Cell Internet Commerce Development Acquired
NewMedia SPARK PLC
6 March 2000
NewMedia SPARK plc ('SPARK') announces the
£85 million acquisition of Cell Internet Commerce
Development AB ('Cell ICD') and a Placing of 38,416,600 new
Ordinary Shares in SPARK
to raise approximately £50 million
KEY HIGHLIGHTS
Acquisition of Cell ICD
- Scandinavias premier Internet and Technology Incubator
- Consideration of £84.7 million : through cash & shares
- 8 incubatee companies in the Cell ICD
Reasons for Acquisition
- Combined company = opportunities to build premier
European Internet and technology investment and
incubation company
£50 million raising via 38,416,600 New Ordinary Shares
- monies raised to fund
- cash payable to Vendors
- continued investment activity of enlarged Group
- Peel Hunt brokers to the issue
Commenting on the announcement, Michael Whitaker, CEO of
SPARK said:
'The acquisition of Cell ICD represents a major step towards
our goal of building Europe's pre-eminent Internet
investment company. We believe that the enlarged Group
will have the strongest Internet investment management team
of any company in Europe. The enlarged Group will also own a
portfolio of some 26 Internet investments, of which six will
be majority owned subsidiaries, and we believe that the
value of this portfolio is potentially very substantial.'
For further information, please contact:
Tom Teichman
Michael Whitaker
Jakob Kinde
NewMedia SPARK plc +20 7851 7600
Lisa Baderoon / Tim Anderson
Buchanan Communications +20 7466 5000
Per Lundberg +46 8 545 035 00
Pdr-Jvrgan Pdrson
Cell ICD +46 8 566 15900
The Board of SPARK announces that it has entered into
agreements to acquire the entire issued and to be issued
share capital of Cell ICD, Scandinavias premier e-commerce
and Internet Incubator, for an aggregate consideration of
£84.7 million to be met by the issue of up to 42,291,490 new
Ordinary Shares to the Vendors and up to £29.6 million in
cash.
In addition the Board announces that it has raised a further
£50 million via a placing of 38,461,600 new Ordinary Shares
by Peel Hunt plc with institutional and other investors.
The proceeds of the placing will be used to fund the cash
payable under the agreements and to fund the continued
investment activity of the enlarged group.
Application has been made for the admission of 55,194,867
new Ordinary Shares in SPARK to trade on AIM. This
represents the initial consideration shares payable to the
Vendors and the shares issued pursuant to the placing.
Trading in the new Ordinary Schemes is expected to commence
on Thursday 9th March 2000.
In addition to Cell ICD's personnel, organisational
infrastructure and goodwill SPARK has also acquired Cell
ICDs portfolio of eight incubatee companies, six of which
are majority owned. The value of the net assets which are
the subject of the transaction is shown in Cell ICD's books
at cost of £3.73 million. SPARK believes that the value of
the acquired portfolio is very substantially in excess of
this, and this figure reflects the balance sheet position of
the incubatee companies rather than their current market
value.
Cell ICD was set up in early 1997 as a joint venture by a
group of entrepreneurs including Christer Sturmark and
Joakim Borgsved, the leading Stockholm based Internet
Investment partnership Ledstiernan Partners, represented by
Jan Carlzon, and IT-Provider represented by Johan Hernmarck.
Cell ICD has two operating subsidiaries, Cell Ventures AB
('Cell Ventures') and eTV, further details of which are set
out below.
Cell Ventures pioneered the e-commerce incubation concept in
Scandinavia when the idea was initiated in 1996 and
implemented in early 1997. Since then, Cell Ventures has
built a track-record of successful investments in Europes
most advanced e-commerce market together with a substantial
current portfolio which makes it a unique player on the
European market. Cell Ventures rapidly built up a portfolio
of e-commerce start-ups during 1997 and 1998. In August
1999, GE Capital Equity became a minority shareholder.
To date the Cell Group has completed 4 exits including the
sale of Cell Network to the listed company Linni Group in
August 1999. The other ventures that have been sold as a
whole or in parts are the auction site Bid2day.com,
Everyshop and AdressDirekt. Further details of Cells
current portfolio are set out below.
Cell Ventures is an 83% owned subsidiary of Cell ICD. SPARK
intends to extend an offer to the minority shareholders of
Cell Ventures to purchase the remaining 17% of the issued
share capital of Cell Ventures on substantially the same
terms as the agreement with the shareholders of Cell ICD.
Reasons and rationale for the Acquisition
The Board believes that the acquisition has significant
advantages to both parties, and believes that the combined
company has the opportunity to build Europe's premier quoted
Internet and technology investment and incubation company.
