Shareholders in Andrews Sykes, the West Midland portable heating and airconditioning equipment hire specialist, are in line for a £25 million windfall.
The Aim-listed company said yesterday it was seeking investor and High Court approval for a shares buyback.
It plans to cancel just over 14 million ordinary shares respresenting 24.2 per cent of the share capital at price of 177.5p each.
The offer represents a premium of 1.8 per cent over Sykes' closing price of 174.5p on Wednesday.
Sykes, which recently pocketed £10 million from the sale of its Accommodation Hire subsidiary, said it was pressing ahead with the buyback even though it did not have enough cash in the bank and trading was tough.
It will go to the High Court for formal approval to restructure its balance sheet by way of a capital reduction and will increase its borrowings from £ 11 million to £30 million.
It said in a letter to shareholders yesterday that despite the tough conditions it was still generating cash and retained adequate levels of interest and debt servicing cover.
"For some time now the economy has been relatively stable in the UK with moderate levels of interest rates which we expect to continue for the forseeable future," the letter said.
"One consequence of this is that cash generative, profitable companies such as Andrews Sykes are able to secure term bank funding at attractive rates in order to return capital to shareholders and thereby enhance shareholder value."
Interim results due to be announced at the end of the September will show a 12 per cent fall in sales to about £24.4 million.
The tender offe will be handled by Birmingham stockbroker Brewin Dolphin.