$1.45 billion for Seequent, a Kiwi company ‘no one has ever heard of’

Silicon Valley private equity firm Accel-KKR and New Zealand’s Pencarrow are in for a big payday after agreeing to sell their stakes in Christchurch-based geoscience software company Seequent to Nasdaq-listed Bentley Systems for US$1.05 billion ($1.45b).

Bentley, a US-based infrastructure engineering software company, said the acquisition would add about 10 per cent to its revenue and earnings before interest, tax, depreciation and amortisation, and that it was expected to be “measurably accretive” for its organic growth rate.

“Most significantly, the combination will deepen the potential … to help understand and mitigate environmental risks, advancing resilience and sustainability,” it said. Bentley’s revenuelast year came to US$801.5m.

Pencarrow managingpartner Nigel Bingham would not be drawn on the return made on the investment, other than to say: “It’s been very, very successful”.

“It’s one of the best businesses in New Zealand that no one has ever heard of,” he said.

Bingham said the reason for Seequent’s relative obscurity was that 99 per cent of its business was offshore.

Pencarrow’s investment in Seequent was in two phases.

The first – a 40 per cent stake – fell to 9 per cent once Accel-KKR took a majority holding in 2018.

“It’s been a continually growing software business so in that context it’s been a great New Zealand success story,” said Bingham.

Seequent chief executive Shaun Maloney is to retire next month, and current chief operating officer Graham Grant will take up the role.

Grant told the Herald that a sharemarket listing was considered but the logic of being part of a far larger organisation like Bentley was “too compelling”.

He said potential investors could gain indirect exposure to the company – more so than in the past – through Bentley.

Grant said Seequent’s software “helps people understand the underground”.

“The problem is that you can’t see the underground. Everything we do on earth relies on the underground.

“So if you want to draw water, want to build a structure, or if you want to build a tunnel you’ve got to know what you are drilling through,” he said.

“That goes for drilling to extract minerals out of the ground or to draw heat from geothermal energy.

“All of that requiresan understanding of the underground but it’s unbelievably complicated.

“Our software makes sense of that and people can make a decision about whatever their purpose is,” said Grant.

Seequent has four kinds of customer: civil engineering, mining, energy and water. The company’s technology is also used in detecting unexploded bombs.

In energy, Seequent software is used in 50 per cent of the worlds’ geothermal energy production.

Grant said the company had enjoyed very strong organic growth but had bought companies along the way.

“Essentially the firm started with a new class of product – which did not exist before in the tech space.

“It was a highly complex mathematical based product for the subservice.

“It was a complete paradigm shift. We created a complete category killer.

“It grew extremely quickly because it fundamentally changed how these industries operated.

“Off the back of that we expanded geographically and made acquisitionsalong the way.”

Grant said the company was a market leader in its field. “We are not the biggest, but there is not other tech company with the breadth of geoscience that we have.”

Seequent said Bentley fully supported its strategy and direction.

The company began with a staff of one person in 2004. It now has 173 New Zealand staff and a total of 430 globally.

After the sale, Seequent would continue to operate as a stand-alone business unit within Bentley, Grant said.

The company’s head office and research and development centre will also remain in Christchurch following the completion of this transaction, which is subject to NZ Overseas Investment Office approval.

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