BlueGem enters FIG sector with fourth deal

The UK- and Italy-focused Merrill Lynch spin-out will pay £17m for a 40% stake in Panmure Gordon, a 133-year-old mid-cap stockbroker and investment bank.

BlueGem Capital Partners has struck its fourth deal from its €205 million debut fund, with an agreement to inject £17.3 million in struggling investment bank Panmure Gordon.

The London-based investment bank and stockbroker, which dates to 1876, said the private placement would substantially strengthen a balance sheet that has suffered from lower stock market volumes and price drops as well as reduced investment banking revenue. It has been employing numerous cost-cutting measures including reducing global staff by 18 percent, reducing UK costs by 10 percent and decreasing costs at US affiliate ThinkEquity by 18 percent.

Following the BlueGem deal, Panmure said it will have regulatory assets of more than £40 million, equivalent to more than three times its required regulatory capital.

BlueGem, founded in late 2006 by former Merrill Lynch Global Private Equity managing director Marco Capello, is purchasing 72 million new ordinary shares in Panmure at a price of 24 pence per share. The deal is subject to shareholder and regulatory approvals and will give BlueGem a 40.3 percent stake in Panmure.

Capello will also gain a board seat, as will BlueGem partner Emilio Di Spiezio Sardo, who was formerly a hedge fund manager at York Capital Management and investment banker at Merrill Lynch.

BlueGem closed its debut fund with €205 million in commitments in 2007. The firm typically targets UK and Italian companies with enterprise values ranging from €50 million to €300 million.

Panmure represents its first financial services deal – a sector increasingly targeted by private equity firms looking to capitalise on market dislocation. The firm’s other portfolio companies are energy company Olicar; The Private Clinic Group, which runs two UK cosmetic surgery centres; and Fintyre, Italy’s largest replacement tyres wholesale distributor.