Australian Private Equity & Venture Capital Journal

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Australian Private Equity & Venture Capital Journal

  1. 1. AUGUST 2014 · Year 22 No 244 Bid for wine company raised to $3.4bn $2.6 billion private equity float success Overseas trade sale provides $NZ700m exit
  2. 2. Australian Private Equity & Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 2 CONTENTS EDITOR’S LETTER Canberra fails to utilise venture 3 PERFORMANCE $2.6bn private equity float success 4 Overseas trade sale provides $NZ700m exit 4 Future Fund looks to private equity to maintain performance 7 Australian managers ranked among world’s best 13 INVESTEE NEWS London Stock Exchange float to fuel Asia-Pacific push 12 Start-up partners with leading vaccine producer 17 CORRECTION: MEO Australia 18 INVESTMENT ACTIVITY Bid for wine company raised to $3.4bn 4 Additional firm reported to have joined $1bn bid 6 Multi-million bids expected for New Zealand-owned business 9 Seed fund now investing more than $NZ5m annually 11 Chinese UK acquisition could have significance for Australia 14 Private equity backing for oil and gas services venture 15 South African investment company buys New Zealand retailer 15 US venture funds invest $3.6m in graphic design start-up 15 Creative fund invests in ‘next generation’ fashion business 16 NEWS FSI interim report recognises role of venture capital 7 AVCAL calls for innovation policy backed by funding 7 New partnership to offer debt to private companies 13 Private banking business changes hands 13 Digital products now among New Zealand’s leading exports 13 Venture-backed software company in IPO queue 15 $NZ1m plus government funding for three incubators 15 Tech company boss to speak at awards event 17 Online business makes acquisition 18 Chinese interest in dairying business 18 PEOPLE MOVES New partner for upper mid-market firm 14 Principle Advisory Services recruits leading adviser 15 Three promoted as major fundraising progresses 17 NEW FUNDS & FUNDRAISING Growth venture fund raises over-target $60m 6 $30m sought for new venture fund 9 Wotif.com founder plans angel fund 14 Wind farm trust targets 10.5 per cent return 17 INFORMAL venture capital US venture capitalist invests in Melbourne start-up 18 CONFERENCES & ROUNDTABLES AVCAL alpha speakers confirmed 18 Coming Events Coming Events 24 Shares Chart Shares Chart 25 FEATURES DATA ANALYSIS POINTS TO SUCCESSION DEALS 19 REARVIEW MIRROR 22
  3. 3. Australian Private Equity & Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 3 AUSTRALIAN PRIVATE EQUITY & VENTURE CAPITAL JOURNAL Owned and Published by PRIVATE EQUITY MEDIA PO BOX 510, Five Dock, NSW 2040 P: 02 9712 1350 www.privateequitymedia.com.au MANAGING EDITOR Adrian Herbert P: 02 9712 1350 M: 0407 226 142 E: adrian.herbert@ privateequitymedia.com.au NATIONAL ADVERTISING MANAGER Philip Thomson P: 02 9489 0033 M: 0419 757 211 E: pthomson@ marketingforesight.com.au DESIGNER Odette Boulton Australian Private Equity & Venture Capital Journal is an Independent publication. The Journal welcomes editorial contributions. All opinions are those of the authors. All material copyright Australian Private Equity & Venture Capital Journal and individual authors. ISSN number: 1038–4324 Editor’s Letter T here are essentially two ways in which government can promote business development, through funding or removing legal and legislative roadblocks. Eleven months after its election, the Coalition government has provided neither form of assistance to venture capital. The government’s first budget took the knife to industry assistance packages including ending the Innovation Investment Fund (IIF) program and abolishing Commercialisation Australia. The abolition of the IIF came as no great surprise but what was surprising was that no replacement policy was put forward to stimulate the venture sector. This is a sector that the UK government, for example, identified as a key to recovery soon after the global financial crisis (GFC) and funded. Australia weathered the GFC much better than the UK because of the minerals boom but with that boom now over we need to develop replacement industries. Surely the venture sector has a key role to play in this? The Abbott government did announce in the budget a $1 billion Medical Research Future Fund, with strings attached. That, however, only cast doubt on government planning. Australia has a strong track record in research and particularly in medical research. What we don’t have is a similar record in commercialising that research. This has been pointed out by a number of government reports. AVCAL is calling for the government to establish a self-sustaining (as the IIF largely was) innovation system including a $500 million translational innovation fund which could be used to attract matching private sector funding (yes, again like the IIF). AVCAL is also arguing that 10 per cent of the Medical Research Future Fund should be allocated specifically to establish a translational medical innovation fund. But if we accept treasurer Joe Hockey’s contention that any government funding of commercial enterprise is inappropriate, surely the pro-free enterprise Liberal Party, should be working on removing legal and legislative roadblocks? But not much seems to be happening there. Consider the seemingly simple matter of reversing the Labor Party’s changes to rules governing the taxation of employee share options (ESOPs). The changes were made to prevent ESOPs being used by large companies to avoid tax in remunerating key employees. But this made it impractical for cash constrained early stage companies to use ESOPs to help attract experienced staff. Prior to the election the Liberal Party promised action. The issue is, however, apparently still being reviewed by the offices of the prime minister and of industry minister Ian Macfarlane. And what of other notable road blocks; the tax treatment of collective investment vehicles, for example? This issue was not resolved by the former government and, apparently, remains to be addressed by the Coalition. But it is not all bad news from Canberra. Despite Commercialisation Australia being abolished, the organisation’s case managers remain in the employ of the Department of Industry and are continuing to work with their early stage business clients. Meanwhile key staff are now focusing on building up an international business matchmaking service to find partnership and investment support for such businesses. Apparently we can expect an announcement in November. Let’s hope it will be one of many. ADRIAN HERBERT Managing Editor, Australian Private Equity & Venture Capital Journal CANBERRA FAILS TO UTILISE VENTURE
  4. 4. Australian Private Equity & Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 4 INVESTMENT ACTIVITY Bid for wine company raised to $3.4bn Kohlberg Kravis Roberts (KKR) has made a revised offer of $3.4 billion for Treasury Wine Estates (ASX: TWE), now in partnership with Rhône Capital. Treasury, which rejected an earlier bid (APE&VCJ, Jun 14), has agreed that “it is in the interests of its shareholders” to engage further but has said it plans to grant only non-exclusive due diligence. This will give any other interested parties opportunity to submit bids. In its 4 August ASX announcement, Treasury said the new offer of $5.20 cash per share was an increase of 50 cents a share or 10.6 per cent over KKR’s $4.70 cash per share offer of 16 April. The offer also represents a premium of 40.9 per cent over the $3.69 closing price of Treasury shares on 15 April. Treasury noted that the proposal to acquire all of its shares by way of a scheme of arrangement remained indicative, non- binding and conditional and granting of non-exclusive due diligence would depend on the negotiation of an appropriate confidentiality agreement. If an offer results, Treasury’s board would assess whether it delivered a value proposition superior to managements renewed strategic plans to: • Increase and accelerate consumer marketing investment in the company’s brands; • Continue to drive efficiencies and improve the company’s cost base; and • Address structural opportunities in the company by focusing on commercial brands separately from the luxury and “masstige” (downward extension of prestige) portfolio in Australia (including initiatives to unlock further supply chain cost savings); as well as inorganic opportunities to build on management’s existing growth platforms for Treasury’s luxury and “masstige” brands. Treasury has performed poorly since it was spun off from former parent Fosters Group in 2011 but it includes high value brands such as Rosemount and Penfolds, maker of Australia’s most famous wine, Grange. The turnaround strategy announced with the rejection of KKR’s initial bid, appears to have had some success. The company ran a special deal in July offering a $650 wine fridge for $200 to buyers who bought six or more bottles of high-end Penfolds wines through a retail outlet. It has been reported that up to 12,000 customers took up the offer. Rhône Capital is a New York-based private equity firm which tends to focus on European and trans-Atlantic investments. The firm was founded in 1995 by billionaire financiers Robert Agostinelli and Steven Langman who remain managing partners. PERFORMANCE $2.6bn private equity float sets new high Carlyle Group and TPG Capital investee Healthscope made a successful return to the ASX on July 28 after raising $2.6 billion, a new high for an Australian private equity float. The most recent private equity float of similar scale was TPG and Blum Capital’s $2.3 billion float of department store chain Myer (ASX: MYR) in 2009. The float of Melbourne-based Healthscope was also the largest on the ASX since Queensland rail business QR National – now Aurizon (ASX: AZJ) – raised $4.6 billion in 2010. Carlyle and TPG have retained 38 per cent of Healthscope which operates private hospitals, medical centres and pathology laboratories throughout Australia. The business has also begun expansion of its pathology business into Asia. The two international private equity firms are to hold their joint stake in voluntary escrow until the company announces results for the 2015 financial year. Healthscope chief executive Robert Cooke acquired more than 1.47 million shares in the offer. Healthscope (ASX: HSO) opened at its issue price of $2.10 and immediately dropped 1 cent to $2.09. The stock ended the day – after almost 91 million shares had been traded – 5.2 per cent higher than the listing price at $2.21 on a day in which the SP/ASX 200 Index fell 0.1 per cent. Institutional shareholders took up 58 per cent of Healthscope’s shares in the IPO and retail investors 34 per cent through a broker firm offer as there was no public offer. Holders of ASX-listed debt securities Healthscope Notes took up 7 per cent, or $164 million worth of stock, at a discounted $2.0475 a share offer. Healthscope forecast in its prospectus that it would increase revenue growth in the 2015 financial year by 5.8 per cent to $2.448 million from $2.314 million in 2014. It said the increase would be driven by increasing earnings across its Australian hospitals and Australian and international pathology divisions. Carlyle and TPG took Healthscope private in mid-2010 (APEVCJ, Jul 10) for $2.7 billion representing $6.26 per share. Since listing, Healthscope shares peaked at $2.27 and closed on 4 August at $2.23. PERFORMANCE Overseas trade sale provides $NZ700m exit Pacific Equity Partners (PEP) is to exit New Zealand snack food company Griffin’s Foods Limited through a $NZ700 million sale to Philippines-based Universal Robina Corporation (URC). The sale is subject to approval by the New Zealand government’s Overseas Investment Office. Griffin’s is New Zealand’s leading biscuit and snack food company and manufactures products such as Gingernuts, Cookie Bear, MallowPuffs, Eta Salty Snacks and Nice Natural snack bars. The company exports to about 20 countries including Australia. URC is one of the largest food and beverage branded products manufacturers in the Philippines and has a market capitalisation in excess of $US7.6 billion. The company also has growing export markets particularly in the ASEAN region. PEP bought Griffin’s from Danone Asia Pte Ltd in 2006 for an enterprise value of $NZ385 million. At the time, the business had annual net sales revenue of $NZ176 million and led the New Zealand biscuit market while it held second place in the savoury snacks market. Under the ownership of PEP and management, more than $NZ180 million was invested in developing two new manufacturing centres in Auckland and
  5. 5. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 5 acquiring the Nice Natural snack bar business. This has taken Griffin’s to the number one spot in the New Zealand snacks market. An export sales division was also established under PEP. Overseas sales of Griffin’s products have grown to generate over a third of the company’s revenue. Earnings before interest, tax, depreciation and amortisation (EBITDA) have also grown substantially. URC expects to use its established sales networks in the Philippines, Vietnam, Thailand, Indonesia, Malaysia, Singapore, Hong Kong and mainland China to further increase Griffin’s exports. URC has committed to retain production in New Zealand where the company employs about 800 people. URC also plans to retain Griffin’s senior management team. Griffin’s was founded by John Griffin in Nelson in 1864. Despite being under overseas ownership since the 1960s, the company has maintained its own brands and products. Kraft’s Nabisco acquired Griffin’s in 1962 and held it until 1990 when it was sold to Britannia Foods. That year, Britannia sold Griffin’s confectionary business to Cadbury’s and in exchange acquired Cadbury’s Hudson, Cookie Bear and chocolate biscuits range for Griffin’s before on-selling the business to Danone. Once URC’s acquisition is completed, Griffin executive chairman Ron Vela will stand down but will be retained as a consultant. Griffin’s chief operating officer Alison Taylor will take over as chief executive. PEP managing director David Brown said the private equity firm was proud of its strong track record of growing earnings in corporate carve out situations by backing local management teams to execute on strategies to significantly expand their businesses. “Working with the Griffin’s management team has been a fantastic experience and a great example of collaboration in a sector we know well,” he said. Brown said he was confident the business would continue to grow under URC. URC chief executive Lance Gokongwei said that in recent years his company had been looking for opportunities for acquisitions and partnerships in line with a
