Seek (ASX: SEK) has announced details of the separation of its investments business and plans for the spin-out to rapidly raise $460 million in investment capital.
The separated investment business is to be led by Seek co-founder Andrew Bassat who stepped down as the online job advertising company’s chief executive in February.
The separation plan was first outlined by Seek when it announced Bassat was stepping down. Bassat made it clear then that he was planning to devote his time to investing in early-stage technology companies in future and would leave managing Seek to his successor, former Commonwealth Bank chief executive Ian Narev.
Under the separation plan, Seek is to create an independent unit trust to be known as the Seek Growth Fund. Holdings in Seek’s Online Education Services division and investments in 14 early-stage ventures will be transferred to the trust as seed assets.
In return, the trust will issue units worth $1.215 billion, based on independent valuation of the assets, to Seek.
A new management company for the trust is to be formed. Bassat will lead the management company and head a team comprising all the investment professionals of the current investments business.
The management company will receive unspecified management and performance fees to manage the fund.
A total of $460 million is to be raised for future investments. Seek is to provide $200 million of this with the remainder to be contributed by other investors including around $80 million from Andrew Bassat and the management team. The fundraising is expected to be completed by mid-September.
Under a separate agreement, the management company will receive fees to manage Seek’s holdings in investments that will not be transferred to the fund, primarily Chinese online jobs marketplace Zhaopin and recruitment software business JobAdder.
Announcing details of the separation plan on 11 August, Seek said the fixed management fee that it will pay the investment management company to manage the transferred assets would be lower than the previous cost of managing the assets. The separate performance-related fee it will pay will be proportionately lower than performance fees to be paid by other unit holders and will be lower than similar fees usually paid in the Australian alternatives investment market.
Seek chairman Graham Goldsmith the board was confident that the separation would unlock the full potential of both Seek and its investments business.
Image: Paul Bassat; he will now lead the new investments business.