LONDON NewMedia SPARK, the incubator, plans to buy the technology corporate finance house NewMedia Investors Ltd. NewMedia Investors will become a wholly-owned subsidiary of NewMedia SPARK and will continue to offer services to NewMedia SPARK’s investments and corporate finance advisory services to New Economy companies under the NewMedia Investors name.
NewMedia SPARK acquires the entire issued share capital of NewMedia Investors for GBP10 million to be financed with the issue of 14,684,288 new SPARK shares. NewMedia Investors was an original investor in NewMedia SPARK.
One of the key reasons given for the purchase was the need to cancel the companies’ Founder Agreement. At the time of NewMedia SPARK’s flotation in October 1999 the company entered into this agreement with NewMedia Investors, which undertook to give NewMedia SPARK first refusal on its relevant deal flow and to carry out a range of deal negotiation and investment monitoring functions in return for certain fees. As a consequence of NewMedia SPARK’s expansion the costs of this arrangement have escalated. By acquiring NewMedia Investors the increasing cost will be removed and will immediately be cash-flow positive for NewMedia SPARK.
In addition NewMedia Investors is SFA regulated and as such means that NewMedia SPARK will be able to broaden its investment remit.
“NewMedia SPARK is now the largest quoted early-stage technology investment fund in Europe. The acquisition of NewMedia Investors will cut costs, allow us to widen our regulated activities and manage our business more effectively. The enlarged group will have a stronger corporate structure, facilitating further growth and allowing us to maximize returns for our shareholders,” said Michael Whitaker, chief executive officer of NewMedia SPARK.
Glasshouse Associates is the seller of NewMedia Investors, however Glasshouse will become a wholly-owned subsidiary of NewMedia Investors. The shares of Glasshouse Associates, owned by Thomas Teichman and Andrew Carruthers will be held through their interests in the Teichman Guernsey Settlement of which Thomas Teichman is a beneficiary and Blaze Ltd., a company owned equally by Andrew Carruthers and his wife, will hold 66% of the issued share capital of Glasshouse Associates.
Teichman and Carruthers are directors of NewMedia SPARK and are also directors of Glasshouse Associates. Accordingly, under the London Stock Exchange’s Alternative Investment Market rules, the purchase is a related party transaction and does not require shareholder approval. However, the transaction will be subject to section 320 of the rules, which requires prior approval by shareholders of certain transactions between a company and its directors or persons connected with them, is likely to apply to the purchase. So shareholder approval is being sought before a definitive agreement is entered into.