New York's Diligent Boardbooks to raise $24m in NZ IPO

By NZPA

Thursday 15th November 2007

In a rare upturn of the usual process, New York software company Diligent Boardbooks plans an Initial Public Offering in New Zealand to raise $24 million and will list on the NZ exchange.

On completion of the IPO, the corporate governance software company will have a capitalisation of $104m.

Founded by New Zealander Brian Henry, Diligent moved its software division to Christchurch from New York after the September 11 attacks.

Another unusual feature of the offer is a performance warranty offered by founding shareholders, who through DBMS LLC warrant would forfeit up to 20% of their shareholding if licence fee projections contained in the company's prospectus are not met.

The company's product is a web-based service which provide board members instant access to board papers from any computer, anywhere, anytime.

The software removes the need to manage voluminous, unwieldy and often out-of-date paper files.

The Web 2.0 application hosted and maintained by Diligent eliminates any need for in-house maintenance or expertise on the part of clients.

Henry said in the company's statement that in the near future every significant board in the world would use online digital boardbooks.

The prospectus for the Diligent IPO was registered on November 8 and the offer is open from today until Wednesday December 5.

The offer of 24m $1 shares to individual and institutional investors in NZ with a minimum investment of 3000 shares is unlikely to have a public pool due to early indications of strong demand, the promoters said.

Diligent plans to list on the NZX on December 11.
After the IPO is complete the Diligent founders will retain a combined shareholding of 67%, converting debt holders 6%, employees and directors 4% and new shareholders, including Huljich Wealth Management (HWM), 23%.

HWM has bought 3.28 million shares in the company prior to the IPO, on the same terms as those being offered in the IPO. HWM managing director Peter Huljich has joined the Diligent board of directors.

Henry, who has worked in the US for about 20 years, maintains a residence in Christchurch.

Diligent software has been available to clients since 2003 and is being used by many blue chip corporations, including AIG SunAmerica, Investors Bankers Trust and Motorola.

The product has not yet been marketed in New Zealand but is being used by NZX and lines company Vector, and the company is fielding inquiries from other organisations.

Proceeds from the IPO will fund the international expansion of Diligent's sales drive.

The company's growth to date has been based on a sales force of just one-to-two full time equivalents, and its business plan sees that expanding to 78 over the next two years.

Diligent's global target market includes more than 30,000 plus banks and 60,000 plus mutual funds.

It said its market penetration was currently very low. It estimated less than 20% of US companies used a web-based board portal and less than 5% of those used an externally provided portal.

Henry said ease of use and extremely strong security were the key selling points of the software.

The product was developed over three years following a request from AIG SunAmerica Funds, which was a client of Diligent's predecessor company, a New York based software development business.

"The commercial rollout commenced in 2003, and we are now at the point where client feedback and other commentary suggests that Diligent Boardbooks is the leader in this field.

"Nevertheless, we have only scratched the surface of the opportunity."

There is a one-off installation fee, typically about $US6000 ($NZ7965) and clients pay an average annual licence fee of around $US31,000.

The prospectus projects total revenue of $US5.8 million in 2008, which would then grow substantially in the next two years.

The company is chaired by Edward Charlton, a director of HSBC Private Bank in London. Three board members including Henry, are US based and three are New Zealand based -- Huljich, professional director Rick Bettle and Christchurch lawyer Mark Russell.

Henry said New Zealand was the ideal market for Diligent to list on.

"Aside from personal ties, the expertise of our Christchurch team is perhaps the critical element in the company's ability to deliver its product offering."

He looked at other options, including raising the capital in the US and UK and offers from private equity and financial services groups.

"None of these could match the benefits of listing in New Zealand."

He said listing was a considerable advantage as it replicated the governance status and requirements of the great majority of Diligent's clients _ and the size of the New Zealand market was well-suited to give Diligent profile and visibility that would not be readily achieved in private ownership or through listing in other markets.

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