Petards Group (LON:PEG), the security and surveillance group whose products include the ANPR vehicle registration system used by UK police forces, has declared that a tender offer for its shares made yesterday by Water Hall Group Plc (LON:WTH) does not reflect the underlying value of the company. Under the terms of the offer made by Water Hall, whose operations currently focus on waste management support services, it wants to acquire up to 104,511,925 Petards shares at a price of 0.7p each. If it achieves its aim, it would hold a 29.99% stake in Petards and the right to veto any special resolutions proposed by the board.

The move by Water Hall came a week after Petards announced plans for a share capital reorganisation as part of a move to slim down its share register. Currently it has around 14,331 shareholders of which 13,632 have shareholdings of less than 10,000 shares. These 13,632 shareholders account for 95% of the company’s shareholders by number, but represent less than 1.5% of the total number of existing ordinary shares. Petards said the situation was making it difficult for it to raise any new money from investors.

The company said its share reorganisation was aimed at offering smaller shareholders an economical means of realising value from their holdings. It conceded today that shareholders whose holdings of Petards shares are currently worth less than £3 would be better off accepting the Water Hall’s tender offer if it becomes unconditional. However, it noted that despite the offer representing a premium of 27.27% over its average share price this week, it nevertheless undervalued the company.

In April, Petards announced a 45% rise in pre-tax profits for the year to December 2009 on revenues down 15.8% at £15.9m and said it was confident that its markets would continue to expand. In the same period, Water Hall recorded a loss of £0.7m on sales down 16.9% at £1.5m.

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