Augmentum Fintech (AUGM), the growth capital fund struggling on a 45% discount, has agreed a £185.7m cash bid from Norwegian buyout group Verdane of 111p per share and a 27% premium to yesterday’s closing price of 87.4p.
Shares in the investment trust launched eight years ago to back start-ups looking to shake up financial services jumped nearly 25%, or 21.6p, to 109.5p in early trading, a 29-month high.
The bid, which is unanimously recommended by the board, may disappoint long-term shareholders who have seen the shares plunge from a peak of 171p in September 2021, and who will have hoped for more given its net asset value per share of 159.5p. The take-out price represents a 30% discount to that.
Chair William Reeve said the board had considered a range of strategic options on behalf of shareholders, who had not seen the portfolio’s potential reflected in Augmentum’s market valuation, and that the offer from Verdane was the best it had received.
Reeve said: “Over several years, we have faced a persistent and widening discount to net asset value, compounded by low levels of liquidity. This has made it difficult for shareholders to realise the true value of their holdings or for Augmentum to raise the capital necessary to support our ambitions.”
He added: “By accepting this offer, shareholders can realise value today that the public markets have been unable to provide, while ensuring our portfolio companies are able to gain access to the deep capital and expertise of Verdane, alongside the existing management, for their next chapter.”
Despite backing high growth companies such as Tide, Zopa, Iwoca, Cushon and Interactive Investor, Augmentum had generated a comparatively modest 35% underlying total return in the past five years as interest rates and inflation made market conditions more difficult. Before today the shares had fallen 38% over the same period. In half-year results in December the company highlighted that £125m of its investments were effectively ignored by the shares’ low valuation.
QuotedData understands that Tim Levene, chief executive of Augmentum VC, AUGM’s investment adviser, and chief operating officer Richard Matthews will join Verdane, a buyout firm specialising in tech-enabled and sustainable businesses help to digitalise and decarbonise the European economy. Its Verdane Freya XII Investments AB fund set up the Frontier Bidco company through which the transaction is being conducted.
Augmentum needs the approval of 75% of shareholder votes at a general meeting yet to be called. Its directors, who hold nearly 2% of the shares, have committed to support the deal even if there is a higher offer. Broker Canaccord and Asset Value Investors (AVI), holders of 7.2% of the shares, are also in favour.
Our view
James Carthew, head of investment company research at QuotedData, said: “How do we get to a situation where a board is happy to recommend a bid at more than a 30% discount to net asset value (in monetary terms giving up £81m out of a NAV of £267m)? If the NAV is correct, shareholders should not let Augmentum go so cheaply and I hope this flushes out a counteroffer from another party. Shareholders should be ready to vote to block this deal if it does not. However, as we’ve seen with HgCapital (HGT) and others, agentic AI is calling into question the valuation of a whole swathe of businesses and it is possible that fintech could be affected. If the board is prepared to sell because it feels the NAV is overstated, it should revalue the portfolio now so that investors have all the information available to them and can make up their minds.”
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