LMS venture arm to spin off as Leo Capital

Publicly listed London Merchant Securities is to de-merge its venture capital arm, which will be renamed Leo Capital.

Publicly listed business and property investment firm London Merchant Securities (LMS) has announced that it will spin off and seek a public listing for its venture capital arm.
The new company, expected to start trading on the UK’s Alternative Investment Market by 12 June, will be named Leo Capital. LMS said it will continue to own its property division and will remain listed. The de-merger will be subject to a shareholder vote on May 17.
LMS said the different market focus, capital requirements and expected future growth characteristics of the property and venture capital divisions of LMS are better served as independent businesses.
The venture capital arm currently manages a £217.8 million (€315 million; $382 million) investment portfolio of quoted and unquoted businesses in the UK and US across a number of sectors, including applied technology, energy and industrial, healthcare and medical, media and leisure and financial services. It also has positions in 25 venture capital and private equity funds in the US and seven in the UK.
LMS said the venture capital portfolio has realised £678 million in cash over a 15-year period and generated an IRR of 10.9 percent.
LMS’ property division, currently valued at £1.076 billion, comprises a portfolio of office, retail and leisure investment properties in London, in areas such as Fitzrovia, Islington and Clerkenwell.
The demerger proposal involves shareholders receiving one LMS ordinary share and one Leo Capital share for every share they own.
Leo Capital will also receive £65 million in cash from LMS for the purpose of repurchasing up to £50 million of shares from current shareholders who wish to sell their shares, subject to a tender offer.
Jonathan Agnew, current chairman of Nationwide Building Society and former managing director of Morgan Stanley and group CEO of Kleinwort Benson, will be chairman of Leo Capital. Robert Rayne, current CEO of LMS, will temporarily act as CEO of Leo Capital until a permanent appointment is made, after which he will become a non-executive director of the new firm.
Leo Capital will operate out of offices in London and San Francisco.
NM Rothschild & Sons and JP Morgan Cazenove advised both LMS and Leo Capital on the de-merger.