Bowmark Capital has sold its 20% stake in RDF Media when the company floated on the AIM market of the London Stock Exchange.
RDF, an independent UK television production company, is the maker of reality TV shows such as Wife Swap and Faking It, as well as shows like Scrapheap Challenge. The company listed with a share price of 144 pence, giving it a market valuation of £48.8m, in the middle of its indicative price range of £46m to £52m. Since the IPO, the company has performed solidly, never dropping below its issue price and on May 20, the share price closed at 150 pence per share.
The float of 57% of RDF raised £28m; £9.9m of which went to Bowmark, which represents a 3.3x return and an IRR of 34%. Bowmark, through Bowmark Fund II, first invested in RDF in April 2001, when it pumped in £3.16m. Prior to the IPO, approximately 60% of the company was owned by management, and the balance owned by two business angels, Neil Record and Les Halping, who helped fund the business when it formed in 1993.
The decision to go public was made by Bowmark, with management, in November 2004. Kevin Grassby, managing director of Bowmark, said an IPO was always the favoured exit route: “A float gave management what they were seeking, which was access to further capital, liquidity, and the ability to retain control of the business.”
RDF was financed by business angels at inception and its growth was self-financed until 2001. The company has recorded uninterrupted turnover growth since its foundation and increased operating profit from £0.7m in 2002 to £4.1m in 2005. In the year to January 2005, RDF made pre-tax profits of £4.2m on turnover of £48.2m, and pre-tax margins have grown from 3% in 2003 to 8.5% in the last financial year.
With the money raised, RDF will fund its expansion plans, both in the UK and internationally. These include building regional production units around the UK, such as in Bristol, Glasgow and Manchester, as well as buying up other UK independent media companies and libraries from US cable channels.
The IPO of RDF came two months after a fellow independent producer listed on AIM. Shed Productions, which makes Footballers’ Wives, floated 51% of its shares in March, listing at 88 pence per share, and is currently hovering around the 102.5 pence mark, down from 115 pence shortly after floating.
The media sector has long been attractive to the private equity industry, and private equity buy-side transactions now account for 29% of the number of European media deals during 2004, and 45% by value.
Bowmark’s interest in RDF came before the implementation of the 2003 Communications Act, which, as well as lifting restrictions on foreign ownership of UK TV and radio broadcasting companies, also meant production companies could retain more of their programming rights. The firm admits that RDF’s performance and prospects have been improved as a result.
Bowmark is not the only private equity firm to have shown an interest in independent production companies. In 2002 LDC invested in Mersey Television, and, in 2003 Bridgepoint invested in Chrysalis TV (now All3media), Kleinwort Capital bought into Hat-Trick and Beringea invested in Zenith.