Chairman takes company out of market to prevent asset-stripping takeover.
The stock market is stifling the growth of small businesses and making them vulnerable to asset strippers, said Wainhomes chairman Bill Ainscough this week.

Ainscough took the company he founded private last week after five unhappy years on the share market, during which its share price halved, even though pre-tax profit doubled. In January, the share price dropped to 90p, 18p below the company's net asset value of 108p.

The Chester-based housebuilders' move will save it £5m a year in dividends and fees – a significant proportion of its pre-tax profit, which is expected to be £14m this year on a turnover of £135m.

Ainscough said: "The last three to four months have been particularly bad from a share price point of view. Basically, we are being undervalued because there is a lack of investor appetite for smaller firms, not because of anything we have done wrong. We felt unloved." Ainscough said Wainhomes could not use its shares to raise money to expand because they had fallen so much.

He said: "We floated originally as a way of raising extra equity to expand, but the low share price wouldn't allow us to. We got to the stage where the view was that we either had to sell up or buy the company back. We had all the disadvantages of being a listed company without any of the advantages."

He said the poor value of the shares also left the company open to hostile takeover bids. "You are always vulnerable when your share price is low. We were living in a slightly nervous world the whole time."

Ainscough believes that going private will give Wainhomes greater security and more flexibility to expand. He said that these advantages may lead other medium-sized housebuilders to follow suit. "I wouldn't be surprised to see other people in the sector follow down the same path. It makes sense," he said.

Ainscough added: "We're now going to consolidate our position and work hard to get the business growing again, this time using our own funds to expand." The buyout bid, which was backed by the Bank of Scotland, values the company at £88.1m.

The bank provided the debt finance to buy out the remaining shareholders. It has taken a 30% stake. Stockbroker BT Alex Brown advised on the deal.