Investment Advisory Agreement & Trading Update

RNS Number : 6729T

Gresham House PLC

21 July 2015

 

Gresham House plc (AIM: GHE)

21 July 2015

Award of Investment Advisory Agreement and Trading Update

·     Award of first Investment Advisory Agreement - Strategic Public Equity mandate

·     Significant Investment for Gresham House

·     Pre-close Trading Statement for six month period ended 30 June 2015

Gresham House plc ("Gresham House" or the "Company") today announces, alongside a pre-close trading statement, that it has been conditionally awarded its first investment advisory mandate for SPARK Ventures Plc (AIM: SPK "SPARK") to be led by its Strategic Public Equity ("SPE") investment team.    

The Company also intends to make a significant investment in SPARK to support the new investment mandate.   

·     Investment Advisory Agreement for SPE mandate

The new management team has been active in pursuing both organic and acquisition opportunities for developing the Company's specialist asset management business and is pleased to announce that it has conditionally secured its first investment advisory agreement with SPARK.

SPARK, the investor in early stage digital information and technology companies, has today announced that it is proposing, subject to shareholder approval, to change its investing policy to pursue a new SPE investment strategy in partnership with Gresham House. 

It is proposed that Gresham House Asset Management Ltd ("GHAM"), the Company's specialist asset management subsidiary, will be appointed investment adviser to Sapia Partners LLP who will act as investment manager to SPARK until GHAM receives regulatory approval from the Financial Conduct Authority, whereupon GHAM will become the investment manager to SPARK.

Under the Investment Management Agreement, GHAM will receive initially as adviser and then as manager (when regulatory approval is received), a fee of 0.125% per month of the net asset value of the SPARK portfolio. The initial portfolio value will be approximately £38.6 million. In addition, GHAM will be entitled to a performance fee of 15% of the increase in net asset value per share of SPARK over a 7% hurdle rate.

The assets will be managed within GHAM's SPE team, led by Graham Bird and Tony Dalwood, which targets superior long-term investment returns through applying private equity techniques to investing in public markets.

Gresham's appointment will replace SPARK's existing investment management relationship with SPARK Venture Management Holdings Ltd ("SVMH").  Tom Teichman, Chairman of SVMH will join the SPARK SPE investment committee.

·     Significant Investment

SPARK is undertaking a fund raising to increase its assets under management ("AUM") by a further £13.8m, alongside an open offer to shareholders.

In line with its New Investing Policy, as defined and set out in the Company's Admission Document dated 8 October 2014, Gresham House intends to make an investment of £5 million in SPARK and swap its entire 10.6% shareholding in SpaceandPeople plc for new shares in SPARK. The Company therefore intends to invest a total of £6.4m in SPARK and will hold approximately 19.4% of SPARK's resultant issued share capital, before the open offer entitlements. Following completion of this transaction, the New Investing Policy will continue to apply.

Certain SPARK shareholders have also agreed to inject a limited number of selective shareholdings into the enlarged SPARK, comprising shareholdings in companies which have characteristics that have historically generated strong returns, including potentially supporting management in shareholder value creating strategies.

In addition, the Gresham House management, SPE investment team and investment committee, including Michael Phillips, Tony Dalwood, Graham Bird, Rupert Robinson and Bruce Carnegie-Brown are personally participating in the placing.

The Gresham House SPE investment team has the ability to invest a limited amount in private equity.  Gresham House has agreed heads of terms with SVMH with the intention to acquire a majority stake in the business with a view to retaining access to SVMH's venture capital expertise. 

SPARK has received irrevocable undertakings or letters of support to vote in favour of the proposals at its forthcoming General Meeting representing 44% of SPARK's total voting rights.

·     Overview of SPARK

SPARK is an AIM-quoted investing company which, following completion of its fund raising, is expected to have an AUM of approximately £38.6m. SPARK's largest investment is its holding in IMImobile plc, valued at approximately £17.3m, with the remaining current assets being predominantly cash.

Anthony Dalwood, Chief Executive of Gresham House commented:

"Securing our first investment mandate is an important step for Gresham House as we deliver on our plans to develop as a specialist asset manager of differentiated and illiquid alternative investment strategies.  SPARK provides an ideal platform for us to execute our Strategic Public Equity investment strategy. The SPARK board is supportive of our plan to deploy the initial capital raised and staged approach to scaling the company.  The positive feedback from the narrow group of investors we have seen recently is extremely encouraging and we believe there will be strong interest from Family Offices and Private Wealth Managers in addition to institutions.   

"Gresham House employs a merchant banking ethos and intends to actively invest, alongside our clients, in funds where it has an investment mandate.  The Company's proposed investment in SPARK represents a significant commitment to the SPE strategy."

Graham Bird, Head of Strategic Investments at Gresham House plc added

"Once we commence the investment advisory agreement, we will advise and then manage the assets of SPARK in accordance with the SPE mandate that Tony Dalwood and I successfully developed at SVGIM - in essence applying private equity techniques and approach to investing in public markets.  SPARK is the first fund that our SPE investment team will manage and we will target superior returns by focusing on inefficient areas of the market, taking block stakes in smaller companies and constructively engaging to identify and support significant value creation catalysts. We will also aim to unlock value from SPARK's existing portfolio by accessing the £150m of unutilised capital and trading tax losses." 

Pre-close Trading Statement

·     Continued progress on existing assets

·     Healthy pipeline of opportunities

There has been considerable progress made in letting the available space at Southern Gateway and the building will shortly be effectively fully let with the consequential benefits to the group.

Planning permission has been granted by the local authority in respect of the land at Newton-le-Willows and the agreement with Persimmon Homes Limited is expected to complete next month.

Following a strong trading statement and award of preferred bidder status with Network Rail, the Company is pleased to note the improvement in the share price of SpaceandPeople Plc where the Company has a significant investment, which will be reflected in the results for the period.

The team continues to appraise acquisition opportunities and has a healthy pipeline of opportunities. 

Gresham House expects to announce its interim results on Wednesday 23 September 2015.

Enquiries:

Montfort Communications

Gay Collins / Rory King                                   07798 626282 / 0203 770 7906

Gresham House plc
Anthony (Tony) Dalwood                                020 3837 6270

Gresham House Asset Management

Graham Bird                                                   020 3757 5613

Westhouse Securities Ltd
Robert Finlay / Richard Johnson                    020 7601 6100

 

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