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Shareholders in bus manufacturer Optare have voted in favour of issuing Ashok Leyland with a 26% stake in the company.
Ashok is part of the Hinduja Group and it invested £5m, at 5p a share, for its shareholding. An institutional investor invested £100,000 at the same price. A further £568,000 was raised from the issue of share warrant shares at 5p each.
Ashok is the leading bus maker in India and a strategic alliance between the two companies will help Optare gain access to low cost sourcing and manufacturing. Optare believes that this will help it compete in export markets.
Optare has granted Ashok the perpetual and exclusive rights to manufacture and sell its buses outside of its core market of 22, predominantly European, countries. If either company improves the design the other can use the improvements in their own markets.
Ashok has seven plants in India, one in the Czech Republic and one in the Middle East with total annual capacity of over 150,000 buses and trucks.
Ashok has the right to appoint two non-executive directors and it has to be consulted if new shares are issued or there is a significant increase in debt, among other things.
The cash raised will help to reduce debt by £2m and be used to develop the business. Net debt was £7.7m at the end of 2009 and Optare plans to sell its Rotherham site, valued at £2.4m in the balance sheet.
Optare’s order book was worth £27.5m in early July. Optare reported revenues of £79.8m and an underlying loss of £5.13m in 2009. There were exceptional costs of £6.9m on top of the underlying loss. They included restructuring, warranty, onerous contract and impairment costs.
At 4.75p a share, Optare is valued at £18.7m.
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