Rothschild and Gervais Williams back new Sorrell venture

Rothschild and Gervais Williams back new Sorrell venture

Lord Rothschild’s £3.1bn RIT investment trust, and funds run by Gervais Williams at Miton Group are among those to have committed to invest in the new venture being established by advertising titan Martin Sorrell.

Mr Sorrell founded the FTSE 100 advertising and marketing business WPP before departing from his role as chief executive of the company earlier this year.

He is to inject cash into Derriston Capital, a cash shell on the London Stock Exchange.

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A cash shell is a company whose only asset is its listing on the London Stock Exchange. It will have previously been a trading company, but apart from possibly having some cash, it no longer engages in any trading activity. The advantage of acquiring a cash shell is that it offers an investor a shortcut to a stock market listing.

Mr Sorrell used the same method when building up the original WPP business. WPP was a business called Wire and Plastic Products, but had ceased to manufacture those items by the time Mr Sorrell bought it.

He used the stock market listing to issue more shares in WPP and acquire advertising businesses with the money.

Mr Sorell will inject £40m of his own money into a company called S4, which Derriston is acquiring.

According to its statement to the stock exchange, Derriston regards this as a reverse takeover, so Mr Sorrell will become executive chairman of Derriston. The name of the company will change to S4 Capital.

Other backers have, to date, provided £11m, with a binding commitment to provide £150m of extra capital in future.

Funds managed by experienced small cap investor Gervais Williams, who runs several funds at Miton, have invested in the new venture. This includes the Miton UK MicroCap trust, which is run by Mr Williams.

His colleague at Miton, Eric Moore, who runs the Miton Income fund, has also invested.  

RIT Capital is an investment trust chaired by Lord Jacob Rothschild and in which he and family members have an investment of £336m. The trust invests in a mix of quoted and unquoted assets.  

S4 Capital, FTAdviser understands, is a name which represents four generations of the Sorrell family.

According to the stock market announcement, it will pursue “a new corporate strategy to build a multi-national communication services business, initially by acquisitions”.   

Russ Mould, investment director at stockbroker AJ Bell, said: “Until yesterday Derriston Capital was just one of several cash shells floating around on the London market.

“However the company, whose shares have been suspended, is very much on the market’s radar now. It is set to become a vehicle for advertising grandee Martin Sorrell to realise his ambitions in the sector following his ignominious departure from WPP.

"However, while WPP shares fell, it is very premature to describe S4 as a challenger to the business, despite Sorrell’s involvement.”

Schroders are another asset management firm reported to have invested in the new venture, but they declined to comment to FTAdviser.