Action Computer Supplies has been forced to seek salvation by temporarily suspending its shares on the London Stock Exchange amid mounting speculation that its merger with Insight Enterprises is floundering.
As revealed in PC Dealer (12 May), Action was in the process of being acquired by the US giant for £92m. On 23 July, Action's shares dropped to 275p following a dive from its 1999 high of 307.5p. At the start of trading on 26 July, the company requested at 8.35am that its shares be suspended.
The prospective deal followed a turbulent period for Action after it issued a profit warning earlier in the year. Action's profit for the six months ended 26 February highlighted a dip from £3.1m to £2.7m.
At the time of the profit warning, Henry Lewis, chairman of Action, said: "PC sales and large customer spending continue to be weak and we remain cautious about the effect on our prospects for the full year."
During the Insight acquisition talks, there was speculation that a counter bid could come from Dixons or Computacenter to prevent a US player from entering the UK market. The deal was expected to be completed by September subject to shareholder approval.
George O'Connor, analyst at investment bank Granville, said: "There was a huge volume of trading activity on Friday and there is certainly something major happening. Either the merger is off or it has lost a supplier, which would have annoyed Insight."
Jeremy Davis, senior analyst at Context, added: "It doesn't sound good at all, especially this late on in the deal with Insight. Action could be about to announce some dire figures and there may have been a leak that caused the shares to drop." He added: "There could also be another player wanting to pick up Action with a cash bid."
Insight's shares on Nasdaq rose to $31.63 on 26 July. Insight was not available to comment. Action said a further announcement would be made this week.
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