Iqgeo Share Discussion Threads

[simon gordon] 23/5/2024 17:03

p1nk,

Nowt to lose by phoning Max and getting his perspective and sharing yours. At least you'll have a better idea of what Kestrel are thinking and you can say your piece. Could be cathartic and insightful.

[p1nkfish] 23/5/2024 16:31

Makes no difference SG, it's done unless there are enough voting against or a much better offer arrives to sway heads.

Credit to KKR, they are some of the smartest people in the room, they can see the potential and "get it".

A raise by IQG would have temporarily dented the net worth of a few individuals whereas a change of ownership, whilst maintaining their jobs, is a very useful liquidity event to them.

The incentives are understandable.
The outcome a done deal.
That doesn't mean I can't whinge if I want to.

[simon gordon] 23/5/2024 15:29

P1nk,

Might be worth phoning Kestrel and speaking to the non-exec Max Royde. When I was in KBC I phoned Kestrel and spoke to Oliver Scott, who was a non-exec.

[p1nkfish] 23/5/2024 15:18

Please watch below.

An example, it's reckoned 75% of the US grid is over 1/2 over it's life expectancy and will need replacing in the next 15 years or so. Not only does the Grid need replacing it needs massive upgrades at the same time - or in any case - to allow fro more DER, EV, Data. The scale is mind-boggling.

Then - this is another example of just one Grid operator spending £60Bn in 5 years. Just National Grid alone. All this needs data collection at the edge, in the hands of the workforce in the field.

IQGEO was well placed before selling-out. Now that economic benefit is taken out of the hands of UK investors and transferred to PE in the US. IQGEO didn't even attempt to stand and grow in the UK market.



Were sweetners thrown in to get it past the BoD?
Anyone have any idea or thoughts on the matter?

The news drought was very strange and lack of any Grid news - coincidence?
They didn't even sell-out at the Cavendish target - it was below - after the stellar write-up.

[p1nkfish] 22/5/2024 16:27

Make if it what you will but not all of these are irrevocable and there's > 40% not included. Management may have to get out there to sell the deal to a few more before it's in the bag. TBD.

"Therefore, the total number of IQG Shares which are subject to either irrevocable undertakings or non-binding letters of intent in relation to IQG Shares is 35,548,984, representing approximately 57.52 per cent. of the issued ordinary share capital of IQG as at close of business on 17 May 2024 (being the last business day prior to the date of this announcement)."

[p1nkfish] 22/5/2024 14:59

Per the WSJ–

"A report last year by the American Society of Civil Engineers found that 70% of transmission and distribution lines are well into the second half of their expected 50-year lifespans. Utilities across the country are ramping up spending on line maintenance and upgrades. Still, the ASCE report anticipates that by 2029, the US will face a gap of about $200 billion in funding to strengthen the grid and meet renewable energy goals."

DER's.

[p1nkfish] 22/5/2024 03:52

Would expect the next set of results to be relatively downbeat to manage perception of the KKR offer relative to future prospects.

[w13ken] 21/5/2024 08:37

All good points pf. I'll repeat my earlier point: Would you consider leaving IQG money in the pot for conversion to TopCo shares? It's a bit of a shot in the dark and you'd have to sell the rest at nearer 470 than 480 but it would give a share of IQGeo's future success.

[p1nkfish] 21/5/2024 08:05

After much reading and talking to various, I agree with Threadneedle.

IQGEO would need more capital to grow but the opportunity is massive and all stakeholders should have been given an opportunity to support it. If there was no support then sell.

The door is wide open to solutions as sold to TEPCO, across the US. The lack of US Grid news I've banged a drum about, in my humble opinion, has a reason, a purposeful reason. Such news would have pushed the price up.

Just heard from someone in Houston (certainly not poor) concerning the hassle of re-establishing electricity after recent storms. The market is there, available. It needs IQGEO solutions.

KKR have gained a special asset and it's a steal. The price they have paid will return handsomely to them as it heads towards $1Bn valuation over the next 5 years.

This smells of the management and Kestrel wanting to take money off the table now and seeing a convenient way to do it quickly with the excuse of lack of liquidity and an unsupportive market. They could have issued more shares and when did they look for market support to prove it's unsupportive?

All is my own opinion only, dyor. This is a steal at 480p.

KKR need only set aside say £25m-£50M maximum to get this to the next level imho (abs max) and even Chapman himself said operational gearing will kick in and it's hardly in a none self sustaining position. The Cavendish forecasts (conservative) were from IQGEO's input.

