Tanfield Group, which makes aerial work platforms, has placed shares in the market at 42p each to raise funds for a bridging loan for associate company Smith Electric Vehicles.
The company raised £2m through the share placing to provide a 180-day loan to Smith Electric Vehicles, in which it has a 24% stake. The loan will be repaid after Smith floats in the US, although no date for the flotation has been released. Smith will pay market rates for the loan.
Tanfield's broker and nominated adviser (nomad), WH Ireland, reckons that Smith's flotation is still likely to take place "prior to the summer recess" but notes that, while US markets are still funding stock market flotations, "the window of opportunity this side of summer is clearly narrowing."
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"Tanfield retains a 24.13% equity stake in Smith Electric Vehicles which, based on a proposed February 2012 private funding round, equates to an unrisked value equivalent to 43.6p per Tanfield share," WH Ireland analyst Matthew Davis calculates.
Davis reckons that if demand for Smith stock ahead of the flotation appears to be strong, "Tanfield may be able to place stock as part of the process, reducing its holding and realising/crystallising value for Tanfield shareholders."
On the home front, Tanfield has used the £11.4m it raised in another placing earlier this year to invest in its supply chain. The boost in capacity has allowed it to increase sales of its platforms and it expects "to reach break-even volumes during the second half of the current financial year."
Darren Kell, Chief Executive, said: "Given that Tanfield is Smith's largest shareholder, Tanfield is keen to support the company in its planned IPO [initial public offering, or flotation]. This fund raising will enable Tanfield to participate in a lending facility that gives Smith that support without risking the progress achieved (so far) in the powered access business."
WH Ireland said the forecast by Tanfield of hitting break-even volumes in the second half of the current financial year is in line with its own forecasts.
"After a two-year buying hiatus, rental companies have begun to replace their ageing aerial lift equipment fleets, a trend which appears to continue despite global macro uncertainties," the house broker said.
Tanfield's improved working capital following its earlier fund raising "allows the company to place larger orders with its principal suppliers, make investments in strategic supply channels and, where necessary, offer incentives to prioritise supply chain commitments from key supply chain partners," the broker explained.
Tanfield shares were down 4.7% at 11:32.
BS
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