  6. 6. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 6 vision of becoming a significant regional player in snack foods and beverages. “While we have already built very strong brands, our strategy is to continue offering our existing consumers and markets in the ASEAN and Greater China regions with innovative, convenient, lifestyle-focused and on-the-go products,” he said. “We believe Griffin’s is a natural strategic fit to our existing snack foods portfolio given its strong brand heritage in New Zealand – a country trusted worldwide in having high credibility when it comes to food quality, safety and authenticity.” He said URC regarded Griffin’s as being at the forefront of global consumer trends for snack products and was excited to have the opportunity to introduce and grow its brands in new Asian markets. Credit Suisse and First NZ Capital advised Griffin’s on the transaction. INVESTMENT ACTIVITY Additional firm reported to have joined $1bn bid Pacific Equity Partners (PEP) is reported to have partnered with Kohlberg Kravis Roberts (KKR) in its $1 billion bid for compliance and risk management company SAI Global (ASX: SAI). SAI announced an indicative bid from Australia’s largest private equity firm on 26 May (APEVCJ, Jun 14). PEP proposed paying $5.10 to $5.25 a share for all of SAI’s shares. The company effectively put itself up for sale or break-up by issuing a statement on 2 June that it would conduct “a formal process to review strategic options”. SAI said that after the approach from PEP it had been approached by a number of other parties expressing interest in the company and its businesses. SAI’s profits have declined over the last two years and a recent report suggested that it might have to pay higher royalties from 2018. SAI currently pays Standards Australia a 10 per cent royalty on its earnings from publishing and selling thousands of Standards Australia industrial standards. The royalty level was set in a 15-year contract granted when SAI was spun out of Standards Australia and floated in 2003. Similar royalty agreements in other countries are generally 50 per cent or higher. SAI has made no further comment but in its 2 June announcement said its board and management were continuing to work on opportunities to improve operational efficiencies and would update the market with its full year results announcement in August. SAI shares closed at $4.82 on 5 August. NEW FUNDS FUNDRAISING Growth venture fund raises over-target $60m Daniel Petre and Craig Blair, formerly of netus, have closed a new technology growth stage venture fund above target at $60 million. The new AirTree Ventures fund had originally sought to raise $50 million. “We received such significant interest from investors that we decided to extend the fund to $60 million and close our fundraising early,” said Blair. He said they had to turn away some investors who had been keen to invest. Petre and Blair expect to make up to 15 growth capital investments of $2 million to $5 million from the fund over the next three years. Investors in the fund have not been revealed but are reported to include investor groups from Westpac, UBS and Macquarie Bank. Other investors include family offices and high net worth individuals. AirTree is the third Australian technology fund with which former Microsoft Australia chief executive Petre has been a key figure. Petre started ecorp in 1997 with capital of $30 million provided by Packer family- controlled then ASX-listed PBL. Ecorp was split off and floated in 2003 raising $385 million. In 2005, Petre linked with former eBay Australia chief executive Alison Deans to set up $40 million investment company Netus which was 50 per cent owned by News Corp (ASX: NWS). Blair joined Netus in 2007. The netus management team bought out News Corp’s stake in 2012 (APEVCJ, Jun 12). At the time, Petre said netus had delivered an internal rate of return (IRR) of more than 50 per cent. Netus was sold to Fairfax Media (ASX: FXJ) for a reported $50 million in 2012. Blair is currently chairman of social television start-up Beamly. He was previously chief executive of Beamly (then zeebox) and a director of online travel pioneer Travelselect/Lastminute.com. Businesses in which Petre and Blair have been involved in founding or funding over the years include Downstream Marketing, Allure Publishing, Ebay, Expedia, ninemsn, zeebox, Wayfair and Paws for Life (now Pet Circle). Blair said: “The Australian start-up space is expanding significantly with a wide variety of accelerators and incubators helping bring more companies on stream than ever in the past. AirTree will complement this effort by being able to commit growth capital to the best of this new class of ventures. Great start-ups, once they have worked out what their product or service offering is, need the capital to fuel growth but they also need investors who can bring proven experience in helping to build successful companies. We feel this combination of funding and expertise is something that AirTree can provide.” He added that in addition to providing capital and hands-on expertise, AirTree would give ambitious entrepreneurs the benefit of its founders’ unique experience in creating high-value exits strategies for Australian companies. Other members of AirTree’s management team are investment manager Paul Bennetts and operations manager Jess Heffernan. Bennetts was previously investment manager with Tulla, the Sydney-based family office of the Maloney family. Kevin Maloney and his son Mark Maloney built up mining services business The Mac Services Group that listed on the ASX in 2007 and was sold to Oil States International in 2010. Prior to joining Tulla, Bennetts spent five years with investment bank Goldman Sachs. Bennetts has first-hand experience of start-up ventures having founded a small but successful retail operation and co- founded an education marketplace. Heffernan previously worked in operations management for a communications organisation and also served as a business consultant for start-ups.
  7. 7. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 7 NEWS FSI interim report recognises role of venture capital Industry association AVCAL has welcomed much of the Financial System Inquiry interim report released last month (July). “The Inquiry has clearly identified that small and medium sized businesses in Australia need better access to growth capital funding, in particular venture capital and private equity,” said chief executive Yasser El-Ansary. The report points out that venture capital and private equity funds tend to finance more innovative and high-growth businesses. It notes: “these firms are drivers of long term productivity growth”. However the report says private equity and venture capital fee structures, and the services these fees reflect, might not always be transparent to investors; it suggests greater transparency would allow investors to make better informed investment choices and would lead to greater competition. AVCAL has responded saying that the high level of involvement in investee businesses by private equity and venture capital managers justifies the level of the industry’s fees. The association says the interim report recognises that, unlike other fund managers, venture capital managers are typically very involved in developing the businesses in which their funds invest, providing mentoring, business expertise and access to industry and market connections. The report notes that Australia’s venture capital and private equity markets are small and that there are barriers to generating significant investor interest. El-Ansary said AVCAL believed Australian private equity and venture capital funds could play a more significant role, supporting investment into up to an additional 30,000 Australian businesses, if current roadblocks to more efficient fundraising were addressed as part of the review. “Australian venture capital funds are currently invested in around only 200 start- ups and early stage ventures. Private equity funds are currently invested in fewer than 350 businesses in Australia. This means they presently have funding capacity to back less than 2 per cent of the investable pool of up to 30,000 businesses,” he said. “There is substantial scope for the industry to play a greater role in building Australian businesses and creating new employment opportunities – especially in new high innovation industries of the future – if the inquiry makes recommendations for changes to some existing policies and regulations ...” He said the inquiry appeared to agree with AVCAL’s view that reform of the Venture Capital Limited Partnership (VCLP) tax rules would be one very simple way that the government could help encourage greater private sector investment in Australian businesses. The report states: “the tax treatment of VCLPs is complex and may be a barrier to fundraising”. It notes that a Board of Taxation review of the legislation has already made recommendations to address this. The report also says that improving access to quarterly RD tax credits would help alleviate cashflow constrains for new ventures. Submissions to the inquiry suggest that some Australian tax settings distort international financial flows and restrict the financial integration of the Australian economy, issues that have previously been raised by the Johnson, Australia’s Future Tax System and Board of Tax reviews. Some proposed changes have been partially implemented, such as changes to the investment management regime and a new tax system for managed investment trusts. Other changes are still being considered by the government such as the tax treatment of collective investment vehicles. PERFORMANCE Future Fund looks to private equity to maintain performance Future Fund chairman Peter Costello has indicated the $101 billion fund is now looking beyond listed equities to private equity, infrastructure and other alternative assets (mainly hedge funds) to drive returns. The former federal treasurer was commenting after the fund reported a 13.9 per cent return for the year to June 30. Since its creation in May 2006, the fund has achieved an annualised return of 7.1 per cent just under its target of 7.2 per cent (CPI plus 4.5 per cent). Costello said: “These returns show the value of long term and patient investing. In the fund’s early days, in a challenging investment climate, the returns were below the target range but disciplined adherence to clear objectives have delivered good results over the medium term. The fund is now focused on performance through to 2020 and beyond.” He said that over recent years the fund had benefited from big rises in the values of US equities but this could not be expected to be such a strong driver of returns over the next few years. He noted that the fund now had large allocations to private equity, infrastructure and other alternative assets in total accounting for 30.3 per cent of the fund assets as at December 31. This compared with equities at 43.2 per cent. These allocations had not changed greatly since then, he added. The Future Fund increased its allocation to private equity by $1.86 billion to $7.47 billion (7.7 per cent) over the 2013 calendar year. The fund’s private equity investments are predominantly with global fund-of-fund managers and large international buyout firms. Archer Capital and Quadrant Private Equity are the only local private equity mangers in which the Future Fund has invested. A new private equity fund manager, European mid-market buyout firm Vitruvian Partners, has been added the fund’s roster this year. Vitruvian raised a £1 billion second fund late last year. The firm was co-founded by former Apax Partners executives. NEWS AVCAL calls for innovation policy backed by funding Industry association AVCAL has called on the federal government to produce a national innovation policy to help drive the Australian economy. Under that policy, AVCAL would like to see the government set up a $500 million translational innovation fund and dedicate
  8. 8. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 8 NOMINATIONS ARE OPEN FOR the Australian Growth Company Awards 2014 SPONSORED BY: The Awards are focused on celebrating excellence in companies that demonstrate high rates of growth, innovation, integrity and sustainability. Award categories are: • Growth Company of the Year • Growth Company CEO of the Year • Exit of the Year • Growth company to watch. Nominations close on the 15th September 2014. The award winnders will be announced on 16 October 2014. Find out more at: www.sparke.com.au/growthawards We thank each of the award partners for their support in bringing these awards to life.
