Tanfield's US sale plan is 'good news'

Mar 11 2010 by Peter McCusker, The Journal

SEVUS has plans to eventually float the company on the US stock market and will make £33m of its shares available to Tanfield’s current shareholders if that is achieved within five years.

Mr Hansel said: "Once completed, this transaction will create a unified entity that will be well positioned globally for growth in the rapidly expanding electric commercial vehicle market.

"We believe this combination will create operational efficiencies and market synergies that will help Smith continue its strong sales momentum and cost reductions."

Mr Stanley says the US government has ploughed money into electric vehicle development in the last year and this makes it more attractive to base the electric vehicle division in the US. The deal will see SEVUS obtain the intellectual property rights for the Smith’s products. The £37m offer is equivalent to 50p per Tanfield share. Its shares rose by 45% yesterday to 41.5p. The proposals have yet to be approved by Tanfield shareholders..

Tanfield has suffered a difficult 18 months during which its has shed over 170 jobs, its sales have plummeted and it has gone into the red.

It made an operating loss of £11m in the six months to the end of June 2009, compared with a £10.3m profit in the first half of 2008. Its turnover dropped by 68% to £29.9m from £92.8m.

At the time Mr Stanley said he had been impressed by the way the American government was investing in low carbon technology.

He said: “The American government, they have a Low Carbon Vehicle Procurement Loan – there is US$25bn in the pot. The American government is putting in huge amounts of money.”

One North East analyst said that as the regulatory environment continued to shift towards low carbon vehicles then the increased economies of scale would lower production costs at Smith’s and help its bottom line.