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InterQuest – a further addition to the management buyout’s timeline of shame

By Steve Moore | Thursday 7 September 2017

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Yesterday brought new shame on Gary Ashworth & co involved in the management buyout of InterQuest Group (ITQ) - as Tom has stated in a BearCast HERE. The following details a timeline of shame…

23 Dec 2014 - Having commenced a formal sale process in October with the shares at 110p, this terminated as “the board does not believe that a sale of the company at this time would achieve maximum value for shareholders in the medium term, having regard to the opportunities, growth potential and inherent value of the company”.

27 Jun 2016 - Shares slump from above 80p to 45p as “now expects that group net fee income and EBIT for the current financial year will be materially below market expectations”.

14 Mar 2017 - with the shares at 34p, the 2016 results announcement includes “we have addressed the areas of the group that have underperformed during the year and developed our service offering both in the UK and in the US following the acquisition of RDW”. A note from Nomad and broker to the company, Panmure Gordon, has a target price of 100p and includes “for investors, to make a handsome return, management simply need to deliver on the numbers. No upgrades are required”.

18 May 2017 - management buyout offer (via Chisbridge Ltd)… at 42p per share. This includes that InterQuest “has continued to report profits above those recorded at the time of its Admission and yet its share price has, for significant periods including the past nine months remained below the price at which Admission occurred, namely 55 pence per share”. Response from InterQuest that “the independent directors of the company, who are being advised by Panmure Gordon, confirm that they have unanimously concluded that they are unable to recommend the offer, when made, to InterQuest shareholders on the basis that it would materially undervalue the company and its prospects”.

So 110p+ not having been deemed to maximise medium term shareholder value, problems addressed and adviser closest to the company considering the shares worth 100p and the executive management complaining about a below 55p share price in relation to what is being delivered… and their solution is to offer 42p per share!?!

15 Jun 2017 - reports “weaker trading in recent months” and “signs of potential challenges ahead”, though “the executive management team and independent director concur that the company, whilst benefitting from solid sector fundamentals which underpin the business in the longer term”.

21 Jun 2017 - Chisbridge’s response to the InterQuest defence document includes “in making the offer at the offer price the management team was constrained by the amount of debt which, in the view of its providers of funding, the business could service after the transaction”.

So “solid” longer-term fundamentals and the management “constrained” by the view of their debt funders?

03 Aug 2017 - Chisbridge emphasises that it “now owns over 50 per cent of the voting rights in InterQuest. As a result it is now the controlling shareholder”.

08 Aug 2017 - offer closes with 58.32% acceptances (that including 32.46% from those in the management buyout team, mainly Gary Ashworth). 

09 Aug 2017 - InterQuest responds to offer closed announcement, emphasising “InterQuest will continue to operate its business as usual and remains a public company subject to the AIM Rules for Companies”.

06 Sep 2017 - At 4:01pm with the contacts the management buyout team’s Gary Ashworth and David Bygrave it announced that on 10th August one month's notice of termination was provided to Panmure Gordon and “the company immediately commenced the process of finding and appointing a new nominated adviser and broker in the ordinary course, and confirmed at the time, as well as subsequently, that it was confident that a new appointment would be made within the requisite notice period… It is now apparent that it may not be possible to conclude an appointment of a new nominated adviser before expiry of the contract with its existing nominated adviser, which the company will not extend… Accordingly, if no appointment is made by 9 September 2017, the company's shares will be suspended at 7.30 a.m. on 11 September 2017. If, within one month of that suspension the AIM company has failed to appoint a replacement nominated adviser, the admission of its AIM securities will be cancelled”.

So, with Chisbridge having already asserted itself as “the controlling shareholder”, just a day after it was emphasised “InterQuest will continue to operate its business as usual and remains a public company subject to the AIM Rules for Companies”, the Nomad and broker was in fact ‘terminated’! I question where was it “confirmed at the time, as well as subsequently”? That “which the company will not extend” suggests it could extend if it wanted to – why with what is “now apparent” is this not being sought? Are the executive management sufficient shysters to just see the AIM admission cancelled?

Unfortunately, the above doesn’t bode well for shareholders (which include myself) on that last point. As such, I can see the argument for, if still holding, just selling out and being done with it. I though currently continue to hold – and, for holders, it’s presently a case of waiting and seeing if the executive management here have any decency at all. A disgraceful situation.

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