Engineering company B Elliott has turned its back on the stock exchange after more than 50 years.
It was first listed in 1945 and in February, it returned to the private sector, forming a new holding company, Capitalmarket. ‘We felt the City found us too complicated,’ chief executive Michael Frye explains.
B Elliott has a group of businesses operating in specialist markets, including some overseas, which made investors hesitant.
‘At £25m capitalisation, the City found us too small. But there is no clear answer to this problem,’ says Frye.
Companies of less than £150m are rarely of interest, he believes. But ‘it is not about whether the City loves or hates the engineering sector. Fund managers, analysts and merchant bankers are interested in the size of fees from clients.’
Besides size and complexity, liquidity was a problem for B Elliott. AP Moller Tankers & Liners held 52.5% of the shares. It wanted to realise its holding, so the company was unable to raise funds for expansion.
‘We recognised we needed a different system,’ Frye recalls. ‘We wanted to make a lot of changes. We wanted to raise £1m, and the stock market did not want to put the money in.’
The company organised a management buyout, turning to venture capital for funding. Morgan Grenfell Development Capital and Foreign & Colonial Ventures backed the move and a new plc, Capitalmarket, was put together to buy the B Elliott shares. Capitalmarket paid £45.3m, a premium of almost 50% over the ordinary share price.
‘We did the right thing at the right time,’ Frye says. ‘There was a 99.68% acceptance of the deal. There may be a question of whether we paid too much, but now we can do what we want to do.’