On Monday the Aim-listed mattress company confirmed media reports that it was in early stage talks with Simba Sleep over a merger, but added “there can be no certainty” the talks will result in a deal.
It also said it had suspended trading on the index from 12 August pending publication of an admission document related to the potential merger which would be structured by way of the smaller listed Eve Sleep acquiring the larger private company Simba.
Under Aim rules for companies an admission document is required because the potential deal is a reverse takeover, that is when the target is larger than the bidder.
Eve Sleep said a further announcement will be made in due course once the company and its advisers have analysed whether the potential transaction is a reverse takeover pursuant to the Aim rules for companies.
Eve Sleep’s latest accounts for the year ended 31 December 2018 revealed revenue of £34.8m but a loss of £19.2m, while Simba Sleep’s latest accounts on Companies House, for the year ended 30 September 2017, showed a £28m loss, against £3.3m for the previous year.
‘Pretty illiquid’ holding
According to Bloomberg, Woodford holds 31% of Eve Sleep, or 81 million shares, while Jupiter fund manager Ben Whitmore, who inherited the stock in the Omnis Income and Growth fund mandate, owns 15.6% of the company.
Seven Investment Management senior portfolio manager Peter Sleep said with average daily trading volume of 431,000 at 5p a share the holding is “pretty illiquid”.
He added: “As I understand it, Simba wants to reverse their business into Eve. I assume Simba will want to keep the listing, but that is not certain. If Eve issues shares in a reverse takeover, I assume the existing shareholders will end up with a diluted share in an enlarged group.
“This transaction does not really address the fundamental problem of illiquidity for Woodford and Whitmore.”
Woodford Investment Management and Jupiter both declined to comment.