Ingot Capital Management, the Sydney-based fund manager that backed the 2003 rescue of ERG Limited, has emerged as a major shareholder in another troubled Perth technology company, Intellect Holdings.
Ingot Capital Management, the Sydney-based fund manager that backed the 2003 rescue of ERG Limited, has emerged as a major shareholder in another troubled Perth technology company, Intellect Holdings.
The deal has an interesting twist, with a firm jointly run by former ERG chief Peter Fogarty involved as corporate adviser.
Ingot has emerged with a 19.9 per cent stake in Intellect and has put one of its representatives, Warren McLeland, on the board of the Technology Park company, which is in the final stages of a major restructuring.
Last week, Intellect gained court approval in Belgium for a debt-for-equity swap with its creditors.
The company said the court approval would enable it to complete its overall restructuring, which has included a ‘back to basics’ strategy review, the sale of its Tafmo services business, an $18 million rights issue and a $7.5 million convertible note issue.
The restructuring was put together by Pendulum Capital, a corporate advisory firm run by former DJ Carmichael director Max Fowles and Mr Fogarty.
Intellect has also announced sweeping changes to its board of directors, which leave it in search of a new chairman and a new chief executive.
Executive chairman Jos Haag is planning to retire from the board in May and non-executive director Graham Henderson, who was formerly general manager of Intellect’s Australian operations, is also retiring from the board.
Dr Haag said Pieter Marx, who is based at Intellect’s corporate head-quarters in Brussels, will be responsible for day-to-day management.
Mr Fowles said the company was currently assessing the role of chief executive, including whether the position should be based in Brussels or Perth.
Intellect was founded in Perth and has an R&D team here, and last week announced that its registered office will transfer from Melbourne to Perth.
Mr Fowles said it was logical to have the registered office in the same city as the R&D office, and this would also make it easier to service the company’s shareholders in Western Australia.
The latest changes at Intellect continue the parallels with the corporate history of ERG.
Both companies have been promoted as potential world beaters in their respective technology fields but in practice have battled to deliver.
Intellect develops electronic payment systems and manufactures a range of point-of-sale devices, generating sales of $13.3 million in the half-year to December 2004.
ERG’s focus is ‘multi-application’ smart card systems, including automated fare collection systems.
Duncan Saville’s Ingot Capital Management holds about 26 per cent of ERG, after backing a major balance sheet restructuring in 2003.
Despite the financial bail-out, an extensive operational review and an increase in half-year operating revenue to $118 million, ERG’s share price is currently near 10-year lows of 26 cents per share.
Intellect shares, currently trading at three cents, are also near all-time lows.
Mr Fowles said both ERG and Intellect fitted Ingot’s focus on infrastructure investments.
Ingot acquired 248 million Intellect shares (equal to 19.9 per cent) after participating in its rights issue, pitched at 2.5 cents per share.
It also holds 5.6 million convertible notes (convertible into 179 million shares) and 44.8 million options (exercisable at four cents per share), which were issued to repay an emergency loan.
The new non-executive directors of Intellect are banker Warren McLeland, who is a director of Stocks Convertible plc, part of the Ingot funds management group, and Paul Phillips, who has wide IT experience.
