Kelso Place makes 183x return from radio IPO(4)

Turnaround specialist Kelso Place’s initial public offering of radio business Sepura has generated a 183 times return multiple.

Kelso Place has partially exited Sepura with the sale of a 27.4 percent stake via an initial public offering for £42 million (€62 million; $85 million).

Based on the £225 million valuation of the stake as of 31 August, Kelso Place has achieved a 183 times return and a 225 percent IRR over five years. 

The turnaround specialist carried out the IPO last month, but could only reveal its return today following a ‘green shoe’ issuance, which raised an extra £5 million.

Sepura sells terrestrial trunked radio terminals, secure communications devices used by military, transportation and local government organisations.

Kelso Place bought Sepura in 2002 for a nominal £1 through a management buyout from The Simoco Group when it entered administration.

Sepura did not have a manufacturing partner when Kelso Place took over and there was uncertainty Sepura’s technology branded TETRA would become the standard. This made Sepura a risky investment, said Sion Kearsey, managing director of Kelso Place.

Kearsey believes the business will grow for the next ten years. “We only sold down 27.4 percent because management convinced us becoming a public company was a powerful thing to do.” Sepura’s main competitors Motorola and EADS are both listed companies. 

The two rival technologies TETRA and TETRAPOL have battled to become the dominant market force. EADS was the main provider of rival technology TETRAPOL, but made the decision to buy Nokia’s TETRA business in 2005.

According to Kearsey, TETRAPOL is now a ‘run off’ technology, in that countries with existing networks will continue to use it for the foreseeable future but new networks will be developed using TETRA. 

During Kelso Place’s ownership, Sepura’s client base has grown to more than 600 customers and it has sold more than 300,000 radio terminals globally. In the financial year to 31 March 2007, Sepura posted profits of £7.6 million on sales of £52 million.