Loss-making VAR Pinnacle to get the MXC treatment

Embattled managed service provider issues new shares to accommodate investment by MXC Capital

Serial channel investment vehicle MXC Capital has seized a 10 per cent stake in embattled VAR Pinnacle Technology Group.

Pinnacle announced this morning that it had conditionally raised about £0.86m through a placing of 13.12 new ordinary shares, partly to facilitate MXC's investment.

The funds will also be used to bolster Pinnacle's growth strategy and for working capital requirements.

Founded by channel entrepreneurs Ian Smith and Tony Weaver, MXC Capital has a track record of building resellers and MSPs via acquisition, with Accumuli and Redcentric being the most recent examples.

AIM-listed Pinnacle, which specialises in comms and IT security, swung to a 2014 net loss of £1.77m on sales that fell 17 per cent to £8.4m as the effects of a misjudged M&A spree a few years ago and a legal spat with ex staff hit its numbers.

Marc Young, chief executive of MXC Capital, said: "We have known Pinnacle for some time. We see an opportunity to work with management to drive the company's strategy, identify acquisition opportunities and accelerate its growth."

Pinnacle chief executive Nicholas Scallan said: "I am confident that the involvement of MXC Capital, with its powerful network of contacts in our industry, will generate a number of opportunities to grow our business. I look forward to working with them."

The ordinary shares were priced at 6.5 per cent, a 16 per cent premium to Pinnacle's closing share price last night.

Anthony Miller, managing partner at analyst house TechMarketView, said the deal is "right up MXC's street".

"MXC is definitely not a passive investor in any shape or form, so we can expect to hear more about the fortunes of the Pinnacle business in due course," Miller said.