J2C to give 35m back to shareholders
- Added:
- Jun 29, 2001
The funds repaid are expected to be between 33m and 35m, and will be repaid through a capital reduction scheme, which will see shareholders receive between 35.5p and 37.5p in return for their shares.
The scheme will be put to shareholders at an EGM, and, if approved, will result in the closure of J2C's portals Translinx and Powernet. Meanwhile, a buyer is being sought for BestValueZone, which provides e-procurement services to Local Authority and Government organisations, and discussions are underway with Blue Circle, the company's joint venture partner in e-cement, to buy J2C's stake.
This move follows the closure of Webfreight and Granite Rock, and the sale of PulpandPaper.Net to its management earlier this year.
Today's announcement follows J2C's warning in February that it would opt for a capital reduction if it failed to secure a major transaction within the next few months. The cash repaid to shareholders represents a premium of up to 34% on J2K's mid-market closing price of 28p yesterday, but is a significant discount to 150p, the price at which the company floated in February 2000.
Karl Watkin, chief executive of J2C, however, defends that “30% in today's market is a pretty good deal”.
Following the capital reduction scheme, J2C will be delisted from AIM. “It will cease [the AIM listing],” said Watkin, “But J2C will continue because somebody will probably buy the brand. Its very well known in the industry.”
Despite seeing considerable cash generating potential in BestValueZone, which incorporates the businesses of Industry On-Line and Tradezone, following the capital reduction, J2C will not have the funds to support the early stage business. “We're in talks with a blue-chip private business,” said Watkin on the future of BestValueZone. The sale, however, is expected to be for a nominal sum, despite the amount invested into the business, with J2C having acquired Tradezone alone for 10m in March 2000.
“In this industry, if you sell for cash you're going to get a lower price,” said Watkin. “If you sell for shares, you can get a fair price but, because we'll no longer be holding those shares on behalf of shareholders, we can't go down that route.”
The company today also announced its interim results for the period to 31 March 2001, reporting a loss of 34.2m on turnover of 0.7m. Losses included 26.5m in goodwill impairment, 1.56m in restructuring and closure costs, and the write off of 1.57m relating to a loan to e-cement.
Shares in J2C this morning climbed 9.82% to 30.75p.