Wednesday, 7 January 2009

Innovation Group - an update

(By Richard Holway) Yesterday I brought you news that Geoff Squire had stepped down as Chairman at The Innovation Group (TiG). I also quoted from the Guardian report that “Squire is understood to have been instrumental in slamming the door in the face of bidders who are believed to have included private equity houses Carlyle, Silver Lake Partners and HG Capital and his departure appears connected with his refusal to do a deal."

After some further investigation, I’m now pretty sure that the Guardian got it wrong. Squire had been pretty unhappy with TIG’s treatment as a listed UK company for some time and had been looking at various ways to take it private. This indeed was his favoured option at the anticipated price of 15-20p. But HG Capital came up with a plan to buy 29% of the equity, inject some £30m and provide shareholders the option to sell at a price in the 15-20p range. TiG would have remained as a public quoted company. The TiG board were supportive of this move and, although Geoff preferred the ‘take private route’ he backed the HG plan too.

However, a trawl of TiG’s institutional investors found no backing for that plan. Clearly it couldn’t proceed without their support. The Board had no choice but to reject both approaches. The institutional investors wanted to remove Geoff and put in their own candidate – Paul Coleman (previously Ch at Systems Union)

All this led to Squire’s departure and David Thorpe being appointed as interim Chairman. A correct process will be run to appoint a new Chairman of which Coleman will be a possible candidate amongst others.

Anthony Miller has written many times on HotViews of his misgivings about both the TiG model and its execution. I think there would be few who would now disagree that TiG got a lot of things wrong (not least its relationship with analysts and the City in general) and now needs to do much if it is to unlock shareholder value. A bit like an alcoholic, recognising you have a problem is the first big step towards its solution. I feel that TiG has now at long last reached that stage of contrition.

As I wrote on Dec 17th, I thought then that Innovation should ‘Take the money”. I am still firmly of that opinion. If the HG Capital deal is still on the table, I would urge the institutional investors to reconsider it in the interests of all shareholders.

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