It smells imho.

[red ninja] 19/5/2024 15:42

Investor's Champion podcast covers sad loss of IQGEO on aim plus it's probable much greater value a few years out.

[p1nkfish] 19/5/2024 07:58

Latest Cavendish note had £5 target and mentioned conservative/conservatively 59x.

[p1nkfish] 19/5/2024 07:50

I wonder who the institutional investor was that Sansom sold to in January?

Not at all impressed and even less so given a day or 2 before news release there was a post on here that with hindsight is suspicious, mentioning sale of the company???

Next will be H1 results that may look poor due to headcount increases and playing into the "what a good thing it is to sell now" narrative.

Add to that the long period with no news - very strange. Especially as Petti was so positive about planetary alignment.

All looks manipulative to me.

[simon gordon] 19/5/2024 06:58

Katie Potts has taken KKR's dosh. Earlier in the year she was bemoaning the lack of scale in the UK and that she was retreating from the UK.

Herald Investment Trust - Feb' '24

There is no doubt that the UK public market is in a more fragile state than during any previous downturn in living memory. The question is whether this is cyclical or whether the damage is more structural. The UK public market is currently a fairly difficult environment for entrepreneurs to raise capital and I am saddened by how much management teams have been diluted by fund raisings at distressed levels. I believe that value in our portfolio will be realised through takeovers but that the costs incurred by listed companies in the UK, with the recent added burden of ESG and auditing requirements, has become too high to attract new companies. Similarly, the costs for managing small investments have increased considerably, with additional ESG and regulatory costs. Unfortunately, active investment management does not scale, and it is conspicuous that larger players have withdrawn and funds have shrunk. There are now too few players in the UK to have an efficient market, and too few co-investors. It is a pity because public markets have provided long- term risk capital for the benefit of the wider economy, but the skillset is disappearing rapidly. It seems the UK will inevitably shrink as a percentage of the Company’s assets.

[simon gordon] 19/5/2024 06:51

Sunday Times - 18/5/24:

City giant Threadneedle clashes with KKR over tech company buyout

Columbia Threadneedle became aware of private equity firm’s swoop on Cambridge-based tech company only days before board backed takeover

Kohlberg Kravis Roberts earned its “barbarians at the gates” moniker for an aggressive pursuit of the American conglomerate RJR Nabisco in 1988. Thirty-six years later the Wall Street private equity firm continues to live up to its reputation after a row erupted at one of the City’s best known asset managers over a Cambridge-based tech company.

Columbia Threadneedle has accused KKR of “ram raiding” the London stock market after it pulled off a £316 million swoop for AIM-quoted IQGeo. Threadneedle, which is IQGeo’s second-biggest shareholder with a 13 per cent stake, is opposing KKR’s takeover bid.

IQGeo has developed software that allows utilitiy companies to track their networks using satellite imagery. It enables broadband companies to create a digital map of their cabling infrastructure, for instance. Previously, the majority of the records were in paper form.

“Although the financial metrics of KKR’s offer are very high, we do not believe it fully realises the long-term growth potential of IQGeo,” said James Thorne, UK equities fund manager at Columbia Threadneedle.

Threadneedle is aggrieved because it became aware of a months-long sales process, overseen by the Takeover Panel, only days before the IQGeo board announced the recommended takeover by KKR.

The company’s largest shareholder, Kestrel Partners, which owns 27 per cent of the company, was aware of the auction by virtue of having representation on the IQGeo board. Kestrel did, however, recuse itself from the sales process.

KKR is taking the unusual approach of financing the entire takeover itself, rather than bringing in lenders to provide bridging loans to fund the deal.

Private equity firms typically seek bridging loans to fund public to private takeovers. Lenders prefer to provide the loans on the basis that the private equity firm will execute the acquisition through what is known as a scheme of arrangement.

A scheme of arrangement requires 75 per cent approval from the target company’s shareholders, but allows the deal to be completed quickly so that the bridging loans are refinanced and then secured against the target company’s assets.

If the private equity firm cannot get 75 per cent approval, then it may switch the mechanics of the transaction to a takeover, which requires a simple majority. But completing the deal typically takes several months longer, leaving the lenders with outstanding bridging loans that are not secured against company assets.

As a result, financing a takeover as opposed to a scheme of arrangement is more expensive in terms of fees and interest costs.

It is the second time in short order that KKR has employed such a strategy. The firm prevailed in a £1.3 billion deal for Smart Metering Systems, another London-listed company, earlier this year despite opposition from its Glaswegian founders.

