AFH drops Lighthouse bid, blames uncooperative board

AFH Financial Group dropped its interest in acquiring Lighthouse Group on Wednesday, blaming a lack of engagement from its target for the decision.

The AIM-traded company made an initial approach on 9 March, and confirmed its interest in Lighthouse on 17 March following a 35% price movement in the shares of Lighthouse since discussions were first mooted.

AFH said on Wednesday that the initial approach was made to explore the potential of a transaction that would be advantageous to shareholders of both companies, with an indicative price of 13p per share - a 26.8% premium on Lighthouse’s 8 March share price.

“The company’s indicative offer recognised Lighthouse’s limited growth prospects under its current strategy and as reflected in market expectations, its inability to make further distributions or other non-trading payments from its regulated subsidiaries without FCA consent and the acknowledgement that approximately 50% of its cash was required to be retained for regulatory purposes,” AFH’s board said in a statement.

It explained it was disappointed by the reaction of Lighthouse’s directors not to engage in discussions, and was surprised by subsequent statements indicating Lighthouse did not consult shareholders before rejecting AFH’s approach.

The board said it believed a potential enlarged group would have brought efficiencies and cost synergies, and that access to AFH’s model would have generated additional revenue and margin for the combined businesses.

"We are naturally disappointed with the reaction of Lighthouse to our indicative proposal which included a mix and match structure for individual Lighthouse shareholders,” said AFH CEO Alan Hudson.

“AFH, with its extensive track record of M&A to date, continues to progress its stated organic and acquisitive growth strategy and looks forward to updating the market in due course,” he added.

Lighthouse released a statement to the market, short and light on detail, confirming AFH had dropped its intention to make an offer for the company.

“Since the group’s last trading update published in the final results on 22 February, trading has continued to be in line with market expectations,” Lighthouse’s board said.