The Boards of both companies share the view that the next
few years will be a period of enormous opportunity for new
business formation and wealth creation in the European
Internet and digital media markets. Key drivers of this will
be:
- The progressive achievement of critical mass Internet
penetration throughout Europe, and its spread from PCs into
broader mass market appliances such as mobile phones, PDA's
and TV.
- Rapid improvements in broadband and wireless
infrastructures.
- Profound changes in the underlying software
architecture of the web enabling much richer functionality.
- Associated with the above, rapid improvements in
Internet enabling software such as intelligent agents and
voice/visual interface agents
- Very substantial capital flows seeking to enter the
sector - Internet companies currently represent less than 3%
of UK and Continental stock markets by value, compared with
almost 50% on NASDAQ.
- The progressive dis-intermediation of off-line
businesses, starting with businesses easily brought on-line
such as financial instrument information and transaction,
information provision and entertainment delivery,
progressively moving deeper into traditional off-line
business functions such as dis-intermediating key elements
of the traditional manufacturing value chain.
- The difficulties faced by many conventional off-line
businesses in reacting quickly enough to the opportunities
in the New Economy due to legacy infrastructure and cultural
problems.
- A high rate of new business formation and
entrepreneurial activity due to perceived capital
accumulation opportunities, the breakdown of traditional
employment structures and a move towards a knowledge based
(as opposed to a capital based) economy.
However in order to take advantage of these opportunities
and to remain a leading participant in this arena SPARK
needs to grow and widen its resources at a rapid pace.
Specifically, the Board believes that SPARK needs to:
- Maintain access to capital markets for funding and a
strong institutional and private client shareholder base.
- Maintain high visibility in both the Internet industry
and the wider financial markets. The market is becoming
highly competitive and SPARK must continue to attract the
best deals, access to capital on competitive terms, and the
best professional staff and partners.
- Establish operations throughout continental Europe.
- Deepen contacts in the US, building on the current Cell
Ventures Boston office.
- Further strengthen SPARK's forward looking technology
skills
Key strategic goals for the combined group include:
- The establishment of local offices, for the combined
operation, in key European centres and in North America led
by Cell ICD personnel. These offices will be based around
Cell Ventures existing incubation model, but following
their establishment SPARK will assist in adding portfolio
investment and corporate finance capabilities to those
offices.
- The establishment of a UK incubation business on the
Cell Ventures model, and extension of the Cell principles to
some of the existing SPARK investments in the UK.
The Board firmly believes that together SPARK and Cell
Ventures can achieve the above goals more effectively and
quickly than either could alone. The Board also believes
that the two organisations have highly complementary
cultures.
Board appointments and management of the enlarged group
Following completion of the acquisition two representatives
of the former Cell ICD shareholders will be appointed as non-
executive directors to the Board of SPARK.
The enlarged group will also institute an executive
Management Committee to direct day-to day operations of the
group within broad guidelines set by the Board.
Membership of this committee will initially comprise: Tom
Teichman (Chairman), Michael Whitaker (Chief Executive),
Andrew Carruthers (Chief Operating Officer), Pdr-Jvrgen
Pdrson (Head of International Development), Joakim Borgsved,
Peter Lindgren, Richard Compton-Burnett, Jakob Kinde and
Joel Plasco.
The Current Cell ICD Portfolio
Dx3 - 60% owned
Dx3 is Europe's leading B2B platform for the aggregation and
delivery via digital streaming of music, video and games to
consumer facing e-tailers, portals and on-line communities.
Dx3 enables content owners (artists, record companies, game
manufacturers etc.) to distribute their content (i.e. music,
games, video etc) in a variety of digital formats through
Dx3s network of affiliates (e-tailers, portals, communities
etc.). The Dx3 distribution platform offers secure
transactions and manages royalty payments to rights owners.
Dx3 is technology neutral (using the technical
platform/solution that suits its partners best), i.e.
Microsoft Windows Media Technology, Liquid Audio and other
platforms. In January 2000 Microsoft selected Dx3 as its
preferred European partner for this service.
An agreement has been signed between Dx3 and Amplified.com,
the largest digital music distributor, forming the leading
global network of digital music distribution.
eTV - 96% owned
eTV is Scandinavias first licensed digital television
station offering interactive services, and the second such
interactive TV business in Europe to be licensed (the first
being Open in the UK). It commenced broadcasting in early
February 2000 and aims to offer viewers an exciting and
broad range of interactive services that will serve as
content compliments to traditional television stations and
as destination points for transactional services. It will
also ally with other traditional channels and offer them an
interactive platform to develop transaction revenue from
their own programming.
