Allen-Vanguard Corp. (TSX:VRS), a Canadian global leader in military
and police protective equipment, may fall into American hands after the
failure of a deal to be taken over by Tailwind Financial Inc.

Tailwind (NYSE:TNF) issued a brief statement Monday saying it "will no
longer pursue the acquisition," while Allen-Vanguard said the deal had
been "terminated."

Neither Tailwind nor Allen-Vanguard, which has
been driven to the wall by heavy debt and sluggish Pentagon orders,
offered an explanation.

But Allen-Vanguard said it is in talks with an "unrelated U.S. investor" on taking the company private.


unidentified investor has a three-week exclusivity period for due
diligence and discussions with Allen-Vanguard stakeholders.

maker of roadside-bomb jammers, blast suits and other extreme-hazard
equipment had announced the Tailwind agreement on Jan. 26, valuing the
proposed all-stock transaction at $41.6 million or 38 cents per share.

was to have been the initial deal for Tailwind, incorporated as an
acquisition company with a US$100-million initial public offering last

Tailwind said Monday it "will proceed with its dissolution
and liquidation" since it cannot complete a business combination within
its one-year deadline. It said its investors' $100 million has been
held in trust in a U.S. Treasury securities money market fund.

shares gained four cents to US$8.13 on the New York Alternext junior
market Monday morning, up from $7.95 when the Allen-Vanguard deal was

Allen-Vanguard stock was unchanged at 15.5 cents Cdn
on the TSX, down from 22.5 cents immediately after the Tailwind deal
was presented, and down from $4 a year ago.

Its shares peaked at
$11.95 in September 2007, before the company fell victim to takeover
integration snags, delayed U.S. military orders and deepening debt woes.

shareholders approved the takeover March 16, and the company's
management, headed by CEO David Luxton, had expressed confidence that
after recapitalization the company could prosper as it dominates the
blast-suit business, while improvised explosive devices "are forecast
to remain a persistent global threat."

Shortly after the Tailwind
deal, Allen-Vanguard announced new bomb jammers with "potential to
reshape the landscape of electronic countermeasures technology," and it
has continued to win multimillion-dollar orders.

But it lost $34
million in its first quarter, including a $30.2-million unrealized
foreign exchange loss, as revenue fell to $72.7 million from $140.2
million a year earlier.

Allen-Vanguard's sales had exploded,
largely because of acquisitions, from $57 million three years ago to
$309 million in the year to last September. But it labours under more
than $200 million in bank debt, and its net loss last year was $436.3
million including a $380-million goodwill writedown, while its
headcount was cut by 100 to 560.

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