  9. 9. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 9 $100 million of the proposed $1 billion Medical Research Future Fund to setting up a translational medical innovation fund. In a submission to the Senate Inquiry on Australia’s Innovation System, AVCAL has highlighted the need for policy reforms to recognise that innovation is not just about research but also about the translation of that research into usable and productive outcomes. “Over the years successive governments have looked at various ways to strengthen university-industry linkages to help stimulate innovation,” AVCAL chief executive Yasser El-Ansary said. “We know what we have to do but unfortunately we’ve continued to ignore the ‘development’ side of ‘research and development’. We have to recognise that supportive innovation policy systems play a critical role in taking research from the laboratory to the marketplace, and this is particularly true for small and medium sized economies like ours.” In past years the Commonwealth government has spent around $9 billion annually supporting research and innovation, with a heavy emphasis on research and industry assistance. A little known fact is that just 1.5 per cent of this expenditure has been dedicated to supporting the translation of research into commercial outcomes. “Given the very small investment we make in supporting translation, we shouldn’t be surprised at our relatively poor performance when it comes to commercialisation rates from research in Australia,” El-Ansary said. Private investment through angel, venture capital and private equity funding plays a vital role in helping to take such innovative businesses to the next level. The Financial System Inquiry’s interim report in July acknowledged this, stating that: ‘venture capital and private equity funds tend to finance more innovative and high- growth firms. These firms are drivers of long-term productivity growth’. “As an economy, we know that we have to lift our game around productivity and we have to take decisive action to set ourselves up for enduring prosperity,” El-Ansary said. A national innovation policy was needed to capitalise on the valuable (and mostly publicly funded) research it already generates in science, technology, engineering, medical science and other advanced technologies. AVCAL’s key recommendations to deliver a productive and self-sustaining innovation system include: • introducing a dedicated translational innovation programme with a long-term focus. This should include a new $500 million translational innovation fund to attract matching private capital into high-risk but high-potential early stage companies looking for commercialisation assistance, and a new translational medical innovation fund funded from 10 per cent of the proposed $1 billion endowment of the Medical Research Future Fund (announced in the federal budget); • delivering a consistent tax outcome for all investors in private ventures and SMEs through Venture Capital Limited Partnerships (VCLPs); • improving existing migration policies to better target innovation-building; • introducing quarterly RD tax credits for early stage companies; • reforming the Employee Share Scheme tax framework for early stage companies; and • strengthening the nexus between publicly-funded research and economic outcomes. Separate to the Senate Inquiry, AVCAL has also been advocating for federal government policy changes to be included in the National Investment and Competitiveness Agenda, which is due to be released in coming months. AVCAL’s full submission to the Senate Inquiry on Australia’s Innovation System can be viewed at: www.avcal.com.au INVESTMENT ACTIVITY Multi-billion bids expected for New Zealand-owned business Private equity firms CVC Capital Partners, Kohlberg Kravis Roberts (NYSE: KKR) and The Blackstone Group (NYSE: BX) are reportedly interested in acquiring cardboard-based beverage and food carton business SIG Combibloc Group AG (SIG). The Switzerland-based global business is owned by Auckland private investment company Rank Group Limited. SIG, which employs more than 5,000 people in more than 40 countries, is valued at around $US5 billion. The business has a plant in Broadmeadows, Melbourne. Earlier this year, Rank Group appointed Goldman Sachs Group to explore a sale of SIG. First round offers are due in September. Bloomberg News identified the private equity firms as having held talks with advisers about potentially acquiring SIG. According to Bloomberg’s sources, the firms are expected to form syndicates with each other or third parties to bid. Rank Group’s other investments include New Zealand-based pulp, paper and packaging business CarterHoltHarvey. NEW FUNDS FUNDRAISING $30m sought for new venture fund Listed funds manager Blue Sky Alternative Investments (ASX: BLA) has begun fundraising for its second venture capital fund. Blue Sky’s venture operation, Blue Sky Venture Capital, has is targeting $30 million for the new fund and has set 22 August as the date for a first close. The new fund is to be registered as an Early Stage Venture Capital Limited Partnership (ESVCLP) which will make returns to investors tax exempt. The fund is to target a 30 per cent internal rate of return (IRR) net of fees. Announcing the fundraising, Blue Sky Venture Capital investment director Dr Elaine Stead said competition for high quality venture capital deals in Australia was at an 11- year low with only $100 million invested in 2013 compared with $29 billion in the US. “There has been no better time to invest in the Australian market,” she said. “Our new fund is aiming to raise $30 million, almost a third of what was invested in Australia last year ... This places Blue Sky in a strong position to take the pick of the best opportunities in an asset class with the potential to generate very high levels of capital growth.” Stead said that 80 per cent of Australian venture investment was currently directed to start-ups and early stage companies. Blue Sky, however, intended to focus on the underpenetrated and lower risk late venture and early expansion stage sectors.
  10. 10. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 10 AUSTRALIAN PRIVATE EQUITY HANDBOOK The first professional practise guide specifically for the Australian private equity industry is now available directly from Private Equity Media. Order Australian Private Equity Handbook by Nick Humphrey (CCH Australia Limited RRP $95.00 inc. GST) now. Simply visit: www.privateequitymedia.com.au and click on “Subscribe” in the green toolbar to buy online. Australian Private Equity Venture Capital Journal subscribers qualify for a special discount price of $85.00 inc. GST. We will mail your hard copy book as soon as your payment is processed. Australian Private Equity Handbook is a plain English guide to professional private equity practise in Australia covering major aspects of deal making and the establishment of a private equity fund. Order your professional practise guide She said the firm was also committed to maintaining a technology and industry agnostic approach in contrast to most local venture firms which typically allocated 80 per cent of investment to the “crowded” biotechnology and IT spaces. Stead said the new fund would be invested across a diverse and balanced portfolio of deals. “We look for validated, game-changing products or technologies which offer a global reach; rapid scalability or growth; established, experienced management teams and businesses where we believe we can genuinely add value,” she said. The new fund will invest in Australian and overseas companies as well as having the capacity to invest alongside overseas venture firms. Blue Sky recently formalised a co-investment partnership with North American healthcare specialist fund Five Corners Capital. “We back companies that address global markets and our investment partnerships ensure our companies have access to the expertise, capital and partnerships needed to support their growth,” Stead said. Blue Sky manages $600 million worth of assets across private equity, venture capital hedge funds real assets and real estate. The private equity and venture capital division has delivered a 16.3 per cent internal rate of return (IRR) net of fees to investors since inception compared to an industry benchmark of 4.9 per cent. Early stage company investments include Mexican-style fast food restaurant chain Beach Burrito, an investment made by the private equity team before the venture operation was established, biotechnology company Hatchtech and online pet supplies business Pet Circle (Paws for Life). The latter two are investments of Blue Sky’s first ESVCLP venture capital fund which raised $10 million last year. The first fund was launched with a similar mandate to the new fund and those two early stage investments illustrate some of the strategies Stead outlined for the new fund. Hatchtech (APEVCJ, Nov 13) has been involved in a long process to develop and
  11. 11. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 11 gain approval for a new low toxicity single application treatment for head lice. The product is, however, now close to being launched on the market with the US Food and Drug Administration (FDA) believed to be close to granting a New Drug Application (NDA). Pet Circle (formerly Paws for Life ˗ APEVCJ, Feb 14) is also a relatively late stage investment for a venture capital firm. The business was launched in 2011and was already generating sales when Blue Sky invested. Blue Sky’s investment was intended to rapidly ramp up operations of the business. INVESTMENT ACTIVITY Seed fund now investing more than $NZ5m annually The New Zealand Venture Investment Fund’s (NZVIF) Seed Co-investment Fund is now investing more than $NZ5 million a year and recently invested in its 100th company. Government-sponsored NZVIF set up the fund in 2006 to support the development of angel investment in New Zealand. Angel groups can apply to partner with the fund. The fund then invests in start-ups on a dollar for dollar basis alongside partners. Ten years ago, angel group investing was minimal in New Zealand but the support of the fund has helped the sector to develop with the result that angel investment in start-up ventures has increased substantially. In 2006 the fund invested $200,000 alongside two angel groups. The number of partners and investments has risen steadily since then with the $NZ5 million mark passed for the first time in the year to June 2013 and again exceeded in the year to June 2014 (for details see table below). The fund has now invested a total of just under $NZ30 million in 115 companies. The portfolio ranges from hi-tech robotics through healthcare, agricultural and industrial technologies to a range of software companies. Investee companies include Invert Robotics, Puteko, D’Arcy Polychrome, Booktrack, Nexus6, Mesynthes, Hydroxsys and Rockit Apples. Two companies have been exited: software company Greenbutton after its acquisition by Microsoft (APEVCJ, May 14), and wireless electricity transmission technology company HaloIPT after it was acquired by US company Qualcomm. NZVIF chief executive Franceska Banga said the fund’s portfolio showed the depth and breadth of technology being developed by emerging New Zealand companies. “Puteko, which we invested in alongside Sparkbox Ventures when it was an idea being commercialised by young developers in Christchurch, is developing unique animation software which creates 3D images from 2D. There is huge interest in Japan and the US and the company recently raised over $NZ1 million in new capital,” she said. “Rockit Apples is a Hawkes Bay company backed by angel investors from Tauranga. It has taken unique miniature apple technology developed by scientists at Crop and Food which it has transformed into a healthy snack food available in retail chains like Starbucks and Marks and Spencers across Asia, Europe and the US; it hopes to be the next Zespri. “Companies like Mesynthes, Hydroxsys and Rockit Apples illustrate the range of applications emerging from New Zealand’s traditional strengths in the primary sector. “The major area of investment is in software and services. Tradme and Xero demonstrated the potential of creating world-class software companies in New Zealand. Angel investors are now backing a lot of new start-ups in the sector. Over 40 per cent of the Seed Co-investment Fund portfolio companies are software-related.” Banga