6 May 2008
THE financial software provider Bravura Solutions has announced plans for a management buy-out of the company in partnership with a private equity investor, Ironbridge Capital, in a deal worth $246 million.
The offer comes with a big catch, however. It hinges on Bravura's two senior executives retaining control of a 30.5 per cent stake in the company that may have been lost in the collapse of a margin lender, Lift Capital.Bravura's chief executive, Iain Dunstan, and its chief operating officer, Simon Woodfull, had margin lending accounts with Lift covering 30.5 per cent of Bravura's listed shares, which may already have been sold by Lift's financier, Merrill Lynch.Merrill gained control of shares worth $761 million from Lift to recover a $621 million loan and has now sold sufficient shares to cover its debt. Lift's administrator, Tony McGrath, of McGrathNicol, said the bank was expected to return "shares and cash to the value of $90 million to $100 million".The success of the Bravura deal depends on a number of things falling the way of Messrs Dunstan and Woodfull.First, their stock needs to be among the shares being returned to the administrator. He then (depending on legal advice) has to agree to sell back the stock to the two executives in return for the payment of the margin loan on their stock.The market appeared to take a dim view of the pair's chances of success yesterday, with Bravura's shares gaining just 2 cents to close at $1.48, 25 cents less than the price being offered by Ironbridge and Bravura's executives.Under the deal, Ironbridge will offer Bravura's shareholders, except for Messrs Dunstan and Woodfull, $1.73 cash a share. The two executives will "receive cash and shares in a special-purpose vehicle established by Ironbridge that will hold Bravura as a stand-alone investment", the companies said in a statement to the market.The Ironbridge scheme of arrangement also depends on court and shareholder approval, and Bravura generating "adjusted" earnings before interest, tax, depreciation and amortisation of at least $23.5 million for the 2008 financial year.Bravura's directors have unanimously supported the scheme in the absence of a better proposal and subject to an independent expert's report, despite the offer price being less than the shares' value at the start of the year.