Seymour Pierce, the stockbroking tiddler, is to acquire the troubled internet incubator Antfactory in a deal that will see much of the company's $118m (£81m) cash pile returned to early stage investors.
Antfactory is among many internet companies that have seen the value of their investments in start-up dot.coms diminish sharply but which still possess plenty of cash. For the nine-month period ended 30 September, it posted pre-tax losses of $32.8m (£22.6m).
Seymour Pierce is to acquire the company through issuing shares and loan notes worth $72.5m (£50m). However, it will in effect wind up the company, transferring most of its assets to a new company associated with its founder shareholders, who will also become shareholders in Seymour Pierce.
The stockbroker will be left with Antfactory's portfolio of 15 investments, and approximately £26.5m of its cashpile. The portfolio was valued at £12.5m at the end of September, and Seymour Pierce said it planned to sell or float the constituent companies "over the coming years".
After the deal, Seymour Pierce will have cash balances of £30m, which it said it would use to develop its asset management business.
John Mackay, the company's chief executive, said: "I rather think we will make money on these investments, which are already adequately funded. We are also getting some profitable investment banking clients too."
Antfactory was established in 1999 with funds of $190m and has expanded through offices in Argentina, India, Israel, Mexico and Sweden. It has invested some $33m over the last two years. Major institutional shareholders include Allianz Capital Partners, Citicorp Venture Capital and CVC Capital Partners.
Harpal Randhawa, Antfactory's chairman and chief executive, and James Pitt, a director of Whitney & Co, another venture capital investor, will become directors of Seymour Pierce. Seymour Pierce was advised by Hawkpoint Partners, the boutique investment bank, in the transaction.Reuse content