Electric Guitar's main trading subsidiary 3radical Limited set for administration

Bristol-based data and marketing company Electric Guitar plc is set to go into administration with a view to seeking a pre-packaged sale as a going concern.

In a stock market statement, the listed-company said the board of its main trading subsidiary 3radical Limited had instructed Paul Ellison and Christopher Errington of KRE Corporate Recovery Limited (KRE) to market the business and assets of 3radical for sale.

That is in anticipation of the pair being appointed as 3radical's administrators and completing a pre-packaged sale of the business and assets on a going concern basis, the firm added.

The decision was made with the agreement of Electric Guitar's board, following the "unexpected termination of its negotiations for substantial further investment" and revised trading projections by 3radical's management presented to Electric Guitar on November 26, it said.

Electric Guitar has been working on a buy-and-build strategy since acquiring Mymyne Ltd in May this year (the RTO), which resulted in significant synergies and cost-savings for the 3radical business.

That acquisition was achieved despite the fall in the company's share price from soon after the RTO, it noted, and further planned acquisitions in consideration for its shares have been inhibited since then as the share price has continued to decline.

The board has been actively seeking additional capital beyond its existing resources to be able to proceed with its buy and build mission, beyond just bringing the 3radical business to profit, it added.

"However, the company's declining share price has not only inhibited its ability to pursue its buy and build mission, but has also made an equity fundraising difficult at this time."

Electric Guitar said it had been engaging in discussions with prospective investors based mainly in Singapore and believed it had secured in principle very substantial new funds last week before the most recent further decline in the company's share price.

"However, just before the board meeting on 26 November and following the recent share price decline, the Board was unexpectedly informed that the prospective investors had ultimately decided not to invest in an AIM-quoted company as they considered the market insufficiently liquid, despite continuing to be interested in the company's business in the future.

"This combination of factors led the Electric Guitar board to conclude that, absent substantial additional funding in the short term that was not now available, 3radical's business could not reasonably be expected to be able to pay its historic and ongoing liabilities as they fall due, despite 3radical's management's positive longer term outlook for the business," it said.