Shares in Rosebank Industries PLC (AIM:ROSE), the new 'buy, improve, sell' vehicle for the founders of Melrose Industries, fell 43% as it resumed trading on Wednesday after a suspension as it carried out a £1.14 billion fundraising to buy electrical components business Electrical Components International (ECI).
The company issued 380 million new shares at a price 300p, a discount to the 660p the shares had reached at the end of May.
On Wednesday, Rosebank issued an admission docusment for the ECI reverse takeover and proposed to raise an extra £6.7 million via an open offer, allowing retail investors to also buy at the same issue price.
The acquisition of ECI, an electrical components business 80% focused on North America that made revenues of $1.3 billion in 2024, requires the approval of Rosebank's shareholders at a meeting convened for 1 July.
Rosebank, which was floated by former Melrose directors last July with the backing of investors including Aviva, said last week that it agreed to buy ECI at an enterprise value of "less than $1.9 billion on a debt and cash free basis", representing nine times expected 2025 adjusted EBITDA.
It is targeting "5 percentage points of operating margin improvement through untapped cost saving and restructuring initiatives", which it expects to "unlock the additional potential of the business".
Shares in the cash shell rocketed from 250p at its £50 million IPO to over 675p in the first week, topping 900p at the start of this year.
The price of this week's funding meant that "reality now hits hard that it will need to raise a significant amount of money to make acquisitions, and then it could take years to do each one up", said analyst Russ Mould at AJ Bell.
He said Rosebank is "not buying electrical components business ECI on the cheap", with nine times adjusted earnings "fine for a company that is running smoothly, but twice as much as you might find with acquisitions of a broken business".