In a deal that has been under discussion since January, SovGem is issuing £2.7 million of shares to Hanson Westhouse shareholders at 11.9p – a premium to SovGem’s current 8p market price but well down from its 50p AIM float price in 2004. The enlarged company will be called Hanson Westhouse Holdings, with SovGem’s present chairman, veteran investment trust guru Garth Milne, in the chair and Bill Staple, Hanson Westhouse’s chief executive, running the show in the equivalent role.
Hanson Westhouse, which made a “small loss” last year, recently raised £258,000 in a placing and plans to raise another £850,000 at 11.9p for working capital and to pay the £500,000 costs of the deal. Staple says the takeover is timed to catch an expected stock market upturn and claims the idea is to recreate a “relationship banking and broking business” in the City with the financing and acquisition potential provided by a share listing.
Andrew Beeson, founder of the Beeson Gregory stockbroking group and the Quoted Company Alliance and ex-chairman of Evolution Group, is joining the board as a non-executive director, along with former Whitehall mandarin and current National Theatre chairman Sir Hayden Phillips. The new group has also attracted some experienced heavyweights onto its advisory panel, including Christopher Holdsworth Hunt, co-founder of broker KBC Peel Hunt, and Peter Meinertzhagen, former chairman of broker ABN AMRO Hoare Govett.
SovGem, which turned a £283,000 loss into a £214,000 pre-tax profit in the first half of 2008, has had a focus on China and other emerging markets. This should dovetail with Hanson Westhouse, which also has an expertise in mining and resources and, says Staple, wants to “build its capability in mergers and acquisitions”.