London's top office fit-out specialist ISG (ISG:AIM) is calling on shareholders not to tender their stock to bidder Cathexis.

Houston, Texas-headquartered Cathexis wants to buy a majority stake or take over the business entirely and has offered shareholders 143p a share.

But ISG' board says the offer undervalues the business, which has a market capitalisation of £70 million and delivered a £30 million pre-tax profit last year, excluding a struggling construction unit.

In a response to a Cathexis letter to shareholders sent over the weekend, ISG's board says the offer is 'inadequate' and that Cathexis is trying to 'seize control' of the company.

It adds:

  • The bid fails to reflect the recent growth and future potential of ISG's core fit-out business;
  • Cathexis is an astute investor that now sees further value in the stock at other shareholders' expense; and,
  • Shareholders are advised to 'take no action whatsoever and to ignore this offer'.

In an offer document posted to shareholders on 19 September 2015, Cathexis says ISG's volatile trading performance, loss-making construction unit and customer concentration mean its offer is fair.


While ISG's office fit-out business is performing well, its construction division delivered an operating loss of £18.1 million last year.

ISG's largest customer contributes around one-fifth of revenue.

'Cathexis believes that the offer provides the certainty of realisable value to ISG shareholders and allows them to mitigate the inherent risks that the company's core construction business, by its nature, is unpredictable and prone to extraordinary losses from time to time,' says the document posted on Cathexis' website.

The private equity fund, which currently owns 29.5% of ISG, says it would consider keeping ISG as a listed entity under the condition it was able to obtain more than 50% of the company's voting rights.

Issue Date: 21 Dec 2015