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(Sharecast News) - Regionally-focussed Mercia Asset Management announced the sale of the Native Antigen Company (NAC) on Thursday, to life sciences tools company LGC, for total cash of up to £18m.
The AIM-traded firm held a 29.4% fully-diluted direct holding in NAC, and would receive initial cash proceeds of £4.8m, with up to a further £0.4m receivable on finalisation of customary closing working capital calculations.
Based on the total expected amount receivable of £5.2m, the total realised return above the £2.7m holding value as at 30 September would be a further £2.5m, Mercia noted.
Of that , £0.6m would be included as a fair value increase in its results for the year ended 31 March, which the board said would be announced on 14 July.
The remaining balance of £1.9m would be recognised as a realised gain in its interim results for the six months to 30 September.
Mercia said the sale was expected to generate an 8.4x return on its original direct investment cost, and a 65% internal rate of return.
It first invested in NAC in 2011 through its third-party managed funds, which as at 31 March held an additional combined 20.9% stake, and subsequently - from its own balance sheet as a direct investment - in December 2014.
In addition to the direct investment returns, the sale would generate a 12.1x return on a blended third-party managed funds investment cost, and a 31% funds internal rate of return.
Mercia said it had "proactively supported" NAC since its first day of trading, including representation from its chief operating officer Peter Dines, as a non-executive director on the NAC board through to exit.
Founded in 2010, as a divestiture from a University of Birmingham spinout company, NAC supplies infectious disease reagents, with Mercia describing it as a "primary source" of reagents for the study of emerging diseases.
"Keeping to our commitment of realising balance sheet investments within a three to seven year period from initial investment, NAC is the fourth full cash exit from our direct investment portfolio," said chief executive officer Dr Mark Payton.
"It has been an excellent investment for Mercia and this sale is a strong demonstration of the value which our differentiated model can create; for investors in our managed funds, shareholders in Mercia and the founders we back.
"NAC is an example of an innovative regional business sourced through Mercia's network, supported initially by our managed fund capital and then scaled using our own balance sheet capital."
Dr Payton said Mercia played a "critical role" in helping the UK's "most exciting" regional businesses scale, adding that Mercia was both a major capital provider to NAC, as well as "a critical partner" in helping the business achieve its potential.
"I look forward to watching as they continue to go from strength to strength with their new owner."
At 0853 BST, shares in Mercia Asset Management were down 0.65% at 19p.
31 Mar 2015 08:32