Baltimore Sells Content For Thirtieth Of What It Paid

by Jason Gorringe, Tax-News.com, London

25 January 2002

Irish company Baltimore Technologies yesterday raised £20.5m by selling its Content Technologies e-mail security business, and said it now had enough working capital for at least 12 months, but pushed back the date it expects to become profitable by a further six to nine months.

Content Technologies, which was bought by Baltimore for £680m in September 2000, was bought by Clearswift, a privately-owned e-mail security and management group backed by Amadeus Capital Partners.

Baltimore's CEO, Bijan Khezri, admitted Baltimore's financial position had forced it to sell at a time when technology valuations were very low. "It was critical for us to find a compromise between the medium-term financing requirements of Baltimore and the ability to profit from the upside in Content."

The structure of the deal gives Baltimore Pounds £12m in cash on closure, £2.5m in Clearswift 5% per cent loan notes maturing in 12 months, and an 11% stake worth £6m in the enlarged group, which Mr Khezri said he believed Baltimore would profit from in the future.

Baltimore put up Content for sale in August after admitting the business had little in common with its own. At the end of the third quarter, Baltimore's cash reserves stood at £32.4m, with analysts forecasting a quarterly burn rate of £9-12m after the restructuring announced in August.

Mr Khezri said the decline in sales at Baltimore had stabilised in the fourth quarter after falling from £28.4m in the fourth quarter of 2000 to just £15m in the third quarter of 2001. Baltimore had been forecast to produce positive earnings before interest, tax, depreciation and amortisation by end-June, but Mr Khezri said that would now be delayed by six to nine months.

"We could have had that ebitda positive position in the second quarter this year but it would require further inroads into the operational and developmental side that would have castrated the business," he said. Baltimore's shares were unchanged yesterday at 14.5 pence.

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