"Blue Horseshoe loves Ince Group."
Shareholders in The Ince Group Plc have reacted with surprise to the listed law firm's announcement that it intends to acquire a broker in a £10 million all-share offer, after its CEO stated a month ago that he had no intention of doing so.
Gordon Dadds snapped up troubled shipping and insurance specialist Ince in 2018, and CEO Adrian Biles has steered the group through multiple acquisitions following his legacy firm’s IPO in 2017. This year, the company awarded Biles a £500,000 bonus "directly linked to share price performance".
However, investors who were already anxious over Ince's sinking share price, which continues to hover at around half its initial value, have expressed concerns that Biles was not transparent about the plans for his latest acquisition.
At Ince's AGM on 28th September 2021, Biles was asked about the possibility of further purchases and if they would be funded by internally generated cashflow, or by borrowing money or issuing more shares. Biles replied that he was looking at possible targets with around £10 million revenue, but "none of these has crystallised into an opportunity as yet", and that, "in terms of how we'll pay for them, that would be from internally generated cashflow - we have no intention of borrowing more money or issuing more shares at present".
However, just a month later, on 26 October 2021, Ince announced an all-share offer for Arden Partners, a broker and corporate advisor, which will see Arden shareholders receiving seven Ince shares for every 12 Arden shares.
Investors have claimed that the Ince CEO must have known at the time of the AGM that the firm was intending to issue shares to acquire Arden. "The important point here, unless I am mistaken, is that Biles said that they'd fund future acquisitions out of free cashflow, but he's almost immediately gone and issued new shares to buy a new company", grumbled an investor on a discussion board for Ince shareholders.
Ince's play for Arden has not gone entirely smoothly. Listed companies are required under AIM rules to have a 'Nominated Advisor', and because Ince's Nominated Advisor had been Arden, its offer to buy the broker constituted a possible conflict of interest which resulted in Ince's shares being suspended on 28 October.
An irate shareholder disclosed the email the firm sent to placate him. "The concerns you raise are understandable", Ince told him, explaining that "discussions had been ongoing with the AIM team at the London Stock Exchange for weeks" regarding the Arden offer "and today’s suspension is both unexpected and very regrettable".
Some shareholders claimed the disclosure that Ince had been working on the Arden offer for a considerable amount of time leant credence to the view that Biles may have misspoken at the AGM, with one asking, "Was the CEO's statement 4 weeks ago a blunt lie?"
Asked whether Biles had slipped up, The Ince Group told RollOnFriday in a statement, "As a listed company, we are required to inform the market about any material developments. We often engage in price and market sensitive discussions with other businesses, but until discussions are formalised, they are not disclosable".
Querying Biles's move to purchase Arden, one investor said, "Companies use brokerages like that to write flattering articles in order to sell more shares. He'd have been better off hiring them to promote INCE rather than buy the darn firm..."
However, there was still plenty of support for Ince among other shareholders. "I've decided not to sell my holding (not that I can at the moment anyway) as I think the operating business is good", said one, "but I've lost faith in management over this".
"I'm definitely not giving up on INCE", said another, "the legal business itself is exceptionally cheap compared to competitors and the revenue last year topped £100m for the first time". ROF says: STRONG BUY!*
*ROF is not regulated by anyone and is not liable for investment advice, which is not advice and which may or may not turn out to be brilliant or absolutely useless or not or otherwise.
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