2ergo to buy back Broca

MOBILE phone technology group 2ergo is planning to buy back Broca, the subsidiary it demerged two years ago, at less than a third of the price.

The all-share offer, which requires shareholder approval, will see 2ergo take back Broca at a significant discount.

When Broca spun-out in March 2007 it was listed on the Alternative Investment Market at 52p a share, valuing the business at £19.5m.

2ergo is now offering 12.5p a share, giving Broca a market value of £4.9m. The price reflects the decline of Broca’s shares which were down to 8p earlier this year.

In December Broca admitted it was short of cash but its shares rallied in mid-January when the company revealed it was conducting takeover talks. The shares closed at 16.5p yesterday.

2ergo, which helps companies use mobile phones to trade and market services, said the deal would enhance its range of products and its geographic reach. Broca’s technology enables consumers to pay securely for goods and services such as event tickets with their mobile phones.

Both companies are based in Rawtenstall, Lancashire, and 2ergo’s joint chief executives Neale Graham and Barry Sharples both sit on Broca’s board and hold shares in the company. 2ergo also holds nearly 20% of Broca’s shares.

Mr Sharples said: “Broca was originally demerged from 2ergo in March 2007 as we felt its value was not fully recognised as part of the 2ergo Group, and felt, at the time, that it would be better placed to achieve its goals as a separate entity.

“However, in the current market environment, we believe that we can better enhance Broca’s prospects and value as part of the enlarged group.”

Peter Harvey, Broca’s chairman said: “As announced towards the end of last year, although we have seen growing interest in, and market readiness for, our patented technology, we have experienced delays in the completion of a number of key licence contracts.

“In the current environment, we believe that being part of the enlarged group should ease the development constraints that we have experienced and provide the best vehicle to fully exploit Broca’s technology going forward.”

If the deal goes through Mr Harvey, fellow non-executive Roger Alexander and chief executive Ian Price will resign from the board. Mr Price will continue to work for Broca until the business is fully integrated.