KKR’s decision to fund the deal in full negates such risks as it means financing is in place for either eventuality. It also means that the threat of opposition from dissenting shareholders, which could block the sale through a scheme of arrangement if representing more than 25 per cent, is mitigated unless more than 50 per cent of investors oppose the deal.

In the case of IQGeo, it means Threadneedle is powerless to stand in the way of KKR’s takeover of the business. Four of the company’s five largest shareholders — Kestrel, Charles Stanley, Herald Investment Management and Canaccord — are backing the takeover. Threadneedle first invested in IQGeo in 2010, when it floated.

Last week Jeremy Hunt, the chancellor, insisted that the UK can create a $1 trillion home-grown tech giant to rival Microsoft or Google.

Reflecting on the chancellor’s remarks, Thorne said: “We’ve been early-stage investors in UK tech for over 10 years, providing clients exposure to leading companies and producing strong long-term returns. IQGeo is a great example of the kind of company we look to invest in.

He continued: “KKR has seen the same potential in the company we did. IQGeo is now well-funded, generating significant revenue and profit growth with the potential to become many multiples of its current size.”

A spokesman for IQGeo said: “The board believes that the 480p a share offer from KKR, which crystalises a 11 times return over the last five years, represents highly attractive value for shareholders.

“In addition, KKR will provide support, expertise and significant investment to enable the company to move onto its next phase of development. The board is pleased that the transaction has already received written support from nearly 60 per cent of our shareholders.”

KKR declined to comment.

[p1nkfish] 17/5/2024 09:25

Thank you, all the best everyone.

[horseyphil] 17/5/2024 08:51

I would echo W17Ken's comments about the amazing contribution that pf has made to this board over the years.

There's no way of knowing whether IQGeo management ever looked at this board, but if they did I'm sure that the insights and information you provided will have had an impact on their thinking and strategies. Your early suggestion on the merits of acquiring Comsof, which I think we would all agree was transformational, was brilliant.

This is not the way many of us would have wanted this to end, and it feels premature and something of a missed opportunity, albeit a profitable one.

IQGeo has been one of my best ever investments, though I was heavily underwater from my original buys in the old Ubisense back in 2013. I averaged down and then back up. Without this board I'm not sure I would have had the conviction to build up that stake and then hold it, even as the price rose substantially.

So, thank you very much pf, and I wish you every success with your other current and future holdings. Same goes to other contributors, including Red Ninja and W17Ken.

[p1nkfish] 17/5/2024 07:46

Incentives matter and management have substantial options and probably want to take money off the table + Kestrel. We are pawns. Who can they unload to without trashing the price and becoming pray to an acquisition at a lower price?

As for liquidity - I'm convinced it was illiquid on purpose so that's not much of an excuse.

Good luck but not much can be done.
I hold a very decent amount and would be prepared to hold for another 3-5-10 but that means nothing vs BoD + Kestrel + other holders combined.

Management may also receive some sweetners once KKR own it.

Know the incentive, predict the outcome.

[wjccghcc] 17/5/2024 06:54

Yes, thank you pinkfish.

This is one of my largest holdings with my first purchase at 105p. I am half minded to vote against as my % is not insignificant and I think this should be way higher in 5 years. However, I do understand their argument that profits are likely to plateau/decline over the next couple of years as they step up investment so the share price would probably go nowhere for a while.

[wjccghcc] 17/5/2024 06:54

Duplicate.

[w13ken] 16/5/2024 22:05

You've unquestionably been the most valuable and conscientious poster on IQGeo matters pf so many thanks for your contributions here over the years. It's not quite the full story that we hoped for but it's still been an excellent result for long-term holders. I hope to cross paths with you again on other forums.

I don't suppose many, if any, would bother to leave IQG money in the pot for conversion to TopCo shares with their lack of liquidity and uncertainty so it's time to move on, with or without the wait for 480p. I'll share info on the rest of my portfolio soon and I'd be interested to hear more on ideas from others who were smart enough to be IQGeo investors.

[horseyphil] 16/5/2024 12:59

When KKR acquired Smart Metering Systems (SMS), the bid was announced on 7 December 2023. The offer was declared unconditional and shareholders received payment on 22 March 2024.

[alphabeta4] 16/5/2024 12:32

Thanks, handy to have an idea.

[w13ken] 16/5/2024 10:44

Not yet but judging by previous takeovers we can expect it to be a bit more than 2 months.