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Dragons' Den badboy ups Expansys bid to £7.55m

Still 88 per cent lower than investors coughed in 2010

Lanky Dragons' Den badass Peter Jones is edging closer to signing a deal to buy AIM-listed Expansys for a fraction of the price of some shares he placed on the market in 2010.

The irascible tennis aficionado – Jones trained as a coach in his teens – launched an initial buy-out offer of £6.1m via PDJ Bidco in January, but upped the bid late last week to £7.55m.

"PDJ Bidco's increased and final offer of 0.65 pence per share is full and final and will not be increased," according to a statement issued.

The aggregate of PDJ Bidco, Jones and their "concert parties" represent some 65.75 per cent of Expansys shares. On his own, Jones held 51.2 per cent of the stock, according to the firm's website.

Independent Expansys directors advised by institutional broker and corporate advisor N+1 Singer unanimously recommended that shareholders accept the deal, the firm stated.

Jones relationship with AIM-listed Expansys began in 2010 when he acquired a stake from founder and CEO Roger Butterworth, believed to be for circa £1.6m, taking control of the PLC.

Expansys had floated in 2007, some nine years after Butterworth set up shop to sell mobility products online from the firm's base in Manchester.

According to Companies House, Butterworth's position as a director was terminated in February 2010, but Jones' appointment was not made official on the database for a further five months.

Jones went to the City in July that year and raised £30m in a share placing, with £13.4m of this used to buy Data Select Network Solutions and PJ Media for £38m.

He had owned SIM-wholesaling firm DSNS and held a 42 per cent stake in PJ Media, which designs and builds e-commerce platforms.

Expansys placed 978,078,993 shares on the market for 5.6 per cent per unit - some 88 per cent higher than Jones current valuation of the stock.

Of the funds raised, £10.9m was spent as part consideration for the acquisition of DSNS, £8.2m was splashed on DSNS loans, £3.4m on working capital for the swollen organ, £2.8m to repay loan notes owed to related parties acquired with DSNS, £2.5m as part consideration for the buy of PJ Media and £1.8m to fund the placing.

Sources claimed that Timothy Eltze, a COO at DSNS, did due diligence on the deal before he left in March 2010 and joined Expansys as president of the Americas operation in April that year.

The acquired firms were billed as "transformational acquisitions" but the company seems to have been in and out of the red ever since.

It seems not every senior person at Expansys was behind the deals. Companies House records show that FD Cate Hulme left in July just before the deals were closed.

It is unusual that an FD ups sticks and exits in the middle of a big acquisition. Hulme was unavailable to comment to expand on the reasons for her departure.

The £38m price tag seems substantial when compared to DSNS and PJ Media's results for fiscal '10 - DSNS made an operating profit of £3.2m on sales of £15.4m and PJ Media made an operating profit of £489k on sales of £2.9m.

Doubt was cast on the buy price when last year in fiscal '13 numbers, Expansys booked a goodwill writedown charge of £17.4m. This, along with other expenses, ensured the group crossed the finishing line with losses of £18.8m.

These results had followed a better fiscal '12 when Expansys posted an operating profit of £1.9m compared to an operating loss of £725k in the previous year - Jones's first year at the helm.

So after posting losses in two out of the three full years since Jones took a seat on the board, it is little wonder that the Dragon wants to buy the whole business rather than uttering those fateful words, "I'm out".

Jones did not respond to calls to his mobe. ®

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