Two years after $US130m sale to Nasdaq-listed Emulex, the security company has a surprise management buyout. UPDATED with special feature audio: interview with Endace CEO Stu Wilson.
Endace, which develops technology that measures, monitors and protects high-speed networks, is back in New Zealand hands after a management-led buyout from its American parent Emulex.
The firm has also reached a settlement to return $1.9 million of around $13.6 million research and development funding provided in recent years.
The loss-making company, which is understood to have laid off 100 people or about two-thirds of its staff late last year, was being asked to make the repayment under Callaghan Innovation's clawback provisions.
Ownership has now transferred to New Zealand company Echidna, which is two-thirds owned by Endace chief executive Stuart Wilson and one-third by chief financial officer Andrew Harsant. It's understood little money exchanged hands but the new owners have taken on the vendor's associated corporate debt.
The settlement reached between Endace and Callaghan will see the technology company repay $1.9 million, which Callaghan's chief financial officer Richard Perry said is a sizable portion of recent grant funding from the Crown. Callaghan won't say how much was originally sought.
Endace has had three separate government grants. The first was a $4.4 million investment grant from TechNZ in July 2010 and the second was a technology development grant in December 2010 worth up to $6.7 million over three years. That was granted at the tail end of the clawback provision period. It has also been paid $1.8 million under a growth grant awarded in October 2013, which had a potential total contract value of $6.8 million and has since been suspended.
The company also got a number of student grants to oversee post-graduate students doing R&D work where, Mr Perry said, the majority of the benefit was to the student rather than the company.
Mr Wilson, who has been with the company for more than a decade, said the team were excited to be part of a New Zealand-owned entity again.
"We have a team of really smart people round the world, many who have been with us since the very early days of Endace," Wilson said. "We're continuing to invest strongly in R&D and new product development and we've got several new products lined up to launch over the next few months."
In the most recent accounts made public for the company, Endace reported a net loss of $US22.5 million for the year ended June 29, 2014, revenue of $US23 million, and R&D expenses of $US11.5 million.
Formed in 2001 to commercialise research out of University of Waikato, Endace was sold in 2013 to Californian networking solutions firm Emulex, which in turn, was sold in May last year to Nasdaq-listed Avago Technologies.
Singapore-based Avago, a global leader in the analogue semi-conductor market, decided Endace wasn't part of its core business last year.
It valued Endace at just $US34 million, $US100 million less than it was sold to Emulex for just two years before. When sold to Emulex, Endace had 117 out of 180 staff based in New Zealand, of whom 80% were focused on research.
That sale led to a spat between Endace co-founder Selwyn Pellett and Economic Development Minister Steven Joyce over the $11.1 million in taxpayer funding it had then received. Mr Pellett was concerned the company was being sold to overseas interests without having to repay the grants, even though he personally benefited from the grants as a shareholder.
Clawback provisions were introduced two years ago to the criteria for R&D grants and remain for three years from the end of the grant contract.
Callaghan has used the clawback provisions on two other companies. It's seeking $332,967 from Trends Publishing after it had an R&D grant suspended and is seeking $2.9 million from Paris-based gaming developer Gameloft, which shut down its New Zealand operations earlier this year.
(BusinessDesk)
BusinessDesk receives funding to help cover the commercialisation of innovation from Callaghan Innovation.