The business model is to attract viewers/users with a menu
of interactive services, generate revenue from transaction
revenues, sponsorship income, and mini-pay subscription
fees. eTV will focus on key value added activities such as
channel branding, content aggregation, and database
management.
eTV aims to secure distribution on as many digital platforms
as possible. The company will use its license on the
digital terrestrial platform in Sweden as a technology
showcase and base for expansion. Using this Swedish base,
eTV will be offered to any operator in Europe and the US
that is seeking interactive digital content and transaction
services.
Cart Provider Group (CPG) - 57% owned
CPG is a provider of a range of solutions for businesses
that wish to engage in e-commerce. The ambition is to
continue to build the product offering and to be a leading
Application Service Provider enabling shared services for e-
commerce. Currently, the group consists of the two
subsidiaries: GoCart and ePay.
GoCarts offering is a modularised Internet store including
store management and supplementary services such as
integration with logistics, payment solutions, etc.
Euroflorist and SvD are among the companys clients.
Revenues consist of an installation cost, rent and a
commission on transactions in the Internet stores.
ePay has developed a platform which, through a single
contract and technical installation, give e-tailers access
to secure payments, logistics services, customer service,
loyalty programmes and administration. ePays payment
solution currently utilises the secure environment of the
customers own Internet bank and includes card payments and
other services. Revenues are commission based.
Devphiles - 90% owned
Devphiles is an e-learning company focused on competence
development for web developers. The company's main business
is currently in education, both classroom and computer
based, being the leading portal for web developers in
Sweden.
Other services being developed within Devphiles are:
- Devphiles Network is a community (www.devphiles.net)
and its objective is to create the leading on-line meeting
place for developers in Europe. The community will generate
revenues from a variety of offers such as books, seminars,
software and information.
- Devphiles Conference. Devphiles Conference is working
together with its strategic partner Wrox Press in
Birmingham, England to arrange a variety of conference
events relevant to Devphiles' core audience.
Devphiles plans to open offices in the UK, France and
Germany within the next 6 months.
Pricerunner.com - 41% owned
Pricerunner.com is Sweden's leading Comparison Shopping
Site. Pricerunner.com provides the consumer with all
relevant information before a purchase of a product. The
information consists of price and product comparisons,
buying guides, discussion forums, product tests etc.
Information from all relevant major retailers is collected
both online and offline, which is crucial for the success of
such a service in Europe until e-commerce becomes more
widely established. Initially Pricerunner.com has focused on
capital goods and information-rich products such as home
electronics, home appliances, computers, telephony products
and books. As Pricerunner evolves, new product categories
will be added, e.g. sports products, food & beverage
baskets, CDs and various kinds of services. In addition to
the conventional Internet, Pricerunner is already available
on WAP telephones. Pricerunner.com is now preparing an
extensive European expansion during the next 6 months.
Bid2Day - 38% owned
Bid2Day is Swedens leading on-line auction site. Bid2Day
offers both new consumer products as well as a market place
for second hand products. Bid2Day is in the process of
expanding its operations into the other Nordic countries,
namely Denmark, Norway and Finland.
To meet growing demands in performance and functionality,
Bid2Day is currently in the process of moving to its third
generation of software. The new software dramatically
increases both functionality and the number of simultaneous
users that can be accommodated.
In August 1999 Bid2Day became the auction partner of
Telenordia, Sweden's third largest telecom company, and in
September 1999 Cell Ventures sold 51% of its equity in
Bid2Day to Scandinavia's leading ISP/Portal company,
Scandinavia Online. Scandinavia Online subsequently
increased its ownership by a further 10%.
Paletten - 97% owned
Paletten is Sweden4s largest Internet Department Store,
selling a wide range of articles. Currently, the Paletten
site offers approximately 3000 articles arranged in product
categories. The company plans very substantially to increase
the range of products offered, arranged according to
interest groups. These interest groups will be supplied with
innovative content delivered by vertical community sites,
providing a value added shopping experience. Paletten
currently operates in Sweden but is planning a rollout
across Northern Europe both in the current year and in 2001.
In September 1999 Paletten was awarded 'Sweden's Best
Internet Shopping Site' by IT-Affarer, and in December 1999
was appointed as Altavista's shopping.se partner. Paletten
has also created Sweden's largest affiliate program.
Steget - 64% owned
Steget AB is an Application Service Provider for start-ups
and small businesses. The companys operations have
previously been based on a successful CD-rom product, of
which in excess of 70,000 copies have been distributed,
containing information, advice and tools to assist
entrepreneurs in setting up and running small businesses.
