PMR.L Regulatory News (PMR)

2 Feb 2006 16:39

Panmure Gordon & Co. plc02 February 2006 Panmure Gordon & Co. plc Establishment of Panmure Capital, a Joint Venture with Bank of Scotland Further to the announcement of 13 January 2006, the Board is pleased to confirmthe terms on which Panmure Capital has been established. Introductory Panmure Gordon & Co. plc ("Panmure Gordon" or "the Company") and Bank ofScotland Corporate have established a new Joint Venture called Panmure Capital,a co-investment vehicle targeting late stage pre-IPO funding opportunities (the"Transaction"). Panmure Gordon and Bank of Scotland believe that there is currently a fundinggap for smaller companies who seek equity over a relatively short period priorto flotation on a public market. Panmure Capital will address this opportunity. Panmure Capital will initially have £30m of committed equity. Panmure Gordon andBank of Scotland will each commit up to £14.25m and the Managers (describedbelow) a further £1.5m. It is envisaged that the committed funds will be drawndown during a 3 year period. Structure of Panmure Capital The first general partner of Panmure Capital will be Panmure General PartnerLimited (the "General Partner"), a subsidiary of Panmure Gordon. The secondgeneral partner, manager and operator of the partnership will be Panmure CapitalPartners Limited ("PCPL"), a company whose shares are owned by Edward Forwoodand Richard Wyatt (the "Managers"). Richard Wyatt is executive chairman ofPanmure Gordon and will commit £1m to Panmure Capital. Edward Forwood is anexperienced private equity professional and was the founding chief executive ofKvault Software. He will commit £0.5m to Panmure Capital. The Company, Bank ofScotland and the Managers (together the "Investors") will have economicinterests respectively of 47.5%, 47.5% and 5% in Panmure Capital, reflectingtheir relative investments. PCPL is an FSA registered firm which is owned as to two thirds by Richard Wyattand as to one third by Edward Forwood. PCPL will be entitled to a priorityprofit share in the Fund of 2 per cent per annum of the total drawn downcommitments of the Investors net of any VAT or similar tax and reduced by theacquisition cost of investments which have been distributed in specie or whichhave been realised and the proceeds of which have been distributed to Investorsand the Managers (other than in respect of underwriting transactions andbridging investments) ("Priority Profit Share"). The Priority Profit Share willbe subject to a minimum payment of £100,000 in the first year of operation ofthe Fund which shall be offset against future entitlement. It is intended that the Fund will have a life of 5 years with a 3 yearinvestment period. The Fund is subject to customary termination provisionstogether with a right for the Company or Bank of Scotland to terminate the Fundafter 3 years or at any time by removing the General Partner for cause. Inaddition the Fund will terminate on the termination of the appointment of PCPL. Carried Interest After receiving their preferred return of 8% per annum and after accounting forthe Priority Profit Share, the Investors will share 80 per cent of the profitsgenerated by Panmure Capital in proportion to their economic interests. TheManagers and Panmure Gordon will also be entitled to a carried interest, whichequates to 20% of all profits generated above the preferred return of 8% perannum and after accounting for the Priority Profit Share. If the preferred return is achieved, the Managers and Panmure Gordon (throughtheir interest in the founder partner of Panmure Capital (the "FounderPartner")) will be entitled to a "catch up" of their carried interest, such thatthey would receive the first share of profit over and above the preferredreturn, to the extent of an amount which when aggregated with the preferredreturn, would give them 20% of such aggregration. This equates, therefore, to25% of the preferred return. Thereafter, the carried interest amounts to 20% ofprofits generated. Panmure Gordon and the Managers (through their interest inthe Founder Partner) will participate in the carried interest as to one thirdand two thirds respectively. As regards the latter, Richard Wyatt's share willbe two thirds. Carried interest is only payable when all outstanding partners' loans have beenrepaid (together, during the 3 year investment period, with an amount equivalentto undrawn loan commitments) plus 8% annualised on repaid loans. As loancommitments are still available to be drawn down within the 3 year investmentperiod it is possible that new investments can be made following the payment ofany carry which may result in overpayment and so the carried interest is subjectto a clawback mechanism whereby the Founder Partner is obliged to repay anyexcess to the Investors in the event of overpayment. Investment policy and relationship with Panmure Gordon The investment policy of Panmure Capital will be to invest in unlisted companieswhich the Manager considers to have a strong likelihood, within a maximum of twoyears of investment, of achieving a listing on AIM or another public market. Theinvestment objective of Panmure Capital is capital growth. The Fund will have an Advisory Committee consisting of representatives of Bankof Scotland and Panmure Gordon. PCPL will consult with the committee on generalpolicies and guidelines, prospective investment sectors and conflicts ofinterests. Decisions of the Advisory Committee will be taken by a majority voteof its members. Richard Wyatt, as Chairman of Panmure Gordon, will not participate in anydecisions involving the Group's investment in Panmure Capital, nor in anydecisions as to whether Panmure Gordon participates in floating any investeecompanies of Panmure Capital. Prior to investment by the Fund, Panmure Gordonwill not make any commitment to float investee companies. The Directors, excluding Richard Wyatt, having consulted with Hawkpoint PartnersLimited, consider that the terms of the Transaction are fair and reasonableinsofar as the Company's shareholders are concerned. For further information please contact: Panmure Gordon:Tim Linacre 020 7614 8300 Bell Pottinger Corporate & Financial:David Rydell / Nick Lambert / Chris Hamilton 020 7861 3232 Bank of Scotland Corporate:James MontgomerieOffice Phone 0131 243 7016Out of office number 0845 606 6696Mobile 07917 067485Email james_montgomerie@bankofscotland.co.uk Hawkpoint Partners Limited, which is authorised and regulated by the FinancialServices Authority in the United Kingdom, is acting exclusively for PanmureGordon in connection with the Transaction and no-one else and will not beresponsible to anyone other than Panmure Gordon for providing the protectionsafforded to clients of Hawkpoint Partners Limited nor for providing advice inrelation to the Transaction. Notes to Editors About Panmure Gordon * Panmure Gordon is a UK-focused corporate and institutional stockbroker which provides corporate finance advice, distributes and trades securities and publishes investment research on behalf of a wide range of clients * The firm is one of the oldest established stockbrokers in the City, having been founded in 1876 by Harry Panmure Gordon * The business merged with Durlacher Corporation Plc at the end of April 2005 and is focused on UK equities, ranging from FTSE 100 to fast growing AIM stocks * Panmure Gordon is quoted on AIM (PMR.L) * Panmure Gordon currently advises or is stockbroker to approximately 100 companies * Its institutional client base is served by a very experienced sales team and supported by in-depth research on more than 250 companies and 300 investment trusts * For more information on Panmure Gordon please visit http://www.panmure.com * For more information on Panmure Capital please visit http://www.panmurecapital.com Bank of Scotland Corporate, part of HBOS plc, has a reputation for excellence inthe provision of corporate finance, delivering innovative funding solutionsacross a range of markets. With experience across many areas of corporatefinance, including Joint Ventures, Integrated Finance, Structured Finance,Acquisition Finance, Infrastructure Finance and Housing Finance, Bank ofScotland can draw in an expert pool of professionals with proven track records.Bank of Scotland provides funding to more Management Buy-Outs than any otherbank in both the UK and Europe and is now recognised as the top arranger for PFI/PPP deals. Bank of Scotland Corporate employs over 8,300 employees. Totallending at the end of 2004 stood at £78.8 billion. This information is provided by RNS The company news service from the London Stock Exchange