Tadpole Technology Plc is to sell an 80% interest in its rapidly expanding streaming software division for $12m because it has not the resources to continue funding the loss-making operation.
Tadpole formed the division from its acquisition of Endeavors Technology Inc for $3.3m, and the 10.2 pound ($14.9m) purchase of StreamTheory Inc in October 2004.
Though the division has expanded at a rapid rate, with revenue increasing from 213,000 pounds ($311,393) in 2004 to 2.5m pounds ($3.7m) in 2005, its operating loss in 2005 was 8.9m pounds ($12.9p), including a non-cash goodwill impairment charge of 5.9m pounds ($8.6m).
Directors said they carefully considered whether it is in the best interests of shareholders to bear the entire risk of the necessary additional investment, given the uncertainty of the timing and value of potential rewards. They concluded that as a small UK plc with limited financial resources, it is not the most appropriate vehicle to lead this investment role.
Tadpole is selling the operation to DivestCap Management Corp, a New York-based private equity firm that specializes in funding and growing software divestitures.
In a complicated three-stage deal, DivestCap initially acquires an option to buy shares in the streaming company while it conducts due-diligence, and it is only if all three are completed that Tadpole gets the full $12m and sells an 20% holding.
Cambridge, UK-based Tadpole sold its Sparc-based laptop and rack-mount server business in an MBO in October 2002. Now it is left with its geospatial solutions division, which supplies geographical information to field workers for utilities and mapping organizations.