Fusion IP has secured fully listed-IP Group as a partner to help finance future university spin-outs.
IP Group is taking a 19.8% stake in Fusion IP as part of a £3m net placing at 27p a share. Citigroup Capital Ventures has ended its co-investment agreement with Fusion IP and sold its 6.3% stake. Aim-quoted investment company Brookwell sold its stake at the same time. These shares were placed at 27p each. CCV still holds 3.675m warrants exercisable at between 150p and 220p a share - well above the current share price.
The deal will enable IP Group to take 20% of any new stake Fusion IP takes in a university spin-out. This will normally equate to a 12% stake in the spin-out company and it will cost IP Group £60,000. Fusion IP will retain 48% of the spin-out, there by not having to consolidate it as a subsidiary. The original inventors or developers of the technology receive the other 40% of the start-up.
IP Group has to invest in the seed funding round of these spin-outs on the same terms as Fusion IP. It will invest 20% of the amount that Fusion IP has undertaken to invest in the company if the investment is in excess of £200,000. Fusion IP is also keen to utilise IP Groupís expertise.
Fusion IP has exclusive rights to the commercialisation of research generated by The University of Sheffield and Cardiff University. Fusion IP initially focused on medical research but it has been widening the scope of technologies that it is commercialising. There are currently 20 spin-outs in the Fusion IP portfolio and it intends to add two or three new ones each year. The current portfolio has a relatively modest book value of £6.4m, including loans.
Fusion IP has a net asset value of £23.7m, including intangible assets of £15m, at the end of July 2009. There was £5m in the bank at the end of July 2009, which included cash in consolidated subsidiaries.
Management hopes to achieve one exit from an investment in the next year or so with additional exits coming in 2011-12. This will help finance more spin-outs.
At 33.5p a share, Fusion IP is valued at £14.1m.
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