£181M price tag set for Imperial Innovations float

The technology-transfer unit of Imperial College London, continuing preparations for its stock-market debut on 31 July, said it has completed a £25 million private placement and set a public share price that would value the business at £181 million.

The tech-transfer unit, Imperial Innovations Group plc, is planning an initial public offering and a listing on London’s Alternative Investment Market.  It is the first time a university has launched its broad technology portfolio directly on the stock market – and as such has become a focus of international interest among educators and technology investors.

Imperial Innovations said in a statement to the stock exchange on 20 July that it has raised £25 million from an institutional placing of 6,849,315 shares, conditional upon successful completion of the public flotation 31 July. It also plans to sell 410,958 shares for £1.5 million to the pubic, based on a price of 365 pence per share. The total number of shares in issue will be 49,663,878.

At that price, the company is valued at £181 million. And the university’s post-flotation stake of 59.1 per cent, 29,346,339 ordinary shares, would be worth more than £100 million. The public share price set, of 365 pence, is the same as for the private placement. It said the public offer will close at 11am on 27 July, with trading in the company's ordinary shares expected to commence at 8:00am on 31 July.

Separately, on July 17, the university said it also raised £50 million in a bond sale to help fund its academic mission, as well as providing capital for new student facilities and other estate projects.

Radical departure

Imperial Innovation’s IPO has been a few years in the making – and is a radical departure from the way most universities around the world handle the business of selling their discoveries to industry and investors. The aims include tapping a new source of capital, boosting return on its portfolio of discoveries, and giving the whole process of tech-transfer at the university a major boost.

But it's also a controversial move in the academic world. Critics say it pushes the commercialisation of science one step too far, compromising academic freedom. It commits the fruits of much future research at Imperial, up to 2020, to the new company and its investors.

“Companies like Innovations are required to facilitate the creation and addition of value professionally," said Susan Searle, Chief Executive Officer of Imperial Innovations, in an interview. "The knock-on effect to the general public is to help make available the benefits the technologies will bring and also to contribute to the UK economy as has been widely discussed of late in the press. Traditionally the UK has lagged the US in making the most of university research for all concerned and now companies like Innovations are helping it catch up fast."

Analysts greeted the news with interest – but noted it will have competition for investor attention.

“Imperial Innovations is (at) one of the best research universities in the country,” commented Alex Jarvis, an analyst at securities firm KBC Peel Hunt. For investors, the potential appeal of an Imperial Innovations investment is getting a piece of a world-class university’s technology portfolio – but there are also other, competing tech-transfer companies on the public market, following different strategies. Among the largest is IP Group PLC, which licenses technology from several British universities rather than just one. IP Group, Jarvis said, “is working very well but it has a broader reach with a number of universities; so it’s difficult to know what kind of value investors will attribute to a single university (Imperial Innovations).”

Pioneering models

Imperial Innovations is one of a new class of tech-transfer models being pioneered in Britain’s high-quality, but cash-starved academic world.  Others include Biofusion plc, a publicly listed company that commercializes life-science discoveries at the University of Sheffield, Amphion Innovations, Medical Marketing International Group and IP Group, formerly known as IP2IPO. IP Group sells technology from seven long-term partners: King's College London, the chemistry department of Oxford University, and the universities of York, Leeds, Bristol, Surrey and Southampton. As of 13 June 2006, 42 spin-out companies had been created among the group's university partners.

Preparations for the Imperial Innovations flotation intensified in June 2005, when the university placed shares privately in the tech-transfer unit with seven institutional investors. The transaction netted the university £10 million for research and other expenses, and the transfer office a further £10 million to re-invest in new spin-offs. Besides the university with a 71.19 per cent stake, other major investors include Norstan Nominees Ltd. with 10 per cent, Barclays Capital Nominees (No 3) Ltd. with 5 per cent, FF&P IC 2002 LLP(1) with 3.25 per cent, and Gordon House Investor LLP(1) with 1.36 per cent, according to the regulatory filing.

Imperial Innovations has generated revenues in excess of £30 million from spin-outs and licenses since 1997. The company has established equity holdings in 58 spin-out companies and completed over 100 commercial agreements.

The company currently holds shares in three spin-out companies now quoted on AIM; fuel cell company Ceres Power plc; ParOS plc, a provider of energy-saving advanced control solutions; and Nanoscience plc, a developer of low power integrated circuits and silicon chips, following its acquisition of spin-out company Toumaz Technology.

JPMorgan Cazenove is the advisor and the broker of the share sale

Separately, Imperial College London said it completed the sale of £50 million in 50-year term bonds, according to a press statement.  The university's total borrowing facilities now amount to £173 million, after financings arranged in 2003 and 2005. The college has so far drawn down £123 million of this total funding, the statement said.  The Royal Bank of Scotland acted as sole agent for the private placement, it added.

The university, which has more than 11,000 full-time students from 2004 to 2005, is ranked third in Europe and 23rd in the world, according to the 2005 ranking of world universities by Shanghai’s Jaio Tong University.