Melrose quits Chemeq stake: "My generosity backfired"

20/12/2006 - 15:42

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Rockingham-based veterinary pharmaceuticals manufacturer Chemeq Ltd has seen a 50 per cent jump in its share price following the announcement today that founder Graham Melrose had quit his stake in the company.

Rockingham-based veterinary pharmaceuticals manufacturer Chemeq Ltd has seen a 50 per cent jump in its share price following the announcement today that founder Graham Melrose had quit his stake in the company.

According to a substantial shareholder notice, Dr Melrose sold his 26 per cent holding in the company, clearing what was scene as an overhang in the market, resulting in a 12 cent rise in the share price to 24 cents.

Dr Melrose told WA Business News this afternoon that he was forced to quit the stake due to a loan agreement struck two years ago to raise $6.5 million to support the company. The lender had made the decision to sell due to the share price which has slumped in recent weeks, effectively severing his last major link with the company..

"For my equity to go in this way is very disappointing," Dr Melrose said.

"It has been 20 years of sacrifice and very hard work."

He said he still believed in the company.

"I would have to say the sale is not reflective of my estimate of the company, it has not been my decision."

"I think the technology of the company is well proven."

Dr Melrose said he took the loan through Victorian lender Primebroker to provide funding for the company when it was desperately needed.

"The loan was something that I never wished to take out and I did it purely to support the company," he said.

"My generosity has backfired."

However, Dr Melrose said, in hindsight, he would most likely take the same course of action.

The 25.2 million share stake was worth a fraction of the value from Chemeq's heyday in 2004. Then the stock peaked at about $5.50 a share before the company was rocked by overruns on the construction of its production facility and then faced a series of embarrassing disclosures.

Deutsche Securities Australia has acquired a 6 per cent stake for around $1 million.

Dr Melrose retired from the board in August.

In October the company faced another major hurdle when a major bond holder issued a default notice.

 

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