25/10/2005 - 22:00

New equity investors an alternative to float

25/10/2005 - 22:00

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Pooled development fund euromicrocaps has joined AMP Capital Investors and the ANZ Bank’s private equity arm among the state’s active equity investors.

New equity investors an alternative to float

Pooled development fund euromicrocaps has joined AMP Capital Investors and the ANZ Bank’s private equity arm among the state’s active equity investors.

These institutions provide an alternative to a stock market float, which traditionally has been the main source of capital for growing companies.

The range of alternative investors will help to fill the gap left by Foundation Capital’s decision to wind down its role as a provider of ‘expansion capital’ to growing Western Australian companies.

Foundation has invested in some of WA’s best-known companies during the past decade, including boat builder Austal, sandalwood products manufacturer Mt Romance, and Kailis & France Foods.

No other institution has provided as much support to growing WA companies but AMP has been doing its best to fill the breach.

It has invested in three WA companies over the 18 months, with the biggest investment being in transport company Mitchell Corporation.

It has invested $16 million to help Mitchell continue its rapid expansion on the back of the resources boom.

AMP invested $11 million in industrial supplies business Heatley Sales earlier this year, giving it a 70 per cent shareholding.

Its most recent deal, announced last month, was the purchase of a majority stake in Welshpool company WA Forktrucks, which is planning to fold together several subsidiaries in WA and interstate under the brand United Equipment.

ANZ Bank’s private equity arm has completed two WA deals in the past year, including spending $6 million to acquire a 16 per cent shareholding in Ned Montarello’s ThinkSmart group.

ANZ joined Kerry Stokes’ Australian Capital Equity as a major backer of ThinkSmart.

ANZ also provided an innovative debt funding package to Malaga company Lazer Safe so that it could refinance an earlier equity investment by Foundation Capital.

Lazer Safe director Ian Costley said the debt funding was expensive but suited the fast-growing business, which specialises in worldwide sales of safety systems for metal manufacturing machines.

He said the debt was unsecured and meant existing shareholders would not have their equity stake diluted at a time of rapid growth.

Mr Costley said Lazer Safe’s annual sales were budgeted to grow by 50 per cent this year to $1.5 million but could double.

Euromicrocaps has invested in five WA companies after completing an initial $2.3 million capital raising in March.

“That first raising has enabled us to prime the group and get things under way,” managing director John Davidson said.

Its biggest move was a $750,000 investment in Solar Sales, a 20-year old solar energy company with annual sales of $14 million.

Mr Davidson said this industry sector had achieved annual growth of 30 per cent and the financial and management backing of EMC would help Solar Sales pursue growth opportunities.

EMC has also invested $650,000 in Questus Capital Group, which offers a range of financial planning and investment services.

On a much smaller scale was its $150,000 investment in Weedsafe, an early stage company that has developed a chemical-free weed management system.

Mr Davidson said EMC undertook a detailed review of each business before investing, and looked for opportunities where it could add value rather than just providing money.

For instance, EMC has been closely involved in the development of Weedsafe’s business plan, which includes a franchising model.

While euromicrocaps is the only pooled development fund currently active in WA, a second group, Growth Infinity, is looking to raise $5 million to pursue a similar investment strategy.

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