said it remained too early to be able to predict the fund’s overall investment performance as most of the companies were still at very early stages in their development. But she noted: “We have, however, seen some healthy returns from exits from Halo IPT and GreenButton. The rule of thumb is that most companies will fail but a few very good performers will bring positive returns overall across a portfolio. “Since the fund’s establishment, NZVIF has entered into 15 partnerships with angel groups and New Zealand has seen considerable growth in angel investing. But it is still in its infancy. “While it is good to see new angel investment networks establishing – such as Flying Kiwi Angels and Arc Angels – some established angel groups have, over the past couple of years, closed down or reduced investment activity. We need a stream of new groups and new capital entering the market, adding to and complementing a range of existing angel networks and funds to build the market to a sustainable level.” Although the Seed Co-investment Fund focuses on early stage investing, its angel investor group partners have in many cases provided follow-on funding. As a result, while the fund has invested a total of $NZ29.9 million in its portfolio companies, its partners have invested more than twice as much ˗ $NZ61.5 million. Additional private investment has amounted to $NZ77.6 million so the ratio of the fund’s investments to all private investment is 1: 4.6. The average size of the fund’s initial investments is currently $NZ170, 508. Fifty per cent of the investee companies are involved in exporting and cumulative revenues from the portfolio companies to the end of June amounted to about $NZ100 million. Here are brief outlines of some of the companies in the portfolio: • Booktrack: Has developed technology that matches music to text for readers of e-books. Products on sale internationally.  Founded by Paul Cameron in 2010.  Lead and key investors: Sparkbox, Peter Thiel. • Hunter Safety Lab: Developer of hi-tech safety clothing and equipment designed to prevent accidental shootings by hunters.  Founded by Michael Scott in 2009. Lead and key investors: Angel HQ. • Invert Robotics: Awards winning robotics technology company.  Founded by James Robertson in 2010. Lead and key investors: Powerhouse Ventures. • D’Arcy Polychrome: Has developed technology to deliver pre-packed colour for the decorative paint market.  Founded by Rachel Lacy in 2011.  Lead and key investors: Pacific Channel. • TracPlus Global: Provides global tracking, sensor monitoring and data analysis services to companies in the
  12. 12. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 12 energy, oil and gas and mining sectors, emergency service agencies, explorers and adventurers, and armed forces in over 30 countries. Founded by Chris Hinch in 2008. Lead and key investors: Otago Angels. • Biomatters: Company’s ‘Geneious’ programme is one of the most frequently cited commercial software packages for DNA sequence-based research. Founded by Alexei Drummond in 2006. Lead and key investors: ICE Angels. • Rockit Apples: Has developed miniature apples through cross-breeding; packages them in innovative plastic tubes which it exports to overseas markets. Founded by Geoff Allison in 2005. Lead and key investors: Enterprise Angels. • Hydroxsys: Has developed world- leading membrane technology for use in a range of industrial processes from dairy processing to mining. Recently raised one of New Zealand’s largest seed investment rounds. Founded by Daryl Briggs in 2012. Lead and key investors: Global from Day One, Sparkbox. • Nexus6: Has developed a range of smart inhalers to administer medicines. Technology includes the ability to digitally monitor inhaler use. Founded by Garth Sutherland in 2001. Lead and key investors: ICE Angels. • PolyBatics: Technology harnesses the power of cells to create natural polymer particles for a range of diagnostic and therapeutic applications. Founded by Bernd Rehm in 2005. Lead and key investors: Manawatu Investment Group. • Mesynthes: Produces tissue sheets for wound care and surgery. Has US Food and Drug Administration clearance for the product’s commercial launch into the US market. Founded by Brian Ward in 2007. Lead and key investors: Sparkbox . INVESTEE NEWS London Stock Exchange float to fuel Asia-Pacific push By European correspondent Selwyn Parker Sweden-based private equity firm, EQT, plans to expand its fast-food and beverage chain SSP in the Asia-Pacific region after floating off nearly 60 per cent of the business on the London Stock Exchange. Until now, SSP’s Asia-Pacific outlets have accounted for less than 7 per cent of group revenues of £1.8 billion but the additional capital will enable the chain to push deeper into a territory it has been anxious to develop more fully for some years (APEVCJ, Apr 2013). SSP manages 300 brands worldwide and has outlets for five of these brands at Sydney Airport. The IPO raised over £482m before the exercise of any over allotment options. Bucking a downward trend on the London market, the IPO was highly successful and valued the chain at about £1 billion, based largely on prospects for further growth beyond SSP’s UK home base. The shares were rushed in early trading; listed at 210p they soon jumped to 222p. This enthusiasm was seen as a vote of confidence in the company’s growth strategy of developing new brands while partnering with established brands such as Burger King and Starbucks in locations of high foot traffic such as airports and rail stations. According to a consensus of analysts, the issue price of 210p suggests a forward enterprise value ratio to earnings before interest, tax, depreciation and amortisation (EBITDA) on 2015 earnings of 8.4 times. Although SSP will use some of the proceeds of the float to reduce debt – a current trend in European private-equity markets – there will still be plenty of cash available for the Asia-Pacific expansion strategy. NZVIF SEED CO-INVESTMENT FUND Year to 30 June Angel Partners Investee companies Amount Invested ($NZm annual) Amount Invested ($NZm cumulative) 2006 2 1 $0.2m $0.20m 2007 4 4 $0.70m $0.90m 2008 8 18 $2.54m $3.44m 2009 9 27 $3.27m $6.71m 2010 11 41 $3.26m $9.97m 2011 12 61 $4.99m $14.95m 2012 14 77 $4.38m $19.33m 2013 14 96 $5.20m $24.53m 2014 14 115 $5.40m $29.93m NZVIF CO-INVESTMENT FUND INVESTMENT Year Amount invested Number of deals 2006 $NZ21,366,964 30 2007 $NZ29,518,348 55 2008 $NZ32,569,403 41 2009 $NZ43,238,580 75 2010 $NZ53,109,861 112 2011 $NZ34,798,049 103 2012 $NZ29,896,789 102 2013 $NZ53,230,971 116 Total $NZ297,728,965 634 Source: Young Company Finance Index NZ ANGEL INVESTMENT–INVESTMENT STAGES Of $NZ297m invested by angels since 2006: • $NZ55.9m (19%) – seed stage • $NZ200.3m (67%) – start-up stage • $NZ29.3m (9.9%) – early expansion stage • $NZ12m (4%) – expansion stage
  13. 13. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 13 Currently, SSP operates nearly 2,000 retail concessions at airports and train stations in 29 countries. At Sydney airport it runs Caviar House Prunier, Itacho, Danks Street Depot, Bambini Wine Room and Trattoria Prego. Some of these brands are being tested for global roll-outs. Chief executive Kate Swann, who revived UK high-street newspapers to stationery chain WH Smith and only joined SSP last year, will stay on to oversee the group’s expansion strategy. The success of SSP’s IPO is something of a triumph of faith for EQT. It bought SSP, which had been split out of FTSE 100 caterer Compass, at the height of the leveraged buy-out boom in 2006 but was forced to write down the value of its 94 per cent stake to zero in 2009. Rather than walk away from the company, EQT pumped £100 million into new brands and outlets and has since seen its investment recover spectacularly. The buyout firm has now recovered all the value of its investment and has a 40 per cent claim on underlying EBITDA of £153 million, according to its 2013 results. EQT recently lead a consortium which acquired I-MED Radiology Network , the Wallenberg family-backed firm’s first acquisition of an Australian-based company (APEVCJ, Apr 14). NEWS New partnership to offer debt to private companies Venture capital funds management firm MH Carnegie Co has partnered with fixed income dealer FIIG to launch a new business which will offer debt to private companies. FIIG has been arranging corporate bonds for small cap listed companies while MH Carnegie Co has been involved in seeking loan capital for its portfolio of early stage private businesses. MH Carnegie principal Mark Carnegie and FIIG chief executive Mark Patton both recognised a market gap where businesses were deemed too risky for bank loans or conventional corporate bonds but did have the high growth/high risk profile that would attract venture capital or private equity investment targeting overall returns in excess of 20 per cent. This prompted them to establish the new business, Alternate Debt Services. Carnegie and Patton have known each other since Carnegie was with investment bank Carnegie Wylie and Patton was with ANZ Banking Group. Alternate Debt Services will structure and arrange high yielding debt across senior, junior and mezzanine tranches, hybrid instruments and preferred equity. The business will target returns of 10-20 per cent for its private investors. Alternate Debt Services will operate completely independently from MH Carnegie Co with FIIG conducting its credit analysis. International debt providers such as Macquarie Bank, Babson Capital and Intermediate Capital provide mezzanine finance to Australian private companies but Alternate Debt Services will offer smaller loans than these firms typically provide, probably in the range $20 million to $100 million. PERFORMANCE Australian managers ranked among world’s best Two Australian private equity fund managers have been ranked among managers that most consistently outperform their peers. Pacific Equity Partners (PEP) and Quadrant Private Equity are among 35 buyout fund managers identified as outperformers among 196 peers by alternative assets research house Preqin. The rankings have been made for Preqin’s forthcoming Private Equity Performance Monitor. PEP is in equal 13th place with five funds with quartile rankings, four in the top quartile and an average quartile ranking of 1.4. Quadrant is in equal 19th placing with five funds with quartile rankings, three in the top quartile and one in the second quartile and an average quartile ranking of 1.6. Both firms also made the outperformer rankings last year. The United States has 21 firms in the buyout rankings, the UK three, Sweden and Australia two each and The Netherlands, Israel, France, Canada, South Africa and Japan one each. Australia does not feature in tables of consistently performing venture capital and fund-of-funds managers both of which are dominated by US firms. Preqin’s ranking system assigns a score of one for a top quartile fund, two for a second quartile fund and so on. NEWS Private banking business changes hands Investec has sold its Australian professional finance and asset finance and leasing businesses to the Bank of Queensland as part of a non-core businesses divestment program. The businesses made up Investec Australia’s private banking business, Investec Bank (Australia) Limited. As a result of the sale, the new local entity for the Investec Group will be Investec Australia Limited (IAL). Investec is now focusing on its core specialist niches of corporate advisory, corporate and acquisition finance, aviation finance, resource finance, infrastructure finance and investment, financial markets and property. Investec’s head of banking and financial markets in Australia Milton Samios said the company’s commitment to corporate, institutional and government clients remained unchanged but IAL was now better positioned to offer clients access to the larger balance sheet and global capabilities of the broader Investec Group. Investec has three principal markets: South Africa, the UK and Australia. The group also has additional offices in Asia, Europe and the US. NEWS Digital products now among New Zealand’s leading exports New Zealand’s digital economy contributed more than $NZ2 billion in export earnings last year making it the country’s third biggest export earner behind dairy and tourism, minister for communications Amy Adams told visitors to an Auckland conference last month (July).
