Small Talk: Creators of Tomb Raider return to the stock market

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The Independent Online

Jeremy Heath-Smith and his brother, Adrian, are floating their new venture, Circle, which is developing interactive DVDs for the "Now That's What I Call Music" franchise of compilation albums, among a string of other projects.

The first of these will be launched in November, promising a video game-style pop music trivia quiz, in the same vein as the Who Wants To Be A Millionaire? interactive DVD.

The record company behind Now, Virgin/EMI, is already pretty excited about the launch - making it an ideal moment to float Circle on AIM.

Jeremy Heath-Smith founded Core Design in 1988, using a £16,000 loan from his wife, and the business was acquired by Eidos, where he spent seven years as development director before being ousted after delays to the latest Lara Croft adventure in 2003. He has earned millions from the Tomb Raider franchise created by Core, and Circle has so far been funded mainly from his fortune.

The company is raising £3m-£5m for expansion in a flotation by the broker Daniel Stewart which, it is hoped, will value Circle at £19m-£23m when shares begin trading next month. Mr Heath-Smith is chief executive, with Adrian Smith as managing director.

Circle describes its interactive DVDs as "family-orientated trivia, puzzle, adventure and learning games" and it is planning to launch products for football fans to tie in with the World Cup next year. It also has collaborations with the Discovery Channel and the US basketball brand, NBA.

"We have a long and proven track record of bringing commercially successful entertainment software to the mass-market," Mr Heath-Smith said, "and we are at the forefront of this exciting new sector. We are confident that our expertise, combined with key brands, will enable us to deliver highly compelling interactive DVD games - and meaningful returns to shareholders."

Investors will be acutely aware that stock market-quoted games developers have rarely prospered. Even Eidos, sitting on the biggest games franchise ever created, was taken over by its upstart rival SCi Entertainment after a string of disastrous profits warnings. Circle at least offers punters the chance to get in early and to back a proven creative team. This is not a flotation that will falter at level one.

NET GAIN

Look out this week for a money-spinning sponsorship deal for one of the UK's biggest five- a-side football league organisers. Powerleague, which runs about 500 divisions around the country, is set to announce a deal alongside its maiden financial results.

Five-a-side has overtaken 11-a-side football as the most popular form of sports participation and, according to statistics from the Football Association, there are now 6 million adults playing the sport. That is up by one-third in just the past two years.

Powerleague is chaired by Claude Littner, the chief executive of Tottenham Hotspur for seven years until 2000, and its shares have scored a 45 per cent gain since flotation in May. Goals Soccer Centres, a rival com-pany, has seen its shares soar 142 per cent since their issue in December last year.

A third five-a-side company joins AIM this morning, although unlike the older pair it does not own its pitches. Rather it contracts them from schools, leisure centres and local authorities. The company is called Pantheon Securities, which operates mainly in London and also runs Sport in Schools initiatives and international summer camps. It has raised £750,000 to buy other leisure businesses, and the shares start trading at 3p tomorrow.

TESTING TIMES

Pharmagene, the loss-making medical research company specialising in the use of human tissue for testing, tied up a long-awaited merger deal last week that, it is hoped, will get it out of its strategic bind. The company has halted its own drug development efforts after several setbacks. It is merging instead with a US company, Asterand, which dovetails nicely with its other business, selling bespoke research on its bank of human tissue to other big pharmaceuticals companies.

If it sounds a bit gruesome, that is because it is. Pharmagene has contracts with hospitals to pick up offcuts from the operating theatre. Given scandals such as at the Alder Hey hospital trust, where organs were removed from children's bodies without parents realising, this is a highly regulated and also a highly sensitive area. Pharmagene's client hospitals might be unnerved by its changing business model, which will now involve passing the human tissue over to Big Pharma, rather than simply conducting the research on its behalf.

Pharmagene says a straw poll of its hospitals suggests 60 to 80 per cent will support the passing on of tissue to third parties, but that leaves a substantial slug which might not. Randal Charlton, the chief executive of Asterand, says there is no logical difference between Pharmagene doing the research or Big Pharma doing it but he concedes that "logic does not always play a part" in discussions with hospitals. The chances are he will talk them around, but it is worth keeping an eye on this subject as the merger progresses.

IN TRAINING

Small Talk has written before about the ambition of some institutional shareholders to force consolidation among the band of tiny recruitment and training companies listed on the stock market, but deals have proved frustratingly few and far between. Quantica has been bulking up, but mainly by buying private companies. We hear another deal is imminent: the acquisition of Capital Learning Services, a London-based training company offering NVQs. The cash and shares deal is worth £1.5m.

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