The Ukrainian Redevelopment Fund, a private investment vehicle launched by US businessman and philanthropist George Soros earlier this year, has announced its acquisition of “a significant equity stake” in Ciklum, a major software engineering company operating globally from its main office in Kyiv (Kiev).
The Ukrainian Redevelopment Fund is set to acquire the entire stake held by Horizon Capital, a leading Ukrainian private equity fund manager, as well as an undisclosed portion of the stake held by Majgaard Holdings Ltd. No capital injection is taking place.
The transaction, of which the details have not been disclosed, is expected to be completed by the end of 2015, subject to customary closing conditions and regulatory approval.
Founded in 2002 by Danish businessman Torben Majgaard, Ciklum has asserted itself as a leading player in Ukraine’s rapidly-growing IT scene. The company now employs more than 2,500 programmers. Facing growing international demand for software development services, Ciklum has recently opened a development center in Belarus – a former Soviet republic neighboring with Ukraine – together with another in Romania, and two in Pakistan, all in addition to its six locations in Ukraine.
“We intend to open additional development facilities in Poland and Spain by the end of the year,” the Ciklum press service told Ukraine Digital News.
Many of Ciklum’s clients are western companies developing their own products. No less than 25 of them have “reached the IPO stage with Ciklum’s development capabilities,” the company claims. One of these companies is Just-Eat, which was valued at more than $2 billion when it went public in London in the spring of last year.
Ciklum itself is not ruling out an IPO, but has stated that, either way, it “will not happen in a short-term perspective.”
A signal for international investors?
“Soros’s Ukrainian Redevelopment Fund has made its very first investment in the IT sector,” notes Andrey Kolodyuk, whose company AVentures has drawn the attention of Soros and other international investors to this industry.
“This is a signal for the global investment community, showing it is time to step in and invest in the Ukrainian IT sector, which did not get the deserved attention in the past,” Kolodyuk added in an exchange with Ukraine Digital News.
Together with Soros, Kolodyuk has joined Ciklum’s board of directors.
Andrey Kolodyuk (AVentures), George Soros, Yevgen Sysoyev (AVentures) and Torben Majgaard (Ciklum)
“I am very excited about my investment in Ciklum,” Soros stated. “It is a very dynamic company in an industry that represents the future of Ukraine. It is also an investment in what I call the New Ukraine – Ukrainians who are young, well-educated, and eager for their country to break from the past and to build an open society. I hope that my investment serves as an example to other investors.”
The Ukrainian Redevelopment Fund presents itself as “a private investment vehicle which focuses on special situations and private equity investments in Ukraine” as well as “companies with significant operations in Ukraine.” The fund targets investments which “have the potential to promote economic and social development in Ukraine.”
A long-standing commitment for Ukraine
In a separate move, the fund also announced today an investment in Dragon Capital New Ukraine Fund under the management of Kyiv-based Dragon Capital. Other investors may be invited to participate after the first closing of this seed-stage round. The New Ukraine Fund will invest and bring managerial support in a wide range of sectors of the Ukrainian economy to support long-term growth, the Interfax Ukraine news agency reported.
Hungarian-born George Soros has been supporting Ukraine’s transition to a free society since the early 1990s through the Open Society Foundations, which he founded. The International Renaissance Foundation