On Friday, Parkmead Group (LSE:PMG) announced an acquisition and related party transaction. Related parted transactions always seem a bit dodgy to me, but as we are told all of the directors (excluding Tom Cross) said it was OK – well, it must be.
Or is it?
The company announced they had signed a share purchase agreement to acquire the entire issued share capital of Pitreadie Farm Limited, “a company owning extensive farmland and sites in Scotland with significant renewable energy potential”.
Seems fair enough, at first glance.
What they didn’t say is that Pitreadie Farm Limited was due to be struck off Companies House and dissolved, at the expiration of two months from the date given.
That was on 25 June, and just after two months Parkmead Group suddenly decides it is a great idea to buy the company. What are the chances?
Source: http://serv1.datalog.co.uk/filing/viewDocument.php/CompanyNumber/SC510252/Date/2019-06-25
Parkmead Group also forgot to mention about the planning approval given just a few months ago for Pitreadie Farm Limited, on 4 February 2019, for a new 1.75 storey detached building with 11 apartments, which will include a swimming pool and a build value of £975,000.
That doesn’t sound very wind-farmy to me. Is it still going to be developed? If so, who is paying for it?
What the company has really bought is a bunch of farm land. At least, that is what Pitreadie Farm Limited is listed as on Companies House.
Source: https://beta.companieshouse.gov.uk/company/SC510252
Despite it being a farming business, the other director aside from Linda Cross is Kevan Smith – his occupation is listed as a “builder”. So, which is it? Farming? Building? Or both?
Bad deal for shareholders
One of the properties owned by Pitreadie is Tipperty Farm. A listing for the property describes it in the following way: “…the topography and aspect of the land provides a good basis for a pheasant shoot as well as exciting roe deer stalking.”
It also includes planning permission for two 800kW wind turbines. Well, it’s a start.
Let’s look at the facts.
Tom Cross increases his stake in the business from 19.05pc to 25.97pc
Shareholders are diluted by this deal
Linda Cross’ business is saved at the last minute from going under
The acquired business has planning permission for 11 apartments and a swimming pool
The acquired business owns a farm which could easily be a holiday getaway and a nice shooting jaunt
Tipperty farm has a license for two 800kW wind turbines
Unfortunately, what seemed like a promising company is now a bargepole for me.
“The Consideration Shares will be allocated, upon completion of the Acquisition, to the repayment of a director’s loan of £4.3 million, which has been used to build and operate Pitreadie’s asset base”
Either Linda or Kevan has sunk £4.3m into Pitreadie, only to be within days of her losing the lot, and then Parkmead steps in to save it. Whether there is legitimate value there – who knows. But when Tom Cross owns so much of the company there is little anyone can do to stop him.
It certainly hasn’t stopped Parkmead loaning £2.9m to Energy Management Associates – a company both he and his wife are directors of.
Source: https://beta.companieshouse.gov.uk/company/SC144476/filing-history – Latest Accounts Note 6
This is also a company that then repaid £2,865,272 back to Tom and Linda Cross for their loans to the company!
Source: https://beta.companieshouse.gov.uk/company/SC144476/filing-history – Latest Accounts Note 6
Those shareholders who followed Cross into Parkmead Group from his Dana Petroleum success and are massively down, will no doubt feel betrayed seeing Friday’s RNS.
You can hear more from Michael in his fantastic free book ‘How to Make Six Figures in Stocks’. This can be downloaded from his website – https://www.shiftingshares.com/
