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I think there is now a fighting chance that the plans of the grossly overpaid directors of AIM listed IFA Group Lighthouse (LSE:LGT) to delist may be scuppered. The ball is now 100% in the court of former boss Allan Rosengren. You may not know this but Allan is Norwegian so I emailed him today wondering if he has any good looking young female relatives with loose morals & a penchant for older men who might be in Greece this summer. So far no response on that, but as a distraction I pushed him on whether he will actually vote no to the delisting. I know he thinks it is a bad idea.
Rosengren owns 14% of the equity. The directors need 75% approval to get this through. If Allan plays ball and says so publically it just needs small shareholders to write to the company and its advisers saying that they will also vote no and then facing an inevitable defeat the board will have to drop the whole idea. As a next step I would suggest that the grossly overpaid executive chairman David Hickey stands aside and Rosengren be asked back to take his place giving a public commitment that Lighthouse will
a) continue to increase its dividend by 10% per annum
b) Use any surplus operational cashflows not required to support the dividend to buy back shares for cancellation ( that would have been c £1.1 million in 2011)
c) seek to reduce its PLC costs by at least £500,000 a year and will use that cash on further buybacks. How can it make such cuts? Easy peasy. Start by firing 2 of its 3 PR firms (heck fire the lot) and one of its two brokers. Beauty parade all its advisers with incumbents being told they can keep the retainer if they agree to a 25% cut in fees. Rosengren owns enough of the equity that he can survive on a £100,000 salary (and be allowed to participate pro rata in all buybacks) – that would make him a good way cheaper than Hickey. It cannot be hard to hack a bit more away from Lighthouse’s bloated boardroom costs.
Will small shareholders rally around Rosengren if he goes for it? I think they will. Today I see that The Share Society (a body out there to represent private punters) sent out a mailing stating:
ShareSoc urges shareholders to vote against Lighthouse Group delisting.
ShareSoc has criticised the planned delisting of Lighthouse Group shares and urges all shareholders to vote against the resolution at the forthcoming EGM. Delisting is severely detrimental to smaller shareholders and the Company has offered no exit. As is common with AIM delistings, there was a sharp fall of 50% in the share price following the announcement as few people wish to hold shares for which there is no public and liquid market.
ShareSoc is not always against delisting if there are good reasons and an exit is provided to those who cannot or do not want to hold unlisted shares. For example, an exit by way of a tender or other offer for their shares. This gives a shareholder a choice as to whether to continue to hold the company or not. Lighthouse Group has given no such option and the Board also states it has not made any attempt yet to arrange even a matched bargain facility. The Board has failed to persuade shareholders and the market that there are sufficient commercial and financial reasons for the delisting, otherwise the share price would not have halved and there would not be so much opposition from shareholders to the proposal.
It is noted that the Circular to Shareholders states that “a heavily discounted share price will significantly restrict any valuation discussions with potential offerors in the future”. Lighthouse shareholder Simon Taylor-Young notes that “the share price fall means that the Company will be remembered as having delisted at a capitalisation of about £3m, compared to the c£6.5m before the announcement, so ironically the Board has set a benchmark way below its former value. Lighthouse should not be remembered as a £3m company.”
ShareSoc also notes that the year end net cash balances of Lighthouse Group were £11m so there was no financial reason why some kind of scheme for buying out dissenting shareholders could not have been contemplated. The Circular refers to the Company’s “heavily discounted share price” yet does not appear to have considered other ways of enhancing shareholder value and maintaining a stronger share price. The Company reported the aforementioned cash balances yet raised the possibility of a reduced or even waived dividend in the forthcoming year. The Company does not seem to have considered alternatives to the delisting that might have reversed the discount they complain about, such as a sale of the company, a tender offer or a return of cash to shareholders. Any one of these could have delivered more to shareholders than the current sub 3p share price.
For further information, please contact: Roger W. Lawson, Chairman, ShareSocTelephone: 07976-962193Email: roger.lawson@btclick.com Or Stan Grierson, ShareSoc, on Telephone 01628-522514
Well I said as much myself earlier today HERE.
Allan mate… it is over to you.
PS I was kidding about asking Allan about the Norwegian birds, I just wanted to annoy Larissa and Frankie after their comments on my Centamin article.
