Shiloh probed as shares skyrocket

DEALS in medical equipment supplier Shiloh are being monitored by the Stock Exchange after unusually high trading volumes sent the company's shares soaring last week.

Shiloh's shares have risen strongly since its loss-making textile spinning business was offloaded in a controversial management buyout backed by Barclays two years ago.

Labour MPs in Lancashire have contacted Melanie Johnson, Minister for Competition, Consumers and Markets, calling for an investigation into the buyout. It resulted in three mills in Lancashire closing with the loss of almost 500 jobs. Yarn production transferred to Lithuania, where labour costs are far lower.

Proceeds from the buyout were used to pay a £1m special dividend to Shiloh's shareholders. But taxpayers had to pick up a bill for £560,000 in statutory redundancy payments to the mill workers who lost their jobs.

The buyout company, Shiloh Spinners, is now in administration. But since shedding the spinning business to focus on sterilised medical supplies to hospitals, Shiloh's share price has gone from strength to strength. It more than doubled in the past year and on Friday touched 312p, valuing the company at over £20m.

Investment company Lupus Capital has been buying shares all the way up and now holds a 9% stake. David Cicurel, a private investor who was once Shiloh's largest shareholder, tried to buy the spinning business, formerly owned by Courtaulds, but was blocked by Shiloh chairman Edmund Gartside, who favoured a buyout led by his nephew James Gartside.

Edmund Gartside said the Stock Exchange or the Department of Trade and Industry had not contacted Shiloh. The company recently recruited Dieno George and Graham Collyer, two former directors from Durex condommaker SSL, to its board.

SSL and its auditors Arthur Andersen are under investigation by the Serious Fraud Office after profits were overstated by £19m in the 1999 and 2000 financial years. George and Collyer left SSL in May 2001.