  14. 14. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 14 Speaking at the NetHui conference organised by InternetNZ, Ms Adams said she believed the most important role for government in the ICT ecosystem was to work on removing barriers and creating an economic environment where IT companies could thrive. She said international cooperation was important for developing New Zealand’s growing expertise in ICT and this had been promoted by the government’s participation in the Korea, Australia, New Zealand Technology Summit (KANZ), the most recent meeting of which was also held in Auckland last month. South Korea and Australia were ideal markets and partners for New Zealand ICT companies, she said. And despite Korea being the home of some of the world’s leading ICT companies, it was clear Korean businesses recognised they could not develop the full range of technology solutions demanded by global markets. As a result they sought partnerships with innovative companies that had technology or applications suitable for embedding in their products and this created a significant opportunity for New Zealand. She said a number of New Zealand companies had already capitalised on this and entered into partnerships with Korean businesses. For example, Flightcell and Rakon had become component suppliers to Korean manufacturers and others, including MetraWeather, RightHemispere and Vista were supplying software. The government, through New Zealand Trade and Enterprise, was also working closely with New Zealand ICT companies to establish and grow their presence in Australia with a focus on secure payments, GPS systems and social media monitoring tools. NEW FUNDS FUNDRAISING Wotif.com founder plans angel fund In the wake of Wotif.com Holdings (ASX: WTF) accepting a $703 million bid by US-based rival Expedia (Nasdaq: EXPE), founder Graeme Wood has spoken of plans to set up a new angel investment fund. Assuming it is completed, the takeover of Wotif.com will net Wood about $140 million. Andrew Brice, who co-founded the online travel booking business with Wood and remains a close business associate, will receive about $100 million. The Australian Competition and Consumer Commission (ACCC) has begun an enquiry into the effects of Expedia acquiring Wotif.com. The ACCC is looking into competition between Expedia and Wofif.com as well as with bricks and mortar travel agency businesses such as Flight Centre (ASX: FLT), Helloworld (ASX: HLO) and STA Travel. Wood’s other business interests include developing an eco-tourism venture at a former Gunns paper mill at Triabunna on Tasmania’s east coast with Kathmandu founder Jan Cameron. The Spring Bay Mill property was bought for about $10 million in 2011 and concept images were recently released. PEOPLE MOVES New partner for upper mid-market firm Quadrant Private Equity has appointed Nick Batchelor as a partner. Batchelor was previously a partner with RMB Capital Partners. Batchelor has become one of four partners at Quadrant, the Sydney-based upper mid-market firm. Other partners are founder and managing director Chris Hadley, Marcus Darville and Justin Ryan. George Penklis, who co-founded Quadrant with Hadley, retired early this year prior to Quadrant raising its $850 million seventh fund, Quadrant Private Equity No 4 (APEVCJ Mar 14). INVESTMENT ACTIVITY Chinese UK acquisition could have significance for Australia By European correspondent Selwyn Parker For China’s Hony Capital, the international brand rights that came with its £900 million purchase of UK-based PizzaExpress last month (July) are clearly crucial assets. This could have implications in other markets including Australia and New Zealand. In the last two years the Shanghai- based private-equity firm has embarked on a round of cross-border investments that are taking it deeper into the Asia- Pacific region as well as the UK and North America. PizzaExpress is similarly focused on international expansion and already has 22 outlets in mainland China. The Hony acquisition is likely to result in the brand being expanded to other parts of the Asia- Pacific region, including, possibly, Australia and New Zealand. Under the ownership of Gondola Holdings (an investee of European private equity firm Cinven) PizzaExpress bought back its international brand rights in 2010 and has since added 68 restaurants outside the UK. In addition to mainland China, these are in Hong Kong, Indonesia, and India. In all, the business operates 504 outlets. The success of the brand outside the UK was clearly a major factor in the high price that Hony founder and chief executive John Zhao was prepared to pay for PizzaExpress, given that the most recent annual earnings before interest, tax depreciation and amortisation (EBITDA) figures were only £90 million, up from £60 million when Gondola took the chain private seven years ago. The deal was the biggest transaction in Europe’s restaurant business in five years. Zhao has said Hony plans to leave the current executive team in place and will support their expansion plans. Success for Hony’s debut investment in overseas-based fast food could encourage Chinese competitors to look to the Australian and New Zealand fast-food sectors for other brands to expand in Asia. Although Chinese private equity has yet to make an impact here, Hony – China’s largest private equity firm by assets with more than $US7 billion under management – is well placed to change this. The firm has a close association with TPG Capital which has an Australian office and has made a number of large acquisitions in Australia including the Myer department store chain and the Ingham poultry business. Earlier this year, Hony became the anchor investor with TPG in a five-year, US$1billion deal to finance, produce and self-distribute up to ten “star-driven” movies a year around the world.
  15. 15. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 15 Zhao, who has an MBA and dual masters degrees in physics and electrical engineering from American universities, has led Hony in pursuing cross-border assets and financing the expansion of Chinese companies into new markets over recent years. “More and more Chinese firms we’ve invested in are envisioning themselves as global companies,” he has been quoted as saying. “We will continue to finance them and team up with them to venture into the global market. We want to become a bridge, through which Chinese companies can acquire advanced technology and brands in mature markets while foreign companies can tap China’s huge growth potential.” Backed by TPG, and overseas institutional investors such as US pension funds CalPERS and CalSTRS as well as Singapore sovereign wealth fund Temasek, Hony holds stakes in foreign companies including Japanese property investment firm Tokai Kanko Co., Italian machinery maker Compagnia Italiana Forme Acciaio SpA and Singapore-listed Biosensors International Group Ltd., a cardio- technology researcher. Sponsored by Chinese conglomerate Legend Holdings Ltd., Hony started out as a manager of US dollar funds focusing on investing in domestic state-run firms in construction, healthcare, finance, retail, media and renewable energy. It has invested in about 70 firms, including Changsha Zoomlion Heavy Industry Science Technology Development Co., China Glass Holdings Ltd. and Simcere Pharmaceutical Group. Hony moved into cross-border investments about four years ago. INVESTMENT ACTIVITY Private equity backing for oil and gas services venture Melbourne private equity firm Proserpine Capital Partners has participated in a $50 million capital raising by West Australian company Condor Energy Services. Much of the rest of the capital was provided by Hong Kong investors. Condor was set up in 2012 to provide oil and gas industry services for onshore operations in Australia. The new capital will be used to finance the purchase of equipment. Condor has just begun a two-year contract with Beach Energy (ASX: BPT) to service natural gas exploration in the Cooper Basin area of Queensland and South Australia. Melbourne-based boutique corporate advisory firm Mitchell Peterson Capital Partners (MP Capital) advised Condor on the raising. Proserpine’s other investments are in: tug and barge hire business Polaris Marine; women’s fashion business, Meredith Clothing Group; industrial cleaning company, Lotus Filters; and commercial fishing business, Corporate Alliance Enterprises. PEOPLE MOVES Principle Advisory Services recruits leading adviser Services business Emerge Media LLC. John Brakey has joined private equity placement firm Principle Advisory Services as an adviser. Brakey headed Macquarie Bank’s fund- of-funds private equity operation for eight years until late 2008 during which time he oversaw substantial growth in the operation’s funds under management. Brakey then spent three years in an investor relations and fundraising role as a director of KKR Australia. In early 2012 he joined MLC, the wealth management division of National Australia Bank, as head of private equity. He left that role in May last year. NEWS Venture-backed software company in IPO queue Francisco Partners’ Australian investee company Aconex is reportedly preparing for an IPO and ASX listing. The San Francisco-based venture firm paid $107 million for a minority stake in the software business in late 2008. Founders Leigh Jasper and Rob Phillpot established Aconex in 2000 and remain the largest shareholders. Aconex provides online document management and collaboration tools for the construction and engineering sector. The cloud-based software-as-a-service (SaaS) products are available on a pay-as- you-go basis. Aconex claims to be the world leader in its niche. Macquarie and UBS are believed to be working on preparations for the IPO. INVESTMENT ACTIVITY South African investment company buys New Zealand retailer South Africa-based investment company Pepkor Limited has acquired New Zealand retail chain Postie Plus Group, SP Capital IQ has reported. The deal involves 64 stores throughout New Zealand. The value of the transaction is unknown. Pepkor owns the Best Less and Harris Scarfe retail chains in Australia. INVESTMENT ACTIVITY US venture funds invest $3.6m in graphic design start-up US venture capital managers Founders Fund and Shasta Ventures have invested a total of $3.6 million in online do-it-yourself graphic design start-up Canva. Canva raised $3 million in March 2013 (APEVCJ, April 13) in a round which included venture capital firms Square Peg Capital and Blackbird Ventures, in Australia, and Matrix Partners, InterWest Partners and 500 Startups, in the US, as well as prominent angel investors in both countries. Sydney-based Canva operates a free service which now has 600,000 users around the world. Revenue is generated by charging $1 a time for the use of images which it licenses for distribution at lower rates. The company recently introduced a ‘design’ button which enables its platform to be easily integrated into websites. The new funding is to be used to expand Canva’s team of 26. NEWS $NZ1m plus government funding for three incubators The New Zealand government has announced funding of just over $NZ1
  16. 16. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 16 million for three technology-focused incubators. The incubators are: • Creative HQ (Wellington), • Canterbury Development Corporation (Christchurch) • The Icehouse (Auckland). All three operate under the Lightning Lab brand. The investment is part of the Ministry of Business, Innovation and Employment’s Accelerator Programme pilot which is designed to support the rapid formation of early stage ICT and digital technology start-ups. Programmes are typically run over three months and are intended to make start-up companies investment ready. Minister for science and innovation Steven Joyce said: “The role of the government’s Business Growth Agenda (BGA) now is to help turn one or two years of good growth into a sustained lift in our economic performance. Encouraging the development of more new ICT and hi-tech companies is a crucial part of the innovation stream of the BGA. “The Accelerator Programme helps foster faster economic growth by assisting entrepreneurs to develop innovative companies that will drive New Zealand’s economy into the future. “The Accelerator Programme will result in New Zealand developing more high growth, globally ready ICT businesses; a larger group of innovative entrepreneurs who can drive these projects; and more private sector investment  into start-up businesses,” Joyce said. The Accelerator Programme complements a wider focused Incubator Support Programme administered by government-funded Callaghan Innovation. INVESTMENT ACTIVITY Creative fund invests in ‘next generation’ fashion business QUT Creative Enterprise Australia’s Creative Enterprise Fund has invested in a business which it describes as “a next generation online fashion retailer”. The size of the investment in Fame Partners has not been specified but the fund is mandated to make $25,000 to $150,000 investments. According to Creative Enterprise Australia, the start-up is tapping into the $6 billion global formal and prom dress market. Creative Enterprise Australia chief executive Anna Rooke said Fame Partners was an innovative Australian fashion technology venture driven by a talented team who were targeting a growing global market. Rooke said digital disruption was affecting many markets including fashion. The fashion industry was undergoing significant change with new brands targeting niche client verticals as well as moving from conventional retailing to online sales. She said Fame Partners had spotted a great opportunity in a high transaction- spend niche market and was using
