Private Equity News & Analysis

£5.2m takeover of Brainspark

The ailing internet incubator has agreed to a £5.2m cash offer from Al Software, the Italian software house.

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Brainspark, the internet incubator that was once valued at £164m, has agreed to a £5.2m takeover by Italian company Al Software.

According to a spokesperson for BrainSpark, quoted in today’s Financial Times, the deal was the best option available despite the firm’s estimated net cash reserves of £4.8m.

Brainspark floated in April 2000 at 125p a share, valuing it at around £150m. With a burn rate of nearly £200,000 a month, the company soon had to scale back its portfolio and reduce staff as the market lost interest in technology companies.

Late last year the company saw its founders Stewart Dodd and Noah Freedman resign from their roles as CEO and CTO respectively, suffered the breakdown of takeover talks with rival Durlacher, and had to close several portfolio companies, including EC1 Media and Gasworld. Investee companies Petspark and the Leisurehub businesses were sold for small amounts.

This led to a significant drop in the firm’s net asset value, which fell from £20.5m in December 2000 to £12.4m at 30 June 2001. Its share price at the end of last year was 4.5p compared with a high of 132.5p in 2000. In December, the firm proposed returning cash to shareholders unless a buyer could be found.

Today the company has investments in eight companies including Easyart, Kerb, Metapack and Smile-On. Following news of the deal, the firm’s shares rose 14 per cent on Monday to 4p.