Inflexion plc trebles net asset value

09 February 2004

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Inflexion Private Equity has announced that Inflexion Plc, its listed investment company intends to acquire a portfolio from London Merchant Securities (LMS), the property and venture capital group. The transaction will result in a significant increase in the companyâ€™s net asset value from approximately Â£13.4m to approximately Â£45.8m. In addition to the acquisition LMS has injected Â£21m capital with other existing institutional shareholders also being invited to participate in a larger capital increase.

LMS will invest a substantial part of its UK-quoted portfolio, worth Â£12m, into Inflexion in exchange for newly issued shares. The Â£21m funding comprises an open offer of up to Â£10m of which LMS has subscribed for Â£6m with other investors also participating, and a deferred cash raising to which LMS has committed to subscribe a further Â£15m. In total as the cornerstone investor LMS has contributed Â£33m to funds under management. Inflexion will use its expanded capital base to increase its commitment to its Private Equity Fund 2 to at least Â£20m from Â£7.5m. Fund 2, which focuses on buy-outs of mid-sized profitable businesses operating in growth markets, achieved a first close of EUR 50m in July 2003. Fund 2 concluded its first acquisition in July 2003, buying the multiplex cinema assets of Ster Century for Â£22m. The fund currently has 2-3 transactions at an advanced stage. Following the deal Inflexion will not be looking at larger transactions, but will have the flexibility to do top end deals without syndication.

Inflexion will endeavor to exit its new portfolio of minority holdings acquired from LMS over the next 18 months to two years. The disposal of assets from the portfolio includes stakes in frequently traded stock such as Whittard of Chelsea, a coffee and tea merchant, and Bloomsbury Publishing. Larger investments in the portfolio include Crown Sports, a health club chain and DMATEK, an electric monitoring firm. There is an arrangement in place with LMS which allows Inflexion to sell any of these assets back at 80% of original cost at any time to the end of March 2005 LMS, a member of the FTSE 250, is a leading property and venture and development capital company with assets valued at over Â£1bn. LMS has a 30 year history of private equity and venture investment, including long term relationships with a number of third party managers LMS directors Robert Rayne and Martin Pexton will join the Board of Inflexion plc as additional non-executive directors.

Philip Secrett of Grant Thornton advised the Company on the transaction, Cazenove will be appointed as broker to Inflexion following the deal. Bruce Hanton and Piers Warburton of Ashurst offered legal advice to the company. Tim Oldridge of Taylor Wessing advised LMS. Two LMS board members, Robert Paynes, chief executive and Martin Pexton, director of corporate development will be appointed as non-executive directors of the Inflexion board.

Contact:Simon TurnerTel: +44 (0) 207 4879888