  17. 17. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 17 customised manufacture and digital technology to provide a distinctly different offering for the formal wear market. Fame Partners founder and chief executive Nyree Corby said the formal wear market had developed from bridal ranges offered through small retailers. These shops were, however, unable to regularly refresh stock. As a result they were unable to keep up to date with fashion trends which were now largely driven by social media. Corby said she had noticed a clear disconnect between favourite frocks blogs and social posts shared by young women and the special event wear available in retail stores. Recognising an opportunity, she had started offering made-to-order formal dresses, marketed, ordered and shipped online. “We’ve experienced strong sales in Australia since start up so we recently opened up our offering to the lucrative US prom dress market,” she said. “Within four months our US sales are already close to exceeding Australian revenue.” Corby said online data complemented the creative side of fashion design. Fame Partners had recently developed a fashion forecasting trend tracking algorithm to keep their designers “ahead of the curve”. And a “twin alert” feature ensured customers could avoid finding someone else was wearing the same Fame Partners dress when they attended at an event. Creative Enterprise Australia is an artistic enterprises incubator based at the Queensland University of Technology (QUT). INVESTEE NEWS Start-up partners with leading vaccine producer Sydney biotechnology start-up NeuClone has entered into a worldwide partnership with Serum Institute of India Ltd to produce biosimilar drugs. Biosimilar drugs are biological products designed to mimic the effect of existing drugs. Serum Institute, which is based in the Indian city of Pune, is the world’s largest vaccine producer. The company will use its resources to assist NeuClone to develop a range of 10 biosimilar monoclonal antibody drugs for treatment of diseases such as cancer and autoimmune disorders. Serum Institute will then have the right to manufacture and supply the drugs in India, China, South-East Asia, the Middle East, South America Africa and other markets. NeuClone will retain licence for US, Europe, Canada, Australia, Taiwan, Japan and South Korea. The company is seeking distribution partnerships with large pharmaceuticals for these markets. NeuClone founder and chief executive Noelle Sunstrom said the partnership with Serum Institute would leverage NeuClone’s patented technology to generate protein drugs at greatly reduced cost than if the start-up continued development on its own. The joint development project is expected to take about eight years. NeuClone, which operates from Australian Technology Park in Sydney, was established in 2007 and is majority owned by its founder. The company has more recently received investment from private investors including all members of its board. The company has received grant funding from the NSW and federal governments including $1 million from Commercialisation Australia. Commercialisation Australia was abolished in this year’s federal budget. NEWS Tech company boss to speak at awards event Tim Power, managing director of recently floated 3P Learning (ASX: TPN), will be keynote speaker at this year’s Australian Growth Company Awards event. The awards will be presented in Sydney on 16 October. Nominations for the awards close on 15 September. For more information visit: www.sparke. com.au/growthawards PEOPLE MOVES Three promoted as major fundraising progresses David Brown, Geoff Hutchinson and Jake Haines have been promoted to managing directors at Pacific Equity Partners (PEP). Brown joined PEP in 2004. Prior to that he was an analyst in the investment banking division of JP Morgan. Hutchinson joined the firm in 2008. Prior to that he was a manager at Bain Company. Haines originally joined PEP in 2002 after working as a Bain Company consultant in Toronto. He left PEP in 2005 to work in the US where he was involved in establishing the US private equity group for Babcock Brown. Haines rejoined PEP in 2008. PEP has not announced a first close but the firm is believed to have commitments of more than $1 billion for its fifth private equity fund. The firm announced it was raising the new fund in March 2013. PEP is believed to be seeking about $2 billion in core investment capital plus co-investment commitments of $1 billion to $1.5 billion. PEP IV, which closed in 2008, was the largest private equity fund raised in Australia to date with $2.7 billion in core investment capital plus $1.3 billion in co-investment commitments. Reaching the lower target for the new fund will maintain PEP’s position as the only Australian private equity firm with the capacity to make solo bids for businesses with enterprise values around $1 billion. NEW FUNDS FUNDRAISING Wind farm trust targets 10.5 per cent return Impact Investment Group (IIG), an impact investment fund manager and co-investor, is raising $3.08 million for a trust that will partly fund a wind farm at under construction near Ballarat, Victoria. Development of the three-turbine Chepstowe Wind Farm is expected to cost a total of $16.3 million. The wind farm is expected to generate enough power for 3,400 homes. Hydro Tasmania has agreed to a 10 year power purchase agreement for all the energy to be generated. IIG is owned by Small Giants, the family office of Daniel Almagor and Berry Liberman along with the fund’s chief executive Chris Lock. Most of IIG’s offer has already been taken up. The remainder is open to wholesale
  18. 18. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 18 INVESTMENT OPPORTUNITY ONLINE BUSINESS - GLOBAL APPLICATION Opportunity for tech-smart operator at minimal cost to run business for two years, expanding consumer base through social media and other marketing, view global license at end of term. Please respond by email: drkenmcd@gmail.com and sophisticated investors at minimum investments of $100,000. The IIG Wind Trust is forecast to deliver an annual blended internal rate of return (IRR) of 10.5 per cent net. The project is being developed by Future Energy which project managed development of Hepburn Wind, a community-owned wind farm which has been operating since 2011. INVESTEE NEWS CORRECTION: MEO Australia An item in the July issue of APEVCJ under the heading “ASX queries sudden price rise” described MEO Australia (ASX: MEO) as a “CHAMP Private Equity investee. MEO is not and has never been a CHAMP investee. The item confused MEO Australia with CHAMP investee Miclyn Express Offshore which was delisted from the ASX on 18 December. INFORMAL VENTURE CAPITAL US venture capitalist invests in Melbourne start-up Online self-publishing start-up Tablo has raised $400,000 in seed capital from Y Combinator partner Kevin Hale and former Catch Group chief executive Paul Reining. Y Combinator is a California-based seed stage venture fund manager. The tablo.com.au website enables writers to create stylish books chapter by chapter, opening up their work to readers as they write. Tablo founder Ash Davies said: “As a blogger I was so used to being able to type something and click a publish button. I wanted to change this and give emerging authors a place where they can easily create, share and connect with readers. Publishing a book with Tablo is as easy as publishing a blog and, when you finish writing, you’ll have an established readership.” Twenty-one-year-old Davies says the Melbourne-based Tablo service is already used by 10,000 authors in about 100 countries. Tablo was a 2013 graduate of Melbourne incubator Angel Cube. NEWS Online business makes acquisition Task outsourcing online business Airtasker has acquired similar Melbourne business Occasional Butler. Occasional Butler’s co-founders, Erz and Jodie Imam have joined the Sydney business as community development advisers. Airtasker co-founder and chief executive Tim Fung said Occasional Butler had gained traction in some of the company’s key task areas and had built a strong community in Melbourne across businesses and individuals. The acquisition of Occasional Butler for an undisclosed sum follows the acquisition of Taskbox in February. Airtasker claims about 130,000 community members across Australia and has plans to expand offshore. NEWS Chinese interest in dairying business After almost two years in an investment tender process, Australia’s oldest farming company, The Van Diemen’s Land Company, may be close to a sale. Renewed interest in the dairying sector is believed to have attracted new parties to express interest in acquiring the company which operates 25 dairy farms in north- west Tasmania. At least one Chinese investor is believed to be among the interested parties. The Van Diemen’s Land Company is 98 per cent owned by the New Plymouth District Council in New Zealand and represents a large part of the council’s investment portfolio. The council wants to divest the investment so it can diversify its portfolio. The council made the investment about six years ago. Although the investment is believed to have performed well in earlier years, The Van Diemen’s Land Company posted a loss last year. The company has, however, greatly increased production volumes in recent years. The Van Diemen’s Land Company has Tasmanian state government approval to increase the area of land it uses for dairying but federal environmental approval is also required and is yet to be granted. CONFERENCE ROUNDTABLES AVCAL alpha speakers confirmed Future Fund managing director David Neal and Hoyts chairman David Kirk, have been confirmed as speakers at this year’s AVCAL alpha conference. Other speakers will include former SAS soldier Ben Roberts-Smith, VC, and Paul Bassat of Square Peg Ventures and formerly SEEK.com. Roberts-Smith, who was awarded the Victoria Cross for his actions during a helicopter assault in Afghanistan, will talk on “Courage under fire”. Bassat will answer questions from moderator Ali Moore in a session entitled “SEEK and you will find”. Previously announced speakers include Dr Charles Dallara of Partners Group and AFL legend Kevin Sheedy, who will be interviewed by Moore on the subject: “Building a team from the ground up”. AV CAL alpha is to be held in Melbourne for the first time, September 3-4. For details visit: www.avcal.com.au/ events/event/avcalalphaconference2014
  19. 19. FEATURE Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 19 A s outlined in an earlier article (APEVCJ, Jun 14), data analysis supports the view that in Australia and New Zealand the mid-market offers by far the largest number of businesses suitable for private equity investment. But how do these potential targets stack up when filtered further for likely positive response? APEVCJ asked Bureau van Dijk (BvD)* to use its Orbis database to examine private companies and tease out potential candidates for succession capital investment. Refining our parameters increased the base sample of private companies with annual revenues of $10 million plus from 8,042 in the previous research to 11,580. We also changed the values from the $US used as standard in international Orbis databases to $A. The turnovers of most of these companies are estimates modelled through quantified peer and industry analysis as less than 1 per cent of Australia and New Zealand’s 11.3 million active private companies are required to report their annual financial performance to ASIC or the New Zealand Companies Office. The search criteria sought private companies with managers or directors aged 55 or older who were also majority shareholders. While these criteria will not specifically identify companies where succession is still to be determined they serve as a pointer to companies warranting further research. Using these criteria, the database identified a total of 1,041 companies. These were split into turnover bands of over $10 million to $50 million, over $50 million to $100 million, over $100 million to $500 million and more than $500 million. As would be expected, the first band included the largest number of companies – 788 – but the second band also included a substantial number – 178. Predictably, the number of companies turning over more than $500 million that appeared to be potential succession capital opportunities was small but seven were identified. Sorting the over $10 million to $50 million first band by the Orbis ‘Major Sectors’ index identified the largest number of businesses – 256 – as ‘Other services’. This category is made up of businesses which do not fit into Orbis categories and, significantly, includes all high technology-based businesses. Orbis data can be interrogated using ANZSIC codes and we tried this but as it produced more than 100 sub-industry classifications we reverted to the Major Sectors index to define categories for this article. A total of 52 businesses were not able to be classified as they had not nominated ANZSIC codes. Using the Major Sectors index, in that first band Other services was followed by Wholesale and retail trade, 191; Construction, 91; Machinery, equipment, furniture, recycling, 54; Primary sector, 27; and Chemicals, rubber, plastics, non-metallic products, 24. Wholesale and retail trade was also well represented in the larger turnover brackets but Construction, Primary sector and Chemicals, rubber, plastics, non-metallic products were each less prominent. Sorting the sample by incorporation date reflected the baby boomer bulge and indicated that many founders are now around retiring age (although, of course, it did not show which founders remained in control). This showed that 199 of the sample businesses were established prior DATA ANALYSIS POINTS TO SUCCESSION DEALS By Adrian Herbert DATA ANALYSIS CAN HELP IDENTIFY THE SUCCESSION CAPITAL OPPORTUNITES SOUGHT BY MANY PRIVATE EQUITY FIRMS. OUR TEST IDENTIFIED NUMEROUS POTENTIAL TARGETS.
