Molten Ventures makes offer for rival VC firm Forward Partners / Image source: Adobe
  • Molten Ventures bids for Forward Partners
  • Both firms technology-focused
  • Offer comes at a small discount

Continuing the trend towards consolidation in the asset management sector, venture-capital investor Molten Ventures (GROW) announced it had reached an agreement to buy rival Forward Partners (FWD) at a small discount to its current share price.

Shares in Molten Ventures eased 0.6% to 278p while Forward Ventures dropped 6% to 31.5p reflecting the discounted level of the offer.

WHY DO A DEAL NOW?

Given both firms invest in fast-growing, early-stage technology businesses, there is a strategic and financial rationale to putting the two companies together.

In terms of timing, over the last 12 to 18 months the venture-capital market as a whole has faced stiff headwinds in terms of higher interest rates, which have made investors more cautious and made it more difficult for managers to raise funds, make new investments and exit existing ones.

According to the Molten board, ‘there are a number of high-quality assets in Forward Partners’ portfolio with the necessary characteristics to continue to outpace market growth rates and become strategically valuable market leaders in attractive niches with the potential to enter Molten's Core Portfolio in the medium-term, including companies with specialisms in applied AI.’

Moreover, the top 15 stocks in Forward Partners’ portfolio racked up an average of 133% revenue growth in the first half of 2023, and over two thirds of them have a ‘cash runway’ of at least 18 months, are expected to reach break-even without further fundraising, or are already profitable.

HOW WILL THE DEAL WORK?

Molten Ventures is offering one new share for every nine shares in Forward Partners, which at last Friday’s closing prices valued the smaller firm at £41.1 million or 31.1p per share, a discount of 7.3% to its last price of 33.5p but a 6.6% premium to the volume-weighted average price of the last six months.

Alongside the offer, Molten Ventures is raising £50 million from investors at a price of 270p per share, a discount of 3.4% to Friday’s close.

The firm says that while its existing balance sheet strength reflects strong capital allocation discipline, it ‘provides limited ability to make new and follow-on investments’.

The Molten Ventures board believes now is ‘an opportune time to raise further equity to increase the company's available cash resources in order to position itself to capture exceptional secondary and primary investment opportunities as well as make complimentary acquisitions as the valuation environment stabilises’.

In a sign of confidence, US investment giant BlackRock, the largest shareholder in Forward Partners, has agreed to underwrite the fundraise by subscribing for up to £25 million worth of shares in the placing.

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Issue Date: 27 Nov 2023