ot everything Fidelity
touches always turns to gold. Though unrelated to its core asset management and distribution business, the Boston Behemoth is finding itself having to bail out one of its most successful investments.
The bailout is for the Colt Telecom Group
, a United Kingdom-based telecom provider that has been caught in the vice of the worldwide tech slowdown. The deal is not likely to have any significant impact on Fidelity's mutual fund operations, as they are a separate business from the Venture unit.
Colt represented Fidelity's most prominent outside investment through its venture capital unit. Yet Colt's market capitalization has fallen 94 percent from its peak as telecom valuations have imploded.
Now, Fidelity Ventures finds itself as the majority owner of the firm. The venture unit has agreed to lead an round infusing an additional $590 million into the telecom firm. As a part of the deal Fidelity will purchase shares pushing its stake to 54 percent of Colt from its current 47.7 percent. If other buyers fail to step up to the plate Fidelity's stake may rise to as much as 72.7 percent.
British regulators waved a requirement that Fidelity make a an offer to purchase all outstanding shares of the firm. The requirement would have been triggered once Fidelity's stake surpassed 50 percent of Colt's shares. All told the financing involves the sale of 649 million shares at 62 Pence apiece. The price of shares rose 21 Pence to 83 Pence on word of the news.
Fidelity Ventures was a ground floor investor in Colt at its founding in 1992. Ironically, the depression in the Telecom market may leave Fidelity as the major backer of one of the few players left in the British market as competitors lack Fidelity's deep pockets.
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