  20. 20. FEATURE Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 20 to 1975, 1,474 were established in the period 1975-1999 and only 732 from 2000 to the present. (Remember the criteria were intentionally set to identify businesses owned by people now aged over 55 so this indicates only that this age group have been less active in establishing new businesses in recent years.) Going into more detail over that bulge period, 52 of the identified companies were incorporated from 1975 to 1979; 88 from 1980 to 1984; 150 from 1985 to 1989; 126 from 1990-1994 and 194 from 1995 to 1999. Sorting the target sample by operating revenue provided an interesting top 20. While the top half-dozen or so were well known businesses, or entities controlled by well known business people, the remainder were less familiar. Even after excluding business sectors that are generally avoided by private equity – such as motor dealerships and construction companies – a substantial number of interesting businesses remained. These included a couple of beef processing businesses and an aluminium window manufacturer, each of which turn over more than $300 million a year. Businesses turning over more than $100 million a year included a building components manufacturer, a primary produce transport and trading business, and a pie making company. Businesses with turnovers in excess of $70 million were in: primary products trading; audio visual and computer equipment retailing; health and beauty products manufacturing, distributing and retailing; chemicals distribution; contract filling of aerosol and liquid products, contract mining; DVD and CD replication and distribution, advertising, hardware retailing; building products wholesaling; hotel and night club operations; steel supplies; fruit and vegetable processing. Interestingly, these businesses are spread right across Australia and New Zealand rather than being concentrated in major cities. *BvD provides company information and business intelligence, particularly on private companies, across many markets internationally as well as Australia and New Zealand. Reference year : Last avail. yr Figures refer to : Number of companies Operating revenue (th AUD) Industry (BvD major sectors) From 10,001 to 50,000 From 50,001 to 100,000 From 100,001 to 500,000 More than 500,001 n.a. All 01. Primary sector 27 1 1 0 0 29 02. Food, beverages, tobacco 12 3 3 0 0 18 03. Textiles, wearing apparel, leather 7 3 2 0 0 12 04. Wood, cork, paper 2 0 0 0 0 2 05. Publishing, printing 7 1 1 0 0 9 06. Chemicals, rubber, plastics, non-metallic products 24 2 1 0 0 27 07. Metals metal products 16 1 0 0 0 17 08. Machinery, equipment, furniture, recycling 54 9 3 1 0 67 09. Gas, Water, Electricity 1 0 0 0 0 1 10. Construction 91 5 8 1 0 105 11. Wholesale retail trade 191 16 18 3 0 228 12. Hotels restaurants 6 1 0 0 0 7 13. Transport 15 1 7 0 0 23 14. Post telecommunications 2 0 2 0 0 4 15. Banks 12 2 0 0 0 14 16. Insurance companies 1 0 0 0 0 1 17. Other services 256 34 9 1 0 300 18. Public administration defence 1 0 0 0 0 1 19. Education, Health 11 94 0 0 0 105 n.a. 52 5 13 1 0 71 All 788 178 68 7 0 1,041
  21. 21. FEATURE Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 21 Figures refer to : Number of companies Date of incorporation Industry (BvD major sectors) From 1900 to 1949 From 1950 to 1974 From 1975 to 1979 From 1980 to 1984 From 1985 to 1989 From 1990 to 1994 From 1995 to 1999 From 2000 n.a. All 01. Primary sector 0 3 0 4 6 3 4 9 0 29 02. Food, beverages, tobacco 2 4 0 3 2 3 2 2 0 18 03. Textiles, wearing apparel, leather 0 2 2 2 2 2 3 0 0 13 04. Wood, cork, paper 0 0 0 0 1 1 0 0 0 2 05. Publishing, printing 0 0 0 0 4 1 3 1 0 9 06. Chemicals, rubber, plastics, non- metallic products 0 1 4 2 4 3 5 9 0 28 07. Metals metal products 0 4 0 1 4 0 6 2 0 17 08. Machinery, equipment, furniture, recycling 1 7 6 10 6 10 8 19 0 67 09. Gas, Water, Electricity 0 0 0 0 1 0 0 0 0 1 10. Construction 0 2 7 9 9 14 21 41 0 103 11. Wholesale retail trade 4 28 13 22 39 37 33 52 0 228 12. Hotels restaurants 0 1 0 0 2 1 2 1 0 7 13. Transport 1 5 4 1 4 0 8 2 0 25 14. Post telecommunications 0 0 0 0 0 0 1 3 0 4 15. Banks 0 0 0 0 2 1 3 8 0 14 16. Insurance companies 0 0 0 0 0 1 0 0 0 1 17. Other services 1 25 13 26 42 34 59 98 0 298 18. Public administration defence 0 0 0 0 0 0 1 0 0 1 19. Education, Health 0 2 2 1 13 9 25 51 0 103 n.a. 0 3 1 7 9 6 10 35 0 71 All 9 87 52 88 150 126 194 333 0 1,039
  22. 22. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 22 REARVIEW MIRROR 5 YEARS AGO... AUGUST 2009 Investors driving managers’ fees down The balance of power in private equity is swinging away from managers toward investors and forcing fees down. Key industry figures, including some fund managers, accept that the conventional private equity manager fee structure of a 2 per cent management fee and 20 per cent share of profits above a predetermined hurdle is no longer sustainable.  No managers have stated this publicly but some privately concede that the ground rules have changed for structuring new funds. Investors are adamant that they expect conventional fund structures to be revised in their favour. Recent research by UK-based alternative assets sector research company Preqin confirms that this is part of a global trend. Preqin found: • 43 per cent of investors recognised a shift toward limited partners (LPs) in the negotiation of terms and conditions • 90 per cent of placement agents were advising their clients to press for terms to be changed in favour of LPs • The mean management fee for buyout funds currently seeking investment had dropped by 20 basis points compared with the most recently closed funds • The mean management fee for the most recently closed venture funds had dropped by 15 basis points • Managers of the largest funds were cutting fees by the largest amounts • LPs were receiving larger shares in rebated transaction fees • More funds were including key man and “no-fault divorce” clauses in contracts. The results of the Preqin survey show clearly that investors are becoming increasingly concerned about terms and conditions. Placement agents are advising their investor clients to press for proposed fee structures to be altered in their favour and the private equity fund managers, general partners (GPs), are listening. Responses to the Preqin survey show that the newest funds – both recently launched and those that have been in the market for some time – are offering lower fees. Resulting from investor pressure, new funds are also more likely to include important governance statutes such as key-man and “no-fault divorce” clauses in contracts. Tim Friedman of Preqin said the findings of the survey made it clear that GPs should carefully consider how they structure new offerings in the light of changed expectations if they want to ensure they attract interest in the current market. Locally, managing director of placement agent Principle Advisory, Les Fallick, said power had already shifted decisively in favour of investors in Australia.  10 YEARS AGO... AUGUST 2004 Australia and NZ in sights for Asian fund-of-funds Hong Kong-based fund-of-funds manager Emerald Hill Capital Partners anticipates investing in Australian and New Zealand private equity funds in its recently closed Emerald Hill Capital Partners II, LP fund. The fund achieved its US$300 million target with strong backing from endowments, foundations, pension funds, insurance companies and family offices in the US and Europe. Emerald Hill now has more than US$500 million in assets under management. Emerald Hill managing director Eugene Choung said he expected the new fund to be invested in private equity funds with a bias toward emerging markets but Australia and New Zealand would also be prominent in the investment strategy. He said five or six Australia and New Zealand funds were on an investment shortlist. “We tend to favour smaller funds that focus on the small to middle market space and tend to favour teams with strong operating experience, who have a good track record of driving outsize returns through specific hands-on, value-add capabilities,” he added. Three partners in Emerald Hill worked for endowment bodies in the US before setting up Emerald Hill five years ago. About 70 per cent of commitments to date have come from this sector but the firm is seeking to widen its investor base. Mr Choung said he would be interested in opening dialogues with Australia and New Zealand limited partners in coming years and looked forward to familiarising them with Emerald Hill’s investment strategy. Prior to the establishment of Emerald Hill, Mr Choung was director of private equity for the University of Chicago Endowment. 20 YEARS AGO... AUGUST 1994 Fulcrum Capital seeking liquidity for investors Fulcrum Capital Corporation Ltd is considering ways to improve liquidity for its investors, including the possibility of winding up the company. Tim Downing, a director of Sphere Capital Advisers Ltd, Fulcrum Capital’s manager, said the issue of liquidity has been on the agenda for some time and all options have been considered. Fulcrum Capital is an unlisted public company. However, the possibility of a listing was not chosen due to the falling
