LMS Capital awaiting more details on sale of Penguin Computing shares

LMS Capital announced on Wednesday that it has been informed by the general partner of San Francisco Equity Partners Fund 1 (SFEP 1) that the fund has received proceeds from the sale of its investment in Penguin Computing, and that the transaction giving rise to those proceeds also included the sale of the LMS’ co-investment in Penguin.

The AIM-traded firm said Penguin supplies enterprise and high performance computing and cloud computing solutions, primarily in North America.

It owned its interest via its holding in SFEP 1, and through a directly held co-investment, with its combined interest amounting to around 19% of the equity of Penguin.

As at 31 March, the company reported a carrying value of £1.7m for its directly-held co-investment and £10.9m for the interest held via SFEP 1.

Penguin holdings represented 20.9% of the firm’s estimated net asset value as at 31 March.

“Penguin has been acquired by Smart Global Holdings, a US-quoted company providing specialist solutions to the computing, networking, communications, storage, mobile and industrial markets,” LMS confirmed in its statement.

The acquisition price was said to be up to $85m, which included $25m of performance-based payments that were made if certain agreed-upon targets are achieved during Penguin's financial year ending 31 December.

“In addition to the performance related element of the acquisition price there are also amounts from the price retained in escrow, and released subject to satisfaction of certain conditions.”

LMS said it had not yet received a formal distribution notice from the general partner of SFEP 1, nor had it received sufficient details of the transaction, including details of the conditions attaching to the performance-related element of the price, to enable it accurately to assess the impact on its net asset value.

“The general partner has however indicated that initial proceeds to the company are likely to amount to around 60% of the carrying value of Penguin holdings, and that release of the escrow plus payments under the performance-related element of the price could allow the company to receive proceeds equal to its carrying value, or possibly a small premium, during the first half of 2019.”

LMS said a further announcement would be made in “the near future”, when it has more information.