No armour-plating for tech firm forced into a ‘reverse takeover’

    The Armour Group

    A technology firm is in a race against time to save itself from being de-listed from the Alternative Investment Market (AIM).

    The Armour Group – which moved out of its Lonsdale Gardens base to Chatham a year ago to cut costs – saw its shares suspended in August, giving the company until February 5 to find a viable plan to unfreeze its shares.

    Last week, the shareholders voted at an AGM to lay the groundwork for a reverse takeover of the company.

    Financial director Mark Wilson admitted things at the firm were now getting desperate as time runs out: “We are up against it so the pressure is on to secure a deal.

    “Unfortunately, several deals in the past year have fallen through, which is why we are now in this situation.”

    It comes a year after the company divested its two operating divisions in a bid to become a purely investing company and debt free.

    But while Armour Automotive sold for £11.2 million, the loss-making Armour Home Electronics was not disposed of in a cash transaction.

    Complications from the deal and the ongoing under-performance at the division resulted in what chairman, and majority shareholder, Bob Morton, admitted at the time was ‘a significant loss on disposal’ of £13.6 million.

    The firm’s failure secure any investment opportunities since has effectively made the company dormant.

    This breached the rules of AIMS, which promptly announced on August 4 it would be suspending the firm’s shares the next day, leading to a 26 per cent plunge in the share price as investors panicked.

    It was not helped by the decline of its balance sheet, after losing just over £1m for the year ending August 31.

    Armour is now exploring the option of engineering a ‘reverse takeover’ of the firm by another company – described as a ‘retail focused software business’ – in a last ditch attempt to prevent a potentially disastrous de-listing.

    The deal is currently undergoing due-diligence, but it could result in the company ceasing to exist in its current form said Mr Wilson, adding: “It will in effect be a takeover of the company and I expect the name will be changed.”

    But worse would be seeing yet another deal fall through, and company statements warn: “There can be no guarantee that the current proposal will reach a successful conclusion.”

    In order to smooth the path, shareholders voted to approve broadening the company’s investment criteria away from purely technology, as well as allowing the company to buy back its shares if needed at an AGM on December 7.

    Mr Wilson said: “We are making sure there is less chance for any last minute glitches due to the time pressure.”

    And Mr Wilson was still confident this latest deal had a good chance of success, he said: “Hopefully by the start of the new year we shall be releasing some good news.”

    Who is Bob Morton?

    Armour Group chairman Bob Morton, 73, has been described by various publications as a ‘serial investor’ and a ‘veteran’ and ‘shrewd.’

    He has a long history of investing in ‘small capital’ companies, and therefore is also seen as a man prepared to take risks, earning the title of ‘small caps king’.

    Originally an accountant based in St Albans, Mr Morton entered the world of investing in 1970.

    He is said to follow a long term approach to investing, seeking value in small-cap shares.

    His first venture was helping to launch an exhaust fitting company called Euro Exhaust Centres, with just £1,000 of investment.

    Nine years later, it was sold to Kwik-Fit for £11m.

    Other examples of companies he has made a killing from have been Norank, which was started with £1,000 worth of capital and was eventually sold for £10 million.

    There have been several other examples where returns have netted Mr Morton millions from tiny investments.

    But it has not always been smooth sailing and Armour Group, with shares suspended at 3.25p as opposed to the 62p high in 2007.