Astaire finds black hole, putting Hoodless takeover in doubt

Astaire's acquisition of Hoodless Brennan is in jeopardy after the company found a £1.4 million black hole on the balance sheet of its Bristol-based wealth management subsidiary Rowan Dartington.

Astaire's shares were suspended earlier this afternoon and the company is now offering Hoodless Brennan shareholders the opportunity to rescind their vote in favour of the merger.

Astaire said it had uncovered  'potentially irrecoverable debtor balances' of £1.4 million during a recent audit of Rowan Dartington. It is not clear what the debt relates to, though the wealth manager said client money and assets were safe as they are segregated.

Evolve acquired Astaire - previously known as Blue Oar Securities - in March 2009, and said the majority of debtor balances 'appear to pre-date' the merger.

In a statement, Evolve said: 'The position as regards such debtors does not impact on Rowan Dartington's current cash flow projections, as no reduction in such debtors was anticipated. Any deficiency in regulatory capital in Rowan Dartington, which would arise in the event of these debtors being treated as wholly irrecoverable, is capable of being made good from Astaire's own resources.

However, while Astaire is able to meet the costs of this black hole from its own reserves it is not clear that the combined group would have sufficient reserves to meet FSA rules if the deal went through.

In light of this, Astaire's offer for Hoodless Brennan has been extended to the 8 May, with the Hoodless Brennan shareholders who accepted the proposed merger allowed to withdraw their acceptance.

Astaire shares were suspended from the Aim-listed market at 1pm on temporary basis, an hour before the announcement of problems at Rowan Dartington.