Tanfield Group (LON:TAN), the electric vehicle manufacturer, has launched an open offer for shares in the group in an effort to raise £2.0m of short term working capital. The move comes ahead of plans by Tanfield to consolidate its UK and US electric vehicle operations and take a stake in the combined business as part of a potential flotation in the US next year.

As part of today’s fundraising, the company is offering 20m new shares at an issue price of 10p – representing a discount of 31% on yesterday’s closing price – with one new share for approximately every 3.7 existing shares. Over 90% of the open offer has been underwritten by certain company directors and institutional investors, with directors also providing a £750,000 standby loan facility in the interim.

Jerry Wooding, the deputy chairman of Tanfield, said: “The Board believes that this fundraising represents the best solution to Tanfield's immediate working capital requirements and the high proportion of underwriting gives us certainty of success of the open offer. It is imperative that shareholders support this initiative by voting in favour of the resolution at the General Meeting on 30 September 2010, whether or not they are planning to take up their entitlement under the open offer.”

Negotiations have been ongoing with the management team at Smith Electric Vehicles US (SEVUS) since March this year over a possible sale of the Smith Electric Vehicles business. In August, the Tanfield Board signed a non-binding Heads of Terms to consolidate its Smith Electric Vehicles UK division with SEVUS and said the US management were considering an IPO of the business on Nasdaq as soon as the first half of 2011. Under the updated terms of the consolidation Tanfield is expected to retain a significant interest in the combined entity and share in its future growth and opportunity.

In its interim results last month, Tanfield said it was keeping a close eye on cash preservation, whilst retaining its infrastructure and skills base for the eventual market recovery. Turnover in the first half was £28.1m, resulting in a loss of £9.8m, a significant improvement over the operating loss of £11.0m in the corresponding period of 2009. The company ended the period with a net cash balance of £2.2m reflecting the adverse trading conditions in the period. It said that demand for electric…

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