Tanfield directors have rejected a proposal from UK-based Liberty Electric Cars to combine their businesses. Instead, they want to press ahead with the merger of Tanfield’s US associate company Smith Electric Vehicles US (SEV US) with the UK-based Smith Electric Vehicles. Kansas City-based SEV US has paid an option price of $1 million in return for an exclusivity period of 60 days to complete the merger.
The plan is for the enlarged group, which itself will need additional cash, to obtain a NASDAQ listing, although this could still be some time ahead. Tanfield currently owns 49% of SEV US. The merger deal reportedly includes Tanfield licensing technology to SEV US for a 1% per vehicle royalty.
Liberty is appealing directly to the commercial electric vehicles manufacturer’s shareholders. It proposes a share swap which would give it a majority interest in Tanfield and leave the Alternative Investment Market-quoted company owning a minority stake in Liberty. However, it appears that Liberty effectively wants to reverse into Tanfield. A £15 million loan would be provided to Tanfield by Liberty to help with working capital, with an interest rate of Libor plus 8.5%.
Since Tanfield is short of cash, the $1 million will be very welcome, as would the loan. Tanfield recently raised £1.8 million after expenses from an open offer to shareholders at 10p a share. The cash in the bank at the end of June 2010, even when boosted by these latest cash injections, will not necessarily be sufficient to take Tanfield very far into 2011 unless its cash outflow is slashed.
There is no indication whether or not the loan would be secured on any assets, although it would seem strange if it were not.
The ultimate goal for Liberty is merging the two companies’ electric vehicles businesses. Liberty wants to make “the north east of England the epicentre of global electric vehicle research, innovation and production”.
Liberty re-engineers existing luxury cars so that they run on electricity. It has also developed an electric powertrain technology and talks about a potential order for buses in China.
Tanfield’s powered access division, which is currently heavily loss-making, is not likely to be of interest to Liberty.
Market: AIM
Symbol: TAN
Price: 18.5p
12 month high/low: 38.76p/10.75p
Market cap: £17.4m
| < Prev | Next > |
|---|
