AFH has abandoned attempts to buy rival Lighthouse Group, with its chief executive citing the company’s “lack of willingness” to do a deal despite what he suggested are a host of axes hanging over the firm.
Alan Hudson said he was disappointed the board of Lighthouse would not meet him over the £17.4m offer his company made last week, saying the bid was a generous one given Lighthouse’s “limited growth prosepects” and regulatory costs.
He said: “We are naturally disappointed with the reaction of Lighthouse to our indicative proposal which included a mix and match structure for individual Lighthouse shareholders.
“AFH, with its extensive track record of M&A to date, continues to progress its stated organic and acquisitive growth strategy and looks forward to updating the market in due course.”
In a statement to the London Stock Exchange, AFH said an initial approach was made to explore the potential of a transaction that would be advantageous to both companies’ shareholders.
It said: “The company’s indicative offer recognised Lighthouse’s limited growth prospects under its current strategy and as reflected in market expectations, its inability to make further distributions or other non-trading payments from its regulated subsidiaries without FCA consent and the acknowledgment that approximately 50 per cent of its cash was required to be retained for regulatory purposes.
“The board of AFH believed that a potential enlarged group would have brought efficiencies and cost synergies. In addition they believed that access to AFH’s proven model would have generated additional revenue and margin for the combined businesses.
“Given the lack of willingness by Lighthouse to engage, together with the share price movement which has prevented further confidential discussions, the company cannot carry out what it considers to be the appropriate level of due diligence within the time period imposed.”
AFH made an initial approach to the board of Lighthouse on Wednesday 9 March and submitted a proposal on Tuesday 15 March.
But the board of Lighthouse declined to meet AFH and rejected the offer the next day.
Under stock exchange rules, AFH had until 5pm on 14 April to announce whether it would make a firm offer for Lighthouse.
The news of a potential takeover has prompted the share price of Lighthouse, which is listed on the Aim market, to rise by more than 20 per cent over the course of the last week - from 11.12p on Tuesday 15 March to 13.62p on Tuesday 22 March.
AFH, which is based in Worcestershire, was founded 25 years ago by Alan Hudson and has funds under management of around £1.9bn. At the end of last year, it raised £6.37m through the placing of new shares to help fund more acquisitions.
Lighthouse is London-based and last month announced profits before tax of £900,000.
The firm did not immediately respond to a request for comment on the AFH announcement.