Is time right for Cosalt to walk away?
On Monday, in Grimsby, 183 miles from the London Stock Exchange, an extraordinary general meeting will vote on whether Cosalt Plc should be de-listed and transformed into a private company. The eyes of the City, and oil capital Aberdeen, will be on the company’s Europarc HQ, for a decision which could herald a new chapter in a firm engrained in the town’s industrial past, and keen to play a part in a renewable future. Business editor David Laister reports.
FOR almost 40 years, Cosalt has been the solitary company from this parish listed on the most prestigious financial market in the world.
And had it not been for chairman and majority shareholder David Ross' recent financial intervention, the future could have been in the hands of the administrators, rather than the shareholders, as it will be on Monday morning.
Having exhausted funding streams as the company suffered a run of losses, and paid the price for some costly acquisitions and delayed disposals, as well as an alleged fraud in Scotland, Mr Ross launched a buy-out bid, which was in part successful.
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It saw him take his holding from 15 per cent to a controlling 56 per cent, while supporting the company in its darkest days by injecting more capital.
Now he is seeking 75 per cent shareholder backing to take the firm private, a setting in which he and the new chief executive, Trevor Sands, believe it will be far easier to turn around a ship that has taken on some water.
While gaining the backing of major shareholders, apparently content to cut their losses, and take to the lifeboats with the 0.2p revised offer made just before Christmas, the small shareholders are clinging on, hopeful of calmer water and favourable winds ahead. Many have seen the value of their stakes fall so much in recent times, that it was felt better to retain with hope rather than expectation, and they seem keen to keep Cosalt in the public eye too. And while Mr Ross may appear a saviour, he also has the most to lose, and has sat as a director for the past seven years, and chairman for half of that time as the rocky waters turned to storm-like conditions.
Now a vastly reduced company, focusing on offshore services to the oil, gas and renewables industries, with a specialist workwear division, it has shed legacy businesses including schoolwear, holiday homes, and most recently the marine element.
For Mr Ross, remaining listed is an albatross around Cosalt's neck.
"As it stands, the listing is costing the company in excess of £500,000 per annum," he said.
"That is a number we have reached purely by looking at the six-monthly audits, which are a requirement to have as a Plc, a large number of fees, both regulatory and through the need for advisors, and the fact you have to have a majority of independent non-executive directors on the board. Then there is the great deal of time spent by people in Grimsby dealing purely with the regulatory requirements.
"The major benefit of being a publicly limited company is having access to public capital. However, because of the circumstances at Cosalt, including the pension deficit and the levels of indebtedness, we are not attracting that capital, and the only person putting capital in is me. We are paying a huge amount of money for no discernible benefit. I'm afraid the cost benefit of this listing is a lot more cost than benefit. I hope the shareholders understand this is in the best interests of the company."
It is a company more stable now the Carphone Warehouse co-founder has a controlling share, with a far from inconsiderable part of this personal fortune invested. But the small shareholders argue, to scale, that they are in the same boat.
Addressing one issue that has been raised by a group that have badged themselves SORT – Stop Oval Ross Takeover (referencing the company he set up as a vehicle for the transaction), the third generation family chairman said: "One of the concerns of shareholders is they will have to sell their shares. They won't have to. We will use our best endeavours to set up a match bargain facility for shareholders who want to buy and sell."
In the run-up to the meeting, Mr Sands has explained the importance of Mr Ross' input.
He said: "The company has overcome a number of challenges so that we are now in a sound financial position and have a clear idea of the way forward.
"On my arrival, it was obvious the company urgently required increased funding to support day-to-day activities and provide long term stability.
"David has provided a further £5 million working capital facility in addition to £7.6 million of loans and £4.6 million of bank guarantees. There is no doubt that Cosalt and its employees have a more secure future as a result of David's actions."
On Monday, underlining the cost, the time and the lack of benefits to be gained by remaining listed, he said: "I believe taking the business private is the right thing to do. If shareholders do vote in favour of remaining public it won't change our plans for the business but it will make it more challenging to achieve them.
"Fortunately I have had time to get to know Cosalt and there is no doubt in my mind that it is a good business with the potential to be a highly successful one."
It is this potential that seems to have rankled some shareholders, unsure about their status within a private entity and mindful of the depreciation of their stocks. A SORT spokesman said: "I have had hundreds of people writing to me saying they are supporting the no campaign, telling me their personal stories. A lot of these people risk losing several thousands of pounds, for others it is £40,000, £50,000 or £60,000.
"187 individuals have pledged their support to the SORT campaign, and between them we have got 100 million shares which will have cost them collectively, around £7 million to £8 million. David Ross was offering £200,000. You can imagine the reaction. I am pretty confident we have enough (no votes)."
The spokesman, who wished to remain anonymous due to his own position in the industry, said: "Mr Sands has stated that regardless of the outcome of the EGM, that Cosalt has a good future. To my mind he is basically saying what the shareholders have been saying all along, that this company has a good future as a listed company."