Proposed acquisition
January 20 2004 - 2:00AM
UK Regulatory
20th January 2004
London Merchant Securities plc
Proposed acquisition of a strategic interest in Inflexion plc
London Merchant Securities plc ("LMS") today announces the proposed acquisition
of a strategic interest in Inflexion plc, an AIM-listed private equity
investment company, for an initial investment of �18 million. Through a further
injection of �15 million over the next five years, LMS's investment in
Inflexion will total �33 million.
Inflexion will, subject to shareholder consent, issue new shares to the LMS
Group in consideration for a substantial part of LMS's UK quoted investment
portfolio to the value of �12 million, representing 18p per Inflexion share.
Inflexion's NAV at 30th September was 20.6p per share. In order to underpin the
value of this semi-mature portfolio, a put option has been created whereby LMS
may be required to buy back part of the portfolio at 80% of the acquisition
price at any time up to the end of March 2005. Inflexion will pay LMS 25% of
any profits made on the realisation of the investments that are subject to the
put option.
Inflexion will also make an Open Offer of new shares at 15p per share. LMS will
take up its full entitlement to the Open Offer, investing a further �6 million.
Following these transactions, LMS will hold between 53.7% (assuming maximum
take up of the Open Offer) and 62% (if only members of the LMS Group take up
their entitlement under the Open Offer) of the enlarged company.
Over the next five years, LMS will invest a further �15 million in Inflexion,
by subscribing for new shares. Other Inflexion shareholders may also
participate on similar terms to maintain their pro rata interest in the
company. As a result of this injection of assets and cash from LMS, Inflexion's
net asset value will increase from approximately �13.4 million to approximately
�45.8 million. This transaction will have no material effect on LMS's NAV.
Two board members of LMS, Robert Rayne, Chief Executive and Martin Pexton,
Director of Corporate Development, will be appointed as non-executive directors
of the Inflexion board.
Inflexion plc
Inflexion is an investment company focusing on UK mid-market private equity,
primarily providing development and buy-out capital for established mid-sized
businesses. It has traded on AIM since April 2000. Earlier this year Inflexion
committed �7.5 million of capital into Inflexion Private Equity Fund 2 ("Fund
2"), which achieved its first successful closing this year. LMS is already a
limited partner in Fund 2, having committed �3 million.
LMS's rationale for the transaction
LMS's strategy continues to be to enhance total shareholder returns, which over
the last ten years have been a rolling average of 15.7%, through combining the
revenue stream from its property portfolio with high growth equity investments.
These investments encompass early stage and development capital in the UK and
the US, both direct and through participation in funds, to provide a spread of
risk. Over the last ten years the realised IRR of the investment division has
been 31.2%.
The acquisition of a majority stake in Inflexion plc, through the injection of
the UK quoted investment portfolio, will provide a platform for future activity
in the UK private equity market and will strengthen the management of LMS's
investment interests. LMS is an investor in Inflexion Fund 2 and believes that
this transaction will provide opportunities for profitable investment in
mid-market buyouts.
Timetable
LMS shareholders are not required to take any action. However this proposed
transaction requires the approval of the shareholders of Inflexion. A circular
will be posted to Inflexion shareholders on 20th January 2004 and EGMs will be
held on 5th February 2004 and 10th March 2004 to approve the transaction and
the subscription of shares by LMS. Full details of the timetable are included
in the circular that is being sent to shareholders of Inflexion.
Robert Rayne, Chief Executive of LMS, commented:
"This is a good strategic step, which continues LMS's history of collaborative
partnerships in the UK and US. The acquisition of a strategic interest in
Inflexion presents LMS with a good opportunity for profitable future investment
in mid-market buyouts and development capital.
Through this extension of our private equity interests, we are further
developing our strategy of enhancing total shareholder return by combining the
revenue stream of our property portfolio with high growth equity investments.
We believe that Inflexion is a superb choice of partner - their strong
development and buyout team is a natural complement to LMS's strong venture
management. We look forward to maximising the excellent opportunities offered
by this partnership."
Simon Turner, Joint Chief Executive of Inflexion plc, said:
"The last twelve months have been successful for Inflexion - funds under
management have grown substantially and we have continued to focus on mid
market private equity investments. This transaction, which includes a
substantial capital injection from LMS, is a great endorsement of Inflexion's
investment strategy and team. It is a step change for the business and will
enable it to thrive with a larger capital base to call upon."
For further information please contact:
London Merchant Securities plc Brunswick
Robert Rayne, Chief Executive Andrew Fenwick
Martin Pexton, Director of Corporate Development Simon Sporborg
Carolyn Esser
Tel: 020 7935 3555 Tel: 020 7404 5959
A detailed press release has been issued by Inflexion (IFX.L) and can be
obtained from their website www.inflexion.com
There will be a conference call for analysts of LMS at 10.00 GMT on 20th
January 2004 chaired by Robert Rayne, Chief Executive of LMS. To participate in
the call dial: +44 (0) 1452 561 263. The presentation slides can be accessed on
http://www.lms-plc.com/html/index.cfm?secid=32&itemid=15
Notes to Editors
London Merchant Securities plc is a leading property and venture and
development capital investment company listed on the London Stock Exchange and
a member of the FTSE 250. The property portfolio is valued at more than �850
million* and contains a blend of offices, based largely in central London, and
retail and leisure property across prime UK towns. The venture and development
capital arm was valued at more than �180 million as at 30th September 2003 and
comprises investments in both the US and UK, with a spread of early stage and
second round technology investments, development capital and mature company
buy-outs.
LMS's UK quoted investments forming the consideration for the Inflexion share
issue are Crown Sports plc, DMA-TEK Limited, NMT Group plc, Bloomsbury
Publishing plc, Whittard of Chelsea plc, Bond International plc, and Dunedin
Enterprise Investment trust plc.
Inflexion plc is an investment company that was admitted to trading on the
Alternative Investment Market ("AIM") of the London Stock Exchange in April
2000. Inflexion plc's primary objective is to achieve capital gains from its
investments in UK mid-market private equity. In June 2003, Inflexion plc made a
substantial commitment to Inflexion Private Equity Fund 2.
If the transaction is approved the Board of Directors will consist of Andrew
Shaw (Independent Non-Executive Chairman), John Hartz (joint Chief Executive
Officer), Simon Turner (Joint Chief Executive Officer) and Andrew Burns
(Independent Non-Executive Director), as well as two board members of LMS,
Robert Rayne, Chief Executive and Martin Pexton, Director of Corporate
Development.
END