The content and functionality in the CD-rom will be the
foundation for an interactive web-service whereby
entrepreneurs will be able to access the information, tools
and services they need to conduct their day-to-day
business. Stegets customer base of start-ups constitute an
interesting target group as they are generically investing
and establishing new customer and supplier relationships.
The current SPARK portfolio
In addition to the above investment portfolio that SPARK
will acquire with Cell ICD, SPARK already has its own
portfolio of minority investments in 18 Internet businesses.
SPARK's portfolio currently consists of:
Holding Business
Internet 'infrastructure' businesses
Digital Animations Group plc 13% Virtual
character
animation
Linkguard.com 17% Linkage
software/map
Purple Voice 11% Voice over IP
software
Watchmyprice.com 20% Micro Browser
/data
consolidator
Wireless
Wireless Commerce Ltd 15% Wireless
M-commerce
platform
Dataroam 19% Wireless ASP
B2B
Exxactly.com (formerly Bridge4u) 28% OffshoreIFA
services
Mergermarket 35% Services to M&A
professionals
Skillvest 5% Training purchasing
platform
Synaptics 9% UK/ European IFA
services
Travelstore 3% SMS travel platform
Content providers
Clipserver.com 11% News clipping content
Funplanet.com 12% Games content
Rainbow Network 7% Gay/Lesbian content
B2C Etailers
Crocus.co.uk 9% UK garden products
Firebox.co.uk 27% 18-35 mens lifestyle
products
Jetweb.se 30% Swedish youth air tickets
On-line gambling
2Bet 30% Java based on-line
gambling
In addition to the above one investment, easier!plc, has
been sold for a profit of £2.75m on an initial investment of
£0.5m.
Following the acquisition of Cell ICD, the enlarged Group
will continue aggressively to expand its portfolio of both
investee and incubatee companies. The Group will also
continue to devote substantial resources both to
accelerating the development of the businesses in which it
has an interest and to maximising their value, whether by
flotation, sale, merger or arranging further investment
rounds.
The enlarged Group also intends to place considerable
emphasis on further extending and strengthening its already
extensive working relationships with a wide network of other
venture capital firms, consultancy Groups, software and
service providers and other Internet Industry companies. The
Board firmly believes that in a knowledge based economy the
strength and breadth of the Group's relationships in these
areas will be a crucial determinant of success.
Commenting on the acquisition, Michael Whitaker, CEO of
SPARK, said:
'The acquisition of Cell ICD represents a major step towards
our goal of building Europe's pre-eminent Internet
investment company. Cell's management has extensive and
proven Internet business incubation skills, and the
company's Stockholm base gives it an exposure to leading
edge internet technologies and business models across a
range of delivery platforms - conventional Internet,
wireless and interactive TV. We believe that Cell's
incubation skills and strong position in Scandinavian
markets perfectly complement SPARK's strong position in the
UK Internet marketplace and our portfolio investment and
corporate finance skills.
'We believe that the enlarged Group will have the strongest
Internet investment management team of any company in
Europe. The enlarged Group will also own a portfolio of some
26 Internet investments, of which six will be majority owned
subsidiaries, and we believe that the value of this
portfolio is potentially very substantial.
'We look forward to working together with Cell's management
to roll out our combined operations across the rest of
Europe. The impact of new technologies is creating
unprecedented commercial and investment opportunities
throughout Europe, and our challenge is to build a pan-
European organization with the deep technological, financial
and personnel resources required to play a leading role in
these developments. '
Commenting on the acquisition, Per Lundberg, Chairman of
Cell ICD, said:
'Following a recent strategy review, we concluded that Cell
ICD should establish a partnership with a complementary
organization which could give the business increased
critical mass, help accelerate the rollout of the Cell ICD
business into the rest of Europe, and give the business
greater access to European capital markets expertise.
'After a review of potential partners we are very pleased to
have been able to agree a merger with NewMedia SPARK. We are
impressed by SPARK management's energy and vision, and by
the depth of their expertise both in the UK, the Internet
and wider financial markets. We are convinced that the
combined business will become a major force in the European
Internet market.'
Commenting on the acquisition, Pdr-Jvrgen Pdrson, CEO of
Cell Ventures, said:
'Cell Ventures has, over the past three years gathered a
unique experience in partnering with the best e-
entrepreneurs with truly unique business concepts in the New
Economy.
'By merging with SPARK, we will be able to more effectively
and more rapidly spread successful entrepreneurial start-ups
into the international marketplace. Moreover, the planned
expansion of our incubation model to other key markets than
our existing bases in Sweden, London and Boston, will be
implemented at an even higher pace thanks to the merger with
SPARK.'
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