Inflexion, the AIM-listed mid market private equity investor, has bought an investment portfolio from London Merchant Securities for £12m, which will be met by the issue of new ordinary shares in Inflexion. As part of the deal London Merchant Securities takes 53.7% ownership of Inflexion and Robert Rayne and Martin Pexton will join Inflexion’s board as non-executive directors.
Although the cost of the acquisition is to be met by issuing new Inflexion shares, Inflexion will also seek to raise a minimum of £21m through an open offer and deferred cash raising. London Merchant Securities will subscribe to £6m of the total £10m available under the open offer. London Merchant Securities has also agreed to commit £15m to the deferred cash raising.
The transaction means Inflexion’s net asset value has moved from around £13.4m to £45.8m. The fund raising through which London Merchant Securities has committed a combined £21m, will allow Inflexion to place a minimum of £20m in its first institutional limited partnership fund, which announced its first closing at £50m in the summer of 2003. The total target for the limited partnership fund is £100m.
This means Inflexion will follow structures similar to the Candover and Graphite Capital managed investment trusts whereby the investment trusts commit significant capital to the independent limited partnership fund raisings carried out by these firms. Simon Turner, co-founder of Inflexion, says: “We are still listed on AIM as an investment company, although we might move to the main list [of the London Stock Exchange] as an investment company.”
Inflexion has known London Merchant Securities for some time and the group has committed to the limited partnership fund Inflexion is raising, as part of the first closing. The reason £6m is paid by London Merchant Securities upfront and £15m is on a deferred basis is simply to allow Inflexion to take the money when it is needed for investment.