Multi-million pound deal for man with the Midas touch

Feb 13 2008 by Bill Gleeson, Liverpool Daily Post

Bill Gleeson on howstock market listing has earned a Liverpool fund manager a fortune

FUND manager Simon Edwards was popping the Champagne corks last night at Restaurant Bar and Grill, in Brunswick Street.

Little wonder. Earlier that day, he had pocketed £21m following a deal that sees the Water Street- based company he founded, Midas Capital Partners, achieve a stock market listing.

Like Cains Beer Company last year, Midas has gone for the easy route to a stock market float – using a reverse takeover. Cains bought the publicly quoted Honeycombe Leisure pubs group, while Midas has reversed into the snappily named Iimia Miton Optimal, which has six branch offices around the country and another in South Africa.

Like Midas, it was a fund management group that offered similar investment products to those sold to pension funds and wealthy individuals by Midas.

The deal marks a major milestone in the rapid development of Midas, which Mr Edwards started from scratch just under six years ago when he quit his job as chief executive of the Merseyside Pension Fund.

Yesterday, Mr Edwards said: “We have had terrific reaction from people in the city and around the world. We have had hundreds of emails.

“This listing is very much the next stage in our development. We have had plenty of offers from people wanting to buy us, but nothing has been of interest. Instead, the deal we have struck is Midas going forward to the next stage of its development.

“We are expanding the business and building on our achievements so far.

“We are merging with some very talented fund managers at Iimia. We have a similar culture and a similar approach to investment. Both of us run multi-asset balanced funds that take a cautious approach to investment.

“They have a 10-year track record and so do we, if you include our time at Merseyside Pension Fund. Between us, we have some of the strongest performing funds in the country.”

Mr Edwards’s claim is supported by recent league tables published by two industry analysts, TrustNet and the Investment Managers Association, which show Iimia and Midas occupying two out of the three top positions.

The combined firm will have 15 professional fund managers.

“It reduces the key man risk. Clients like that. It also enables us to share the best ideas.

“The other big benefit of the deal will be to utilise our strong sales and distribution know-how to better effect. They were good at managing money but useless at selling products. We have a strong network that we can market their products through,” he said.

Another benefit is that Mr Edwards will also be able to delegate the administration of the business to a full-time chief executive, allowing him more time to concentrate on what he does best, looking after the money.

“We are getting senior help to run the quoted company and the compliance side and the financial accounting.

“The head office will be based here in Liverpool. That was our stipulation, nor was there any resistance to that,” he said.

Mr Edwards will have the title of managing director while Iimia chief executive Mike Philips will keep the same title in the newly- merged business, looking after those admin functions. Mr Philips will be based in Liverpool for three days a week. Lord Wade of Chorlton is stepping down as Midas chairman, to be replaced by Edinburgh accountant Colin Rutherford.

“Colin has the right combination of skills. He has a strong reputation in the City and he has helped put businesses together before. He is very good at people management,” explained Edwards.

As part of the transaction, Mr Edwards and his fellow investors are taking £60m out in cash. The founder’s share of that is £21m.

He is investing £17m of that in the funds managed by his firm. The latest payout comes on top of the sale of a 10% stake last year that netted Mr Edwards an additional £6m.

Once the deal is completed, Mr Edwards will still retain 17% of the combined business, making him the largest single shareholder.

COMMENTING on reinvesting the cash in Midas funds, he said: “It’s very important for clients to know that you continue to have such a personal incentive in the business.”

The 17% stake is valued by the terms of the reverse takeover at about £20m. Closing the deal in current market conditions is no small achievement.

The value of fund management firms is highly dependent on the performance of the stock market. That’s because fund managers’ fees are based on the value of clients portfolios, which rise in strong markets and fall in harder times. The current stock market volatility makes valuation all the harder to agree.

Nor did the credit crunch help. The payouts to the original investors, including to Mr Edwards, are part-financed by a £40m loan from Bank of Scotland. Mr Edwards admits that this debt cost more than it would have done a year ago, but is relieved the bank agreed to take part.

He explained that he decided to push ahead with the deal, despite the tough conditions, because he got a good offer from Iimia.

“It was done against a backdrop of extremely difficult banking conditions. It couldn’t have been more difficult and its an indication of the belief of the bank in us that they agreed to back us.”

He adds: “Because of the type of assets we hold, we are not badly hit by the volatile conditions. In fact, since we are a cautious fund, we become more attractive in these conditions.

“Most of the rest of the fund management industry has seen cash withdrawn by investors, but we have continued to see business grow. The flow of money to our products is still very positive. We are seen as safer and more secure.”

As for the future, Mr Edwards said: “Our prospects are very exciting.

“We are now much bigger, the deal has given us critical mass. There are big opportunities for Midas. There is an enormous amount of investment cash out there. We have some great products that are very attractive.

“We feel we have only scratched the surface so far.”

BILL GLEESON: PAGE 8

billgleeson