In January 2007, the London Stock Exchange announced an investigation into Torex Retail after the company issued a profits warning only a few days after a positive announcement about contract wins. The company requested a "temporary suspension" of the share listing at the same time and the shares have been suspended ever since. A suspension of the share listing effectively means there can be no trading of the shares on the London Stock Exchange so shareholders cannot easily sell their shares.

At the same time as announcing the profits warning, the company said that year end borrowings were £23 million higher than expected. This raised a lot of concern among shareholders because the company was already highly geared with very substantial bank debts. Historically the company had been making a number of acquisitions financed by debt and had spent over £300 million on such acquisitions, which were apparently yet to be fully integrated.

On the 30th January the Serious Fraud Office (SFO) announced they were also investigating the affairs of Torex and had raided several properties in Oxfordshire and Warwickshire owned by Chris Moore, who has recently resigned as Chairman, Rob Loosemore, former Chairman, and Mark Woodbridge, a company employee and associate of Mr Moore. This had apparently been prompted by Neil Mitchell, the recently appointed chief executive, who claimed to be the "leader of the Torex whistleblowers" in a letter to the Financial Times (FT). Mr Mitchell was suspended by the company as a result, but he requested reinstatement. According to the FT, the company's bankers had also been told that the company would be in breach of at least one of its covenants and they had requested an independent review of the accounts.

Subsequently there were a number of changes of directors, and Mr Steve Marshall was appointed as the new non-executive Chairman. A renegotiation of its banking facilities was also announced.

On the 30th March the company announced a "strategic review" and said it had appointed Jefferies International to advise on its options. Typically this kind of statement usually means the company is putting itself up for sale. Plus they said there was "significant levels of interest" being shown by a wide range of parties which tends to confirm that impression. They also said the "Group's principal financiers" are fully supportive of this development. This is an ominous sign so far as ordinary equity shareholders are concerned.

Clearly the company's financial position is in some doubt although the exact position will not be known until the company publishes more information and of course may depend on the SFO investigation which could take a long time to reach a conclusion. What can happen if a company's shares are suspended in such circumstances? It can mean that the company goes straight into administration or receivership if the directors feel that the situation is so dire as to be irrecoverable. Alternatively of course, if the company is still trading normally (as Torex is), and its bankers are reasonably supportive, it can trade out of its difficulties and the share suspension may be listed in due course, although it might well re-list at a lower price (it's worth pointing out that one VCT who holds the shares has already written down its holding by 50%).

Another alternative is that if the bankers are too nervous about future prospects, and the directors are unsure, then the way out for both is to put the company up for sale. In such circumstances, the ordinary shareholders can end up with very little because it might be a "fire sale" that does not maximise the value obtained. Selling businesses quickly is never easy, and in this case the buyers may be uncertain about what they are getting. In addition, the short term sales "pipeline" of the business (or businesses possibly in this case) might have been damaged because few people who are customers of IT businesses will commit to purchase products or services from companies where long-term and on-going support might be in question. Unfortunately also the directors interests may not be perfectly aligned with shareholders as the former might not wish to take the path of a long term solution, with the short term risk of insolvency (and the impact on their reputations) if there is uncertainty about the financial situation of the company.

The UK Shareholders' Association (UKSA) has formed a group to promote the interests of ordinary shareholders and has requested a copy of the share register from the company with the intention of writing to all shareholders in due course.  In the meantime if you wish to register your interest in the company please contact the following:

Roger Lawson, Communications Director, UKSA, email: uksa@uksa.org.uk, telephone: 020-8467-2686, PO Box 62, Chislehurst, BR7 5YB. Although none of the following is essential it would help to provide the following information: Name, Email address, Telephone number, Postal address, Number of shares held and whether held in a nominee account, in certificated form or personal crest form.  Any such information will be held in confidence by UKSA and will be used to communicate with you to provide further information as it becomes available.

Note that the following press release was issued on the 10th April 2007: Press040_Torex

The following note was issued on the 23rd April to update shareholders: Torex_Update.

The following letter was sent to shareholders on the share register who responded to our mailing, and includes information on possible valuations of the business:Torex_Response_Letter

This update was sent to Torex contacts on the 19th May: Torex_Update_2

This update was sent to Torex contacts on the 30th May and includes a request for financial support: Torex_Update_3. The donation form is also present separately in Donation_Form.

The following was distributed on the 3rd June to our contacts as Update Number 4: "On Friday the 2nd of June, Torex issued an RNS announcement in which it was stated that Neil Mitchell's employment had been terminated and he had resigned as a director. Neil Mitchell was the Chief Executive but had been suspended after he called in the SFO. Keith Taylor has been confirmed as the new Chief Executive. On Saturday the Financial Times reported that four bids were still being considered (it is rumoured that the company had a board meeting on Friday to discuss the bids). The article suggested that the four bidders had been asked to make offers for each part of the collection of operating companies, rather than making offers for the whole company. Bidders were named as Cerberus, Golden Gate Capital, Gores Group and 3i.  These are all private equity houses, rather than trade buyers."

On the 7th June, UKSA distributed the following documents to Torex shareholder group contacts to collect signatures for the requisition of an Extraordinary General Meeting: Requisition_Cover_Letter and Requisition_Form.

The following note was issued on the 15th June: Torex_Update_4

The following press release was issued following the announcement by Torex that the assets had been sold for £205 million, leaving nothing for ordinary shareholders, and the company then placed into Administration: Press043_Torex

A meeting was held by UKSA for Torex shareholders and the media in London on the 28th June. A report on this meeting and what former chief executive Neil Mitchell had to say is present at Torex_Update_5. These are the powerpoint slides used in the presentation by UKSA director Roger Lawson: Torex_Meeting2.

The following note was sent to Torex shareholders on the 21st August 2007: Torex_Update_6. It contains a summary of past events and the issues that have been raised by this affair.

This note was sent to shareholders on the 2nd October 2007: Torex_Update_7