Pinnacle to cover deal with hefty share issue

Published on Thursday 11 June 2009 21:38

PINNACLE Telecom, the Scottish IT minnow, is to issue more than 500 million new shares to cover the cost of buying English technology group Accent Telecom.

Despite being one of one of Scotland's smallest Aim-listed companies, Pinnacle has close to 1.2 billion shares in issue. But it is now set to issue another 508,807,826 shares to cover the 661,450 cost of buying Accent.

Even before the new shares are admitted to trading later this month, Pinnacle already has more shares in issue than FTSE-100 utility company, Scottish & Southern Energy, which has a comparatively modest total of 920,440,801 shares.

Aim-listed Pinnacle was founded as the comeback business of Graham Duncan, the former chief executive of Atlantic Telecom, who is now Pinnacle's non-executive chairman.

A darling of the dotcom bubble, Aberdeen-based Atlantic's value peaked at more than 2 billion, but it collapsed in 2001 with debts of 700 million.

Duncan's newer, more modest venture was formed in 2002 to provide IT and telecommunications services, mainly for small and medium-sized businesses. However, a string of deals funded primarily through new shares, combined with a falling share price, has seen its shares in issue swell, and following the latest deal it will have more than 1.7 billion shares in the market.

In early 2007, the company – which was then called Glen Group – was forced into a share split to allow it to raise cash.

Under stock exchange rules, shares can only be issued at or above par value, which in the case of Glen Group was 1p.

When the trading value of the company's shares fell below their face value, the company was forced to issue ten new 0.1p shares for every old share.

Earlier this year the shares fell below the par value once again, but the company has more than doubled in value since, and yesterday rose another 7.4 per cent – one hundredth of a penny – to 0.145p. Its market capitalisation was 1.7m.

It is likely that the number of Pinnacle's shares in issue will grow further, with its chief executive, Alan Bonner, saying yesterday that it was planning further bolt-on acquisitions.

Bonner said the deal for Accent was a "pivotal transaction" for Pinnacle, adding: "It will materially increase group turnover, and give the enlarged business greater scale and wider geographic coverage. Creating a business of substance remains a key objective of the board."

Accent owns stakes in companies which provide a range of services for SMEs, based in Middlesex, Dorking and Stockton-on-Tees. Its management are staying on in the company after the deal is completed.

According to its most recent accounts, Accent had turnover of 3.52m in the year to 31 March, generating an operating profit of 17,000.