  23. 23. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 23 REARVIEW MIRROR * To access all editions of Australian Private Equity Venture Capital Journal since July 1992, convert to our Archive Subscription. Short term – 30 day – Archive Subscriptions are also available. away of the stock market recently and the history of investment companies trading at below net asset backing. Mr Downing said the requirement for liquidity is based on the nature of Fulcrum’s shareholders with a mix of institutions, corporates and individuals. Fulcrum Capital has 35 shareholders including State Super with 29 per cent, Kanji Ltd with 14 per cent, ASC 7.5 per cent, and Malcolm Turnbull 5 per cent. Sphere Capital Advisers also has a holding. Mr Downing denied a July 21 report in The Australian that GPG Group held 22 per cent of the company. He said GPG had no shares in Fulcrum Capital. He also said that any change at Fulcrum Capital will not affect Fulcrum Two Management Buyout Trust. Progen Fulcrum Capital is involved in the float of Progen Industries in which it first invested 12 months ago. Progen is raising $30 million with the issue of 25 per cent of its capital. Following the issue Fulcrum will hold 5.01 per cent of the equity. Mr Downing said Fulcrum has confidence in Progen and will remain a shareholder.  Progen has the commercial rights to two anti-cancer drugs and the new capital will fund further development and clinical trials. Mr Downing said that there are enormous opportunities in this aspect of biotechnology. However, Progen also has a functioning cashflow business based on a facility in Brisbane which manufactures proteins and enzymes for sale to the international market, particularly the US. The facility is the only one of its type in Australia. Progen’s product is sold via a distribution arrangement with the multinational, Pearce Chemical, a part of Pearce Corporation. The largest shareholder in Progen is Mulgara Pty Ltd, which is partly owned by Jamison Equity Ltd. Sam Kaplan from Lang Corporation, Jamison’s manager, is on the Progen board. TNQ Fulcrum Capital has withdrawn its 21 per cent holding in Telecasters North Queensland (TNQ) from the market, despite announcing its availability only two months. Mr Downing said several serious expressions of interest were received, but it has now been decided that a sale is not in the best interest of shareholders. In part this is due to the recent fall in the stock market and the removal of previous blockages to the reconstruction of TNQ and the TEN Network, in which TNQ holds 40 per cent. Mr Downing said there are a number of options to remove TNQ’s breach of the Australian Broadcasting Act’s 75 per cent audience reach limit. TNQ currently has a reach of 78 per cent. The December 1994 float of the TEN Network has been postponed by one year. A reconstruction of the Network may involve a likely return of capital in some form.
  24. 24. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 24 COMING EVENTS 27 August NZVCA Technical Workshop – Inside the Private Equity Deal. Auckland. NZVCA. www.nzvca.co.nz 27 August Healthcare Forum Keynote speaker: Michael Walsh, Chief Executive eHealth NSW. Sydney. AIIA. www.aiia.com.au/events 29 August iAWARDS 2014 Gala Dinner. Melbourne. MCI Australia. www.iawards.com.au 2 September SydStart. Sydney. The Start Society. sydstart.com 3-4 September AVCAL alpha. Melbourne. AVCAL. www.avcal.com.au 8 September Accounting for Turnaround. CTPA Course through the University of Technology, Sydney. Sydney. Turnaround Management Association of Australia. www.turnaround.org.au/whats-on.php 17 September PE 101. Western Australia. AVCAL. www.avcal.com.au 17-19 September TMA 2014 National Conference Gala Dinner. Sydney. Turnaround Management Association of Australia. www.turnaround.org.au/whats-on.php 2 October PE 101. Queensland. AVCAL. www.avcal.com.au 16 October Growth Company Awards presentation. Sydney. Australian Growth Company Awards. www.sparke.com.au 23 October Tech23. Sydney. Slattery IT. www.slatteryit.com.au 23 October NZVCA Annual Private Equity Venture Capital Conference 2014. Queenstown. NZVCA www.nzvca.co.nz 30-31 October Web Directions 2014. Sydney. Web Directions. www.webdirections.org 4-5 DECEMber YOW! Conference (software developer event). Melbourne. Slattery IT. www.slatteryit.com.au 8-9 DECEMber YOW! Conference (software developer event). Brisbane. Slattery IT. www.slatteryit.com.au 11-12 DECEMber YOW! Conference (software developer event). Sydney. Slattery IT. www.slatteryit.com.au
  25. 25. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 25 SHARE CHART Last sale at end of month AUSTRALIAN LISTED PRIVATE EQUITY FUNDS/ INVESTMENT COMPANIES Investors/ Month Jul-14 Jun-14 May-14 Apr-14 Mar-14 Feb-14 Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 PRIVATE EQUITY VENTURE CAPITAL FUNDS/ INVESTORS A1 Investments Resources (ASX: AYI) 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.002 0.003 0.002 Acrux (ASX: ACR) 1.835 1.005 0.870 1.035 1.72 2.100 2.350 2.22 2.510 2.680 3.300 3.320 Arowana International Ltd (ASX: AWN) 0.915 0.902 0.900 0.890 0.785 0.600 0.450 0.48 0.540 0.480 Authorised Investment Fund (ASX: AIY) 0.028 0.025 0.020 0.026 0.026 0.029 0.029 0.026 0.026 0.033 0.040 0.036 Biotech Capital (ASX: BTC) 0.026 0.025 0.020 0.023 0.025 0.021 0.018 0.025 0.025 0.024 0.022 0.025 Billabong International (ASX: BBG) (Centrebridge Partners/ Oaktree Capital) 0.535 0.500 0.485 Blue Sky Alternatives Access Fund (ASX: BAF) 0.990 0.990 Blue Sky Alternative Investments (ASX: BLA) 2.91 2.950 2.500 2.340 2.400 2.090 2.190 1.610 1.930 1.450 1.390 1.550 BPH Energy Ltd (ASX: BPH) 0.009 0.008 0.009 0.008 0.010 0.012 0.011 0.013 0.013 0.013 0.013 0.015 Bravura (ASX: BVA) (Ironbridge Capital) delisted delisted delisted delisted delisted delisted delisted delisted delisted delisted 0.275 0.275 Burson Group (ASX: BAP) (Quadrant Private Equity) 2.24 2.120 1.940 Chandler Macleod (ASX: CMV) (Lazard Australia Private Equity) 0.330 0.330 0.335 0.415 0.415 0.410 0.415 0.425 0.505 0.475 0.455 0.510 ClearView Wealth (ASX: CVW) (Crescent Capital) 0.800 0.800 0.820 0.760 0.735 0.700 0.660 0.610 0.605 0.655 0.590 0.615 CoverMore Group (ASX: CVO) (Crescent Capital) 1.825 1.885 2.380 CVC Limited (ASX: CVC) 1.490 1.420 1.250 1.180 1.230 1.180 1.200 1.180 1.200 1.100 1.115 1.060 Dick Smith Holdings (ASX: DSH) (Anchorage Capital) 2.020 1.960 2.150 Disruptive Investment Group (ASX: DVI) 0.010 0.014 0.016 0.190 0.250 Energy Developments (ASX: ENE) (Pacific Equity Partners) 5.000 5.190 5.060 5.200 5.160 5.500 Grandbridge (ASX: GBA) 0.044 0.033 0.060 0.060 0.064 0.064 0.045 0.045 0.045 0.040 0.050 0.042 Greencross (ASX: GXL) (TPG) 10.400 9.240 Healthscope (ASX: HSO) (Carlyle Group/ TPG Capital) 2.260 Invigor Group (ASX: IVO) 0.100 0.035 0.040 0.040 0.053 0.020 0.040 0.020 0.020 0.025 0.030 0.032 iSonea (ASX: ISN) (Bioscience Managers/ Triton Inc) 0.210 0.235 0.180 0.180 0.210 0.280 0.320 Lion Selection Group (ASX: LSX) 0.350 0.300 0.400 0.455 0.050 0.510 0.530 0.525 0.530 0.550 0.590 0.535 Mantra Group (ASX: MTR) (CVC Asia- Pacific UBS) 1.960 1.800 Monash IVF Group (ASX: MVF) (Ironbridge Capital) 1.745 1.765 NSX Limited (ASX: NSX) 0.100 0.100 0.115 0.170 0.170 0.170 0.110 0.140 0.150 0.135 0.150 0.110 Oceania Capital Partners (ASX: OCP) 1.500 1.370 1.450 1.460 1.500 1.500 1.600 1.600 1.590 1.600 1.600 1.600 Continued ➤
  26. 26. Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 26 SHARE CHART Pioneer Credit (ASX: PNC) (Banksia Capital) 1.560 1.580 QRX Pharma (ASX: QRX) (Uniseed) 0.750 0.080 0.095 0.094 0.770 0.860 Q Technology Group (ASX: QTG) (Helmsman Capital) 0.031 0.028 0.021 0.015 0.020 0.017 0.020 0.021 0.018 0.020 0.020 0.012 Spotless Group (ASX: SPO) (Pacific Equity Partners) 1.850 1.650 1.820 Techniche Limited (ASX: TCN) 0.088 0.770 0.064 0.650 0.070 0.094 0.070 0.670 0.069 0.081 0.070 0.046 Transpacific Industries (ASX: TPI) (Warburg Pincus, exited 2 Nov 2013) exited exited exited exited exited exited exited exited exited 1.145 0.980 0.960 Veda Group (ASX: VED) (Pacific Equity Partners) 2.100 1.980 2.270 Xero (ASX: XRO) (Valar Ventures/ Matrix Capital) 23.270 24.110 30.000 28.980 36.88 37.360 38.050 29.620 30.900 24.120 16.860 13.850 FUNDS OF FUNDS IPE Limited (ASX: IPE) 0.445 0.495 0.480 0.460 0.465 0.440 0.440 0.435 0.440 0.460 0.440 0.42

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