FTSE 100: 7859.17 ▲ 80.38 (1.03%)
Neil Woodford has agreed to sell his stake in Gigaclear to Infracapital, as M&G's infrastructure investment arm launches a takeover bid for the rural broadband provider.
Infracapital has launched a bid at £4 per share, valuing the unquoted company at £270 million. It said Woodford Investment Management had agreed to sell its 25.4% stake in the company, held in the Woodford Equity Income fund and Woodford Patient Capital (WPCT) investment trust.
Infracapital will pay £68.8 million for Woodford's stake, representing a 35% gain for the fund manager on his investments in the company.
Gigaclear was Woodford's first unquoted investment in his Woodford Equity Income fund, with the manager investing £5 million in July 2014, shortly after the fund's launch.
He took part in a £6.5 million fundraising in February 2015 then, when his Woodford Patient Capital trust launched that year, started to invest in the business across both funds.
He ploughed £10 million into the business in 2015 before investing alongside Infracapital in a £24 million fundraising in 2016 and committing a further £15 million last year.
That led to the company occupying a sizeable position in the Patient Capital portfolio of around 3%, sitting just outside the top 10 holdings.
In the Woodford Equity Income fund, it accounted for 0.4% of the £7.7 billion portfolio at the end of January.
Woodford's agreement to sell his stake has not been matched by Railpen, the pension scheme for railway workers, which is another sizeable investor in Gigaclear. Railpen owns 15.9% of the shares and has 'irrevocably undertaken not to accept the offer in respect of any such shares', Infracapital said in its offer announcement.
AJ Bell was another unquoted investment, and sale of the stake comes after the the portion of Woodford Equity Income fund held in unlisted companies grew to 9.5%. Financial Conduct Authority rules dictate the fund is not allowed to hold more than 10% of its assets in unlisted shares.
This is up from the average 7.5% portfolio weighting to unquoted stocks since the fund's launch, and has grown as outflows have mounted from the fund and some of its biggest listed positions have fallen in value, as Woodford has endured one of the most challenging periods of his fund management career.
Sky News meanwhile reported over the weekend that Woodford had baulked at another fundraising by unquoted Atom Bank.
But Woodford Investment Management said the AJ Bell and Atom moves were decisions driven by investment rationale.
Gigaclear has to date represented a capital intensive investment, and Infracapital's announcement suggests it will remain so, as it pledged to support the company's next round of financing.
'We believe that our cash offer recognises the value that has been created, particularly for those investors who supported the company in the earliest stages of its life, and provides an opportunity for existing shareholders to realise substantial gains in full in cash,' said Infracapital director Ed Clarke.
'Given the capital requirements of the business going forwards it is not obvious when another material liquidity event might occur in the short to medium term for existing shareholders.'