Spark Ventures has raised £10.1m from a placing of stock, a further £3.8m from stock swaps and will raise up to £3.1m via an open offer. They plan to put the money towards a new investment strategy and appoint Gresham House as its investment adviser. Gresham House is buying into Spark Ventures’ outgoing management company, SPARK Venture Management Holdings Limited. Spark Ventures is also planning to consolidate its shares on a 1 for 200 basis.
The new strategy revolves around a new Strategic Public Equity (“SPE”) investment strategy. The SPE strategy targets superior long-term investment returns through applying private equity techniques to investing in public markets. Gresham House will focus on inefficient areas of the market, taking influential block stakes in smaller companies and then constructively engage to identify value creation catalysts. Gresham House also has the ability to invest a limited amount in private equity which will include selective venture capital investments.
The Company will focus mainly on cash generative companies where there is scope for management engagement to identify opportunities to implement either strategic, management or operational changes to create shareholder value in the business and to generate improved equity returns.
In accordance with Rule 8 of the AIM Rules, the Company is seeking the consent of the Shareholders at the General Meeting to its proposed revised investing policy which will, if approved, read as follows:
Business characteristics
The Company will seek to use the expertise and experience of its Board and the members of its Investment Committee to invest according to a rigorous strategic public equity process. The Company will have an active investing policy, investing in assets that will typically have a number of the following characteristics:
— investments that can generate a 15 per cent. IRR over the medium to long term principally through capital appreciation; and
— investments where the manager believes there are value creation opportunities through strategic, management or operational changes.
The Company intends to invest the majority of its capital in a concentrated portfolio of between 10 to 15 smaller UK/European publicly traded companies, typically with market capitalisations of less than GBP250 million and would typically expect a holding period of three to five years. In addition, the Company may also invest in interests in privately held companies, primarily in equity and equity-related instruments and also in preferred equity, convertible and non-convertible debt instruments. The Company will seek to acquire influential block stakes (typically between 10 per cent. and 25 per cent.) for cash or share consideration.
Exposure limits
Any investment which represents more than 15 per cent. of the Group’s gross assets, at the time when the investment is made, in securities issued by any single company will require the Board’s approval. An investment will only be made after the Investment Committee believes that the risk/return relationship is acceptable and the target return hurdle is exceeded.
Gearing
The Company intends to put in place a bank facility but will limit borrowing to no more than 20 per cent. of gross assets.
Returns on investment
The initial intention is to distribute up to 50 per cent. of profits on realisations through dividends, share buybacks or other returns of capital.
Any material change to the New Investing Policy by the Company will require prior Shareholder approval in accordance with the AIM Rules.
GHE / SPK : Gresham House takes on Spark Ventures