As reported here on Friday afternoon, former Terabyte Interactive managing director Keith Phillips has bought the company he founded on behalf of the one he now manages, IT Capital.
The publicly listed IT Capital (ITC) is a "venture catalyst" firm constructed from the shell of the former Iddison Vietnam by CEO Jeff Dittus. It has also invested in local ERP vendor exo-net and the US music portal Tunes.com, but the 100% purchase of the Auckland-based multimedia company represents its biggest move yet.
It also represents an intriguing return for ITC managing director Phillips, who resigned as joint managing director of Terabyte in July last year, selling his 24.5% share in the company to Independent Newspapers Limited and taking INL's stake in Terabyte to 75.5%
ITC is to pay a total of $8.4 million for Terabyte, in the form of $7.7 million in cash payable over a six month period and $700,000 of ITC stock at 40 cents.
Managing director Craig Meek - who is currently in the US accepting an award for the company's Virtual Spectator joint venture with Animation Research - will take his payment in cash and shares and will remain in his management role.
Phillips says Meek will focus on "creativity and innovation" while Phillips himself will return to provide "operational capabilities" for a transitional period.
He says the valuation at which ITC is buying Terabyte is higher than that at which he sold up his original interest 16 months ago.
Phillips characterises his departure from Terabyte last year as a necessary sabbatical and says he may now be able to "make a bigger contribution by attracting capital and providing a broader leadership."
Terabyte is likely to see an immediate benefit in having its future confirmed. INL is known to have been looking to sell Terabyte for months and as the process has dragged on, a number of staff have departed to other jobs in the voracious employment market for Internet development.
INL took a 51% stake in Terabyte in 1995, but it became clear that the company did not figure in INL's long-term plans when the publisher decided to decided to jojntly develop future newspaper sites with the News Interactive, the burgeoning new media wing of Rupert Murdoch's Australian newspaper business.
INL's corporate development manager Don Higgins denies that INL lacked commitment to Terabyte. He says Terabyte, with 50 staff and budgeted revenues of $6.5 million for this year, has been profitable, but "we're very pleased with the sales to ITC because we think they have a vision that will take Terabyte forward.
If Terabyte has not been a priority for INL this year, says Higgins, "it's just that we've been preoccupied with Sky and digital television.
"We got a very attractive offer from ITC. We do see an ongoing relationship with Terabyte and we hope Terabyte will continue to do a significant amount of work for INL on Website development.
"With News Interactive and News Limited in Australia we felt that a joint Web development project was the way to go for us. There were economies for us if we partnered with News Limited on the Web sites. That's not to say we don't have a role for Terabyte, because we do - Terabyte's doing a significant amount of work on INL Web development at the moment."
Terabyte's new future, says Philips, will see it expand into Australia, and attracting "smart money - that is, investors with expertise themselves in this particular industry. They are likely to come from offshore as well as locally.
"The intention is to participate over time in a global infrastructure. Big corporates are starting to recognise that the Internet has no geography and that they need a single, global strategy."
Phillips says ITC will look to capitalise on "latent scalable technologies" developed by Terabyte for e-commerce sites like Rodd & Gunn (which last night won the Interactive New Zealand e-commerce award) for global use.
ITC's strategy also calls for it to build value in companies with which it is involved in preparation for a later sale or IPO, says Phillips. The purchase will leave ITC with about $5 million in cash for "other smaller investments".