Bus manufacturer Henlys has announced details of a £108m rights issue to fund the acquisition of Blue Bird, the US bus builder.
The group, which is raising the money through a two-for-five rights issue at 510p, is raising another £150m by issuing convertible loan notes to Volvo, which now owns 10% of the group.
Volvo will also subscribe to 9.9% of the share issue. If it converted all the notes in full it would have a 30% stake, above the level at which it would have to make a bid.
Henlys shares have been suspended at 575p since the announcement as Blue Bird is the larger company and the deal is deemed a reverse takeover under City rules.
Terms of the rights issue came as Henlys reported a half-year drop in profits from £16.2m to £13.6m. Turnover for the same period increased from £157m to £181m. Chief executive Robert Wood said the fall in profits was due to higher spending on product development and a temporary shortage of low-bodied bus chassis from a supplier.
Henlys builds bus bodies and adds them to bought-in chassis.