27th Apr 2018 09:30
LONDON (Alliance News) - Shares in Flowgroup PLC dropped early Friday, as top shareholders of the company expressed their intent to vote against the company's proposed sale of unit Flow Energy Ltd to Co-Operative Energy Ltd.
Shares in the energy company were trading 19% lower at 0.018 pence in morning trade.
Flowgroup earlier in the month agreed to sell its core business Flow Energy to rival Co-Operative Energy for GBP9.3 million, the proceeds of which would go towards repaying GBP2.1 million of outstanding working capital loan notes to Palm Ventures and Lombard Odier Asset Management; repurchase convertible loan notes issued to Palm and Lombard Odier; and repay other creditors of the company.
However, shareholders Palm Global Small Cap Master Fund LP, Palm Active Energy LP and Provincial House Estates Ltd (UK), which collectively own a 17% interest in Flowgroup and is managed by Palm Ventures, have decided to vote against Flow Energy's sale to Co-Operative Energy.
Instead, the shareholders have declared their support the sale of the company's assets to energy company OVO Energy Ltd, which is believed to achieve both of Flowgroup's objectives to protect its secured creditors, and add an GBP10.0 million in proceeds.
"We were recently made aware that the directors of Flowgroup successfully developed a contingency plan to sell the assets of FEL to OVO Energy Ltd, should a proposed sale to Co-op Energy fail to achieve shareholder approval," said Joshua Horowitz, portfolio manager of Palm Global Small Cap Master Fund.
"As contemplated, an asset sale to OVO provides a 100% recovery for FEL's senior creditor, Shell Energy Europe Ltd, who will be paid in full, approximately GBP24 million, upon a completion date of April 30. A sale to OVO also provides a superior return to the remaining creditors as a whole. Unfortunately, neither transaction is anticipated to result in any recovery to Preferred or Ordinary shareholders," Horowitz added.
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Flowgroup