The haggling over price between oilfield safety equipment provider Cosalt and its chairman, David Ross, is over, and judging by the share price reaction, the directors of the crisis-torn firm spent most of the negotiations bent over an oil barrel.
Ross, who co-founded mobile phone seller Carphone Warehouse, has set up a new company called Oval, which will buy Cosalt for around £400,000.
Cosalt shareholders will be entitled to receive 0.1p in cash per Cosalt share in cash under the terms of the agreed offer, which represents a discount of around 87.18% to the closing price of 0.78p on 16 November, the last dealing day before Ross made his low-ball offer.
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The board's capitulation saw the price of the shares halve in early trading on Friday, though at 0.17p they are still trading at a premium to to Oval's offer. The shares are down 95% over the last year, as the company has suffered a number of setbacks, including the delayed sale of its Marine division which led to serious cash-flow problems.
Earlier this week Cosalt released a statement saying that the firm's cash flow position has continued to deteriorate and that it now has only £900,000 of bank facilities available, which represents sufficient working capital only until 30 November 2011.
That left the company in a very weak negotiating position and the change of ownership looks as if it will ensure the survival of the business. On acquiring control David Ross intends to recapitalise the group to provide funds to allow it to continue to trade.
David Ross said: "This offer represents an opportunity to preserve the company as a going concern and to provide the necessary investment to rebuild the company."
Maurice White, senior independent non-executive director of Cosalt, added: "The company is in a difficult situation. A practical solution is required to secure the future of the business and therefore the independent directors are unanimously recommending the offer to shareholders."
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