Last week smart card company N.D.S. signed documents which would see it taken private, some time later this year or early in 2009. The $3.7bn agreement was wrapped on August 14, and saw private equity group Permira Advisors link with News Corp (which already controlled 96% of N.D.S.’ voting shares). It is a complex financial structure, but it seems that News Corp is not letting N.D.S. fall completely from its control. N.D.S. is sitting on something like $700m in cash on its balance sheet, cash that News Corp cannot get its hands on without facing a major tax bill. Permira has joined with N.D.S. and is acquiring all N.D.S.’ issued and outstanding shares, paying $63 in cash to stockholders, a tasty premium of about 24% on N.D.S.’ share price these last few months. The press releases from both companies talk about Permira ending up owning 51% of N.D.S. and News Corp the 49% balance. This is being arraigned via a complex web of assorted Luxembourg-based “Bidcos” and “Holdcos”, and it includes payments out and fresh debt raised by the “new” business.

The end result is that Permira invests almost $1bn for its 51% stake, while News Corp gets $1.8bn for one third of its controlling stake. While the final details are not yet entirely clear, a story in the Wall Street Journal suggests that Permira will “share voting control with News Corp”. Indeed, the story goes further and while admitting further clarity on the deal is needed, suggests that given that News Corp-related businesses (such as BSkyB, Sky Italia and others) account for 37% of N.D.S.’ total revenues, “one can hazard a guess”.

The WSJ story isn’t too concerned about the N.D.S./News Corp side of the equation, but asks whether Permira hasn’t paid too much for its new asset, and questions whether this particular leveraged buyout was right to pay such a high premium “for only partial control”.

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