Arcis, Strathdon halt FLV sale talks

FLV Fund, the struggling Belgian venture capital firm, has terminated negotiations with Arcis Group of France and the UK’s Strathdon Investments that could have led to a sale of FLV’s portfolio assets.

Flanders Language Valley Fund (FLVF), the Belgian venture group which has endured a torrid few years, is once again on the lookout for a buyer after talks with an Anglo-French consortium fell through.

Arcis, the Paris-based secondaries specialist, and Strathdon, the Hampshire, England-based early-stage venture capital firm, commenced exclusive talks in August 2003. According to an FLVF statement, ‘the parties could not reach full agreement on the completion of the assets transfer’.

It is understood that the potential buyers were uncomfortable with FLVF’s results in the third quarter of 2003, which featured a loss of E483,000, including a E250,000 extraordinary loss following the write-off of portfolio company Keyware and ‘declines of fair value of some capital venture investments’. At September 30 2003, the fair market value of FLVF was E17.7m (E0.86 per share) and it had 28 active portfolio companies.       

In October 2001, FLVF announced plans to wind up its portfolio by December 2004 after being hit by a series of setbacks and controversies, including the seizure of $30m it had contributed towards its FLV Fund Korea. The firm was set up in December 1995 to invest in speech technology and is listed on Euronext Brussels, where its shares currently trade at around E0.4. The shares peaked at around E19.2 in March 2000 when FLV was listed on Easdaq. In June 2000, it raised E76m.        

Said FLVF chief executive Piet Vandermeersch: “We are not distracted by what has happened from our strategy of realising the assets. We had good negotiations, but you can’t carry on forever in exclusive mode and if there is no sign of a transaction, it is better to bring things to an end.”

He added: “We anticipate commencing talks with others because the market seems to have changed for the better. We know there are interested parties that see our portfolio as a nice addition to what they already have.”

He said he did not expect significant further progress by the end of the year, but was confident that the December 2004 sale deadline would be met. FLVF would prefer to sell as much of the portfolio to one buyer as possible rather than a series of piecemeal exits ‘to reduce the workload and administration’ said Vandermeersch.

The firm is continuing its appeal to the Seoul District Court, following the seizure of money by Korea’s Hanvit Bank, which it claimed as security against a loan it had made to personnel connected with the fund. It is also defending a series of lawsuits from US organisations that invested in FLV portfolio company Lernout & Hauspie Speech Products, which filed for creditor protection in December 2000.       
Arcis Group purchases positions in private equity funds as well as directly in portfolios of companies in Europe, the US and Asia. Strathdon invests £50,000 to £2m in established and start-up technology companies in the US and UK.

Strathdon marketing director Colin Spiller, who declined to comment on the reasons for the aborted negotiations due to a confidentiality agreement, said the firm remained interested in managing portfolios with complementary products that could help accelerate the development of its existing portfolio companies.