering company hoping to join the market rather than leave it.
Raspberry Pi, known for its technology products which are aimed mainly at hobbyists and those in education and are produced in Pencoed, Wales, is looking to raise around $40 million and obtain a London listing with a valuation of around £500 million at some point in June.
Cornerstone investors are said to be hedge fund group Lansdowne Partners, which will take up $20 million of shares, and the investment division of chipmaker Arm Holdings (ARM:NASDAQ), which ironically ditched London for a New York listing but is said to be taking up $35 million of shares.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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