As part of an ongoing process in strengthening its balance sheet through acquisitions, early stage technology investment group, NewMedia Spark has entered into an agreement to acquire GlobalNet financial.com, the international financial portal. It is hoped the proposed merger will help solve GlobalNet’s cash problems, as well as improving Spark’s net asset value with access to a new portfolio of investments, which include a five per cent stake in NewMedia SPARK.
“It is a logical acquisition,” says Bruno Delacave, chief financial officer of the group. “This is a great opportunity to acquire a number of assets including businesses which we believe will be very valuable.” If the deal goes ahead, NewMedia SPARK looks set to benefit from assets in excess of $75 million, and for NewMedia SPARK this will result in the group’s net asset value increasing by approximately 5 pence per share.
GlobalNet has been unable to reposition its financial information portal business since the burst of the dot.com bubble last year and although it shows cash on its balance sheet, the company has reached a point, says Delacave, where it will soon have insufficient cash to
meet its liabilities.
GlobalNet announced around the time of its annual results in April, its intention to streamline
its operating business of financial websites and concentrate on maximising the value of its underlying portfolio of investments, bringing its business model closer to Spark’s own business of early stage, technology investment.
While GlobalNet’s underlying portfolio of assets is potentially of value, the directors of NewMedia SPARK believe GlobalNet currently lacks the balance sheet strength and resources to fully realise this value. GlobalNet’s best option would be to use its remaining resources to affect an orderly wind down and disposal of its remaining media businesses. With the backing of NewMedia SPARK’s financial and organisational resources, it is hoped that this will be rapidly achieved.
GlobalNet’s portfolio assets include a 24 per cent shareholding in the online financial services company, EO; a 30 per cent stake in Synaptic Systems Limited, provider of financial services product data and a holding of 5.3 per cent outstanding ordinary shares in NewMedia SPARK.
What NewMedia SPARK is trying to do by assuming these assets, says Delacave, is continue the development of its core knowledge and assets. He adds: “There is no cash in the deal at the moment, but what we are looking at is building stakes in valuable businesses and improving our net asset value.”
Preliminary results for the year ended 31 March saw NewMedia SPARK’s net asset value plunge some 45 per cent. However, NewMedia SPARK continues to strengthen its portfolio and the GlobalNet merger is part of an ongoing acquisition strategy that started last September with the acquisition of technology corporate finance house, NewMedia Investors, followed on in November when the group scooped up early stage investor, Internet Indirect.