Starving Strathmore strips bare

By ELLEN READ

Unable to raise funds, a listed technology venture capital company headed by the chairman of the New Zealand Venture Capital Association is slashing its investments and cutting back on staff.

Strathmore Group is shedding its executive management team and all investments bar one - Kachingo! inventor Global Online.

Executive chairman Phil Norman, who also chairs the venture capital association, told the company's annual meeting yesterday that the board felt that was the best way to maximise shareholder value.

As a start, Strathmore last week reduced its holding in CommSoft to 8.9 per cent from 13.5 per cent. Other investments to be sold included those in software developers Inspar and Soft Tech.

Mr Norman steps down at the end of March and fellow directors Don Cowie, chief financial officer Peter Saunders and Chris Due will also leave during the next few months.

Director Simon Clatworthy will remain with the company and on the board representing the interests of major shareholders Custodian Nominee Company and Genstar Investments - controlled by John Sorenson and Cullen Investments respectively.

"The objective is for Strathmore to become an investment company which only holds positions in Global Online Group companies," Mr Norman said. It would operate with a minimal overhead structure and be strongly supported by Custodian and Genstar. Global technology sector woes had affected venture capital firms, meaning most of Strathmore's portfolio companies had struggled to realise their potential, Mr Norman said.

That had made it virtually impossible for Strathmore to raise additional capital to provide the funding required by most to allow them to weather the turbulence.

"A number have, therefore, raised additional capital elsewhere, with the consequence that Strathmore's shareholdings have been diluted."

The Strathmore board had considered options including the possibility of merging with another listed venture capital company in New Zealand or abroad, restructuring as a fund manager, acquiring an IT business, seeking an NZSE listing, and return of capital to shareholders.

"After carefully considering all of these options, and given the difficulty in raising new capital," he said, "the board resolved that the best way to maximise value for all shareholders would be to focus activities around Global Online, our best performing and most promising investment, realising all other investments in an orderly fashion."

That would take place during the next year. Mr Norman would not be drawn on the amount likely to be raised but said the board would be disappointed if it did not realise the carrying value of the assets.

The decision on what to do with the money raised, which analysts suggest would only amount to a couple of million dollars, was one for the new board but he thought investing more in Global Online was a sensible option.

Strathmore will become a holding company for a 25 per cent stake in Global Online - inventors of retail reward system Kachingo!

Eric Watson's Cullen Investments holds about 28 per cent of Global Online, Mr Norman said.

The most recent valuation of the three Global companies was $70 million. Strathmore holds about 25 per cent in each of the companies.

Strathmore shares closed at 5c.