Irish internet broadcasting company Servecast is set to be sold to Nasdaq-quoted Level 3 Communications in a deal that values the company at just less than €30 million.
The beneficiaries of the deal include a number of the directors of television group Setanta Sport as well as Denis O'Brien's personal investment vehicle Island Capital. Servecast has raised €40 million in funding since it was founded in 1998 by Kevin Quinn.
Other investors in the company include motor racing supremo Eddie Jordan, Canadian technology entrepreneur Bob Jull and Lioncourt Capital, the investment vehicle for Michael Tunney and David Andrews.
Servecast's business is split into two units - a division that focuses on broadcasting sporting events and a corporate webcasting business. The sports business has primarily worked with leading football teams such as Liverpool FC, Real Madrid, Barcelona, Celtic and AC Milan to broadcast their matches to subscribers. It also has horseracing contracts in Britain, France and Germany.
The corporate business is much smaller, but has a number of key contracts including a deal with the Vodafone group to broadcast internal training materials. It also recently announced it was working with Sky News to stream its breaking news service online.
Level 3 is a Colorado-based communications company which owns one of the world's largest private networks as well as significant parts of the internet backbone. Its customers are primarily telecoms companies and it does business with nine of the 10 largest carriers in Europe.
The most recent accounts filed by Servecast with the Companies Office show that at the end of 2005 it had net assets of €2.8 million and cumulative losses of €27.7 million.
Shareholders in Servecast include Mr Quinn and current Setanta executives Mark O'Meara, David Hall, David Hughes, Eamon Maloney and Ian Maloney.
Setanta founders Leonard Ryan and Michael O'Rourke hold more than eight million ordinary shares through a vehicle called Casevine. Through the Servecast Employee Benefit Trust, staff at the company hold 1.5 million ordinary shares and 4.8 million deferred shares.
Servecast's sports division has performed particularly strongly in the last 12 months. The company typically gets a revenue share with the clubs which it signs up, which means that Servecast receives up to 50 per cent of subscriptions sold.
Competition in the area has intensified with sports management agency IMG investing heavily in its internet broadcasting capability. As a result, the Servecast directors felt the market was at its peak and the current valuation was the best they could expect for the company.
Level 3 executives have been carrying out due diligence on the Dublin-based company in the last few weeks and staff are expected to be informed of the deal this week. Servecast chief executive Darach Deehan did not return calls seeking comment.
