Leaving the AIM market

Robert Tyerman reports on the numerous and varied reasons why an increasing number of companies are currently choosing to exit AIM

Whatever hurdles companies wishing to float their shares on AIM may face in today’s tough market conditions, many of those leaving the London Stock Exchange’s junior market by de-listing can also prove how useful AIM has been for them.

Of the 228 companies which have had their shares de-listed from AIM in 2008, research carried out by M&A Magazine shows that the biggest single component – with 61 companies in all – did so because their shareholders had accepted takeover bids.

Reverse takeovers, where companies issue shares to buy other companies whose vendors, as a result, usually end up with a controlling stake in the bidder, accounted for another ten de-listings. Seven mergers took companies off the AIM board and there was one management buy-out.

Another 30 companies either moved from AIM to another exchange, most often the full LSE, but occasionally to the more junior PLUS-quoted market, or reverted to a foreign listing they had had before. Since AIM is often seen as an ante-room for the full LSE or another market, such movements are entirely appropriate and cannot necessarily be seen as setbacks.

Thus, 79 companies de-listed for mostly positive reasons, with another 30 moving either up to a more senior market or PLUS or back to their primary overseas listing. One move to the Full List was Hardy Oil & Gas, with potentially attractive offshore Indian assets – which have subsequently lost some of their appeal.

That total of 79 compares with the 37 companies which left because they had gone into administration. In addition, eight de-listed because their nominated advisers resigned, seven left because their listings were cancelled under the AIM rules after their shares had been suspended for six months and the total was swollen by two insolvencies, six liquidations and a handful of companies still intending to do a deal and return to the market after their six months’ suspension had expired.

Another 33 de-listed at their own request, following the required authorisation from 75 per cent of the shareholding, usually because the plans which would have made an AIM quote useful had not come to fruition. These include leisure and consumer investment hopeful Chariot (UK), which pulled out after several prospective deals came to nothing, and stockbroking and investment concern IAF Group, which blamed market volatility, recruitment problems and ‘a dearth of IPOs’.

Bids and deals

Takeovers came in many shapes and sizes to take companies off the AIM lists. In one of the larger deals in AIM’s history, Italian oil giant ENI bought First Calgary Petroleum, a Canadian resources group with abundant natural gas reserves in Algeria, for the equivalent of £494 million, paying a near-100 per cent premium over the shares’ previous low points, though only a fraction of the heights reached during the peak of the resources boom in 2005.

On a more modest scale, Cambridge-based CeNes Pharmaceuticals, which had lost money and stock market favour developing a post-operative pain drug and other pain treatments, welcomed a bid worth £11 million from Paion AG, a German specialist in innovative therapeutic treatments. Paion offered paper so that CeNes holders would finish with shares quoted on Frankfurt’s Regulated Market.

Last autumn, media entrepreneur Michael Danson, who founded the Datamonitor group before selling out in a £500 million deal, launched a £12 million agreed bid for AIM-quoted SPG Media, operator of controlled circulation magazines, internet reference portals and business conferences. SPG’s chairman Stephen Davidson welcomed the 13p a share cash bid from Danson’s Progressive Capital, arguing SPG’s depressed pre-bid share price ‘failed to reflect the company’s underlying value, while the bid offered shareholders ‘a cash exit’ and SPG itself access to investment needed to deliver sustainable long-term growth.

Another Canadian group, Calgary-based Solana Resources, with oil and gas prospects in the South American state of Colombia, took the merger route when it agreed to combine with Gran Tierra Energy, another Calgary entity, with interests in Colombia, Peru and Argentina. Solana’s chief executive officer J Scott Price joined the board of the combined group, which both parties argued would now be of a size to enable it to take advantage of commercial opportunities in that region.

A different type of transatlantic counter, California-based children’s and family entertainment brand manager and distributor DIC Entertainment, accepted an offer to merge with a subsidiary of Cookie Jar, a fellow children’s entertainment specialist, in a deal worth some £20 million at the equivalent of 51p a share, a 45 per cent premium over the pre-bid price. Given the lacklustre previous performance of DIC’s share price and the competitive industry conditions it faced, the company’s directors argued the deal made strategic sense and the shareholders overwhelmingly agreed with them.

Into limbo?

Shareholders might welcome, or at least accept, a bid or listing switch as a reason for de-listing from AIM. But taking shares off the board, thus denying investors any market for their holdings, often spells something more serious.

That is not always the case. Mining investment concern Galahad Gold went into liquidation for the entirely positive reason that it had made a killing by selling its stake in uranium miner UraMin to French nuclear giant Areva and wanted to return the proceeds to investors.

However, there was little cheering when Myhome International, once high-flying home services and motor franchising group called in the administrators. Steered by entrepreneurial chief executive Russell O’Connell, the company had breached some banking covenants and blamed the consumer slowdown for its woes.

Acquisitive Wales-based ice cream maker Hill Station, once chaired by serial food entrepreneur Pieter Totte, appointed joint administrators in October. Appian Technology, a number plate recognition specialist given to trumpeting its deals with the police and commercial clients, gave its fans a rude awakening when it appointed administrators in November after failing to raise the funds to strengthen its balance sheet.

Robert Tyerman

Robert Tyerman was news editor of 'Growth Company Investor'.

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