Investors smell rewards amid terror fears




By Mark Huband

Financial Times, 14 January 2005

A group of well-connected US investors is planning to tap into the estimated $7bn (£3.7bn) to $10bn global homeland security industry with the listing on Thursday of Crescent Technology Ventures on Aim.

CTV chiefs say concern about a terrorist threat to cyber security, air and sea transport and telecommunications infrastructure has created a new security technology industry that they predict will expand by up to 25 per cent annually for the next 10 years.

The company intends to buy stakes of up to 30 per cent in continental European and US companies involved in developing security technologies but which require injections of capital to turn projects into profitable ventures.

CTV, which will have an initial market capitalisation of £1m, will look at companies developing technology that will protect internet- based communications or identify dangerous materials in air and sea cargo containers.

It also foresees investing in the development of stratospheric airships, floating 65,000 feet above the earth, that can provide an alternative to satellite-based telecommunications.

Central to CTV’s strategy is its use of private investment in public equity – PIPE – transactions on Aim.

“CTV represents a new breed of private equity investment vehicle – publicly transparent and financially accountable to shareholders yet able to invest in private companies whose anti-terrorist technologies and intellectual property are not yet ready for public exposure to terrorism’s highly active global nerve centres,” said Mansoor Ijaz, CTV chairman and chief executive.

But the decision to list on the Aim was also a response to the fallout from the September 11 2001 terrorist attacks and the introduction of the US Patriot Act, which has discouraged Middle Eastern investors from buying stakes in US companies.

Mr Ijaz, an American Muslim of Pakistani descent who had close ties with the administration of former US President Bill Clinton, said his initial intent in putting together the team that had evolved into CTV was to raise funds from the Muslim world in order to counter growing perceptions after the terrorist attacks that the West was at war with Islam.

“The Patriot Act caused many investors in the Muslim world with legitimate sources of funds to shun the United States as an investment environment,” he said. “London offered the ideal balance between the need for regulatory safety, transparency and market liquidity on the one hand and investor comfort with the political and regulatory environs for such investors on the other.”

CTV’s appeal to investors is also likely to be influenced by its directors’ connections to the US military and intelligence establishments.

The company has appointed James Woolsey, former director of the CIA, as chairman of its board of advisers.

He argues that industry has yet to build the technology that provides in-built security measures.

“Osama bin Laden has clearly indicated a desire to inflict maximum economic harm on the West,” he said. “To limit the economic effects of terrorist enterprise threats, we need to build technological elasticity into our economy, paying particular attention to the vulnerability of networks. We must get past protection of existing facilities and improved identification and tracking of individuals and material and begin to build resilience into our networks.”

Among Mr Ijaz’s co-directors on the board of CTV are James Abramson and Thomas McInerney, both retired US Air Force generals with extensive experience in the security technology industry.

Gen Abramson, the director of the former US president Ronald Reagan’s controversial Strategic Defense Initiative or ‘Star Wars’ defence project in the 1980s, says CTV’s range of investments reflected the character of the terrorist threat.

“The best solution to the terrorist threat as it is developing globally will be a multi-layered defence,” he adds. “Stratospheric airships are an integrating surveillance and communications element of a layered defence.”


© Copyright The Financial Times Ltd 2008.