Acorn Group Plc, the UK-based pioneer in PC manufacturing, is to cease existence and hand its only valuable asset – a 269m pound ($433.7m) holding in ARM Holdings Plc – back to its shareholders. It has effectively given up hopes of rebuilding the company around set-top boxes and a silicon and software development operation and is selling these activities off for a negligible 1.2m pounds ($1.9m).
The set-top box operation, touted as offering next-generation technology, has been bought by UK market leader Pace Micro Technology for 200,000 pounds ($322,000) while the silicon and software design operation will be sold for 1m pounds ($1.6m) to a team led by chief executive Stan Boland.
Ever since ARM was spun out of Acorn in April 1998 (CI No 3,392), the soaring value of the RISC chip designer became the only attraction of Acorn shares as the company struggled to get out of the red. Though management changes in June brought an end to the output of RISC workstations and the staff was cut by 40%, a return to profitability proved elusive.
Results for the year to December 31 show that only the profit of 18.1m pounds ($29.3m) from the sale of ARM shares enabled the company to report a net profit of 8.2m pounds ($13.2m) on revenue that slumped 54.2% to 11.5m pounds ($18.6m)
In effect, Acorn had become a start-up using ARM shares to finance its development but this was at odds with the aim of most of its new shareholders who saw the company as an opportunity to inexpensively acquire ARM shares.
This is exactly the deal they have ended up with as they will be offered two ARM shares for every five Acorn shares by MSDW Investment Holdings, the company set up to handle the transaction. Owners of more than 50% of the shares have already accepted the deal – and ARM shares dipped 5% to 661 pence on the prospect that around 24% of the company will soon be hovering over the market. The deal also allows Acorn to avoid a huge capital gains tax bill on the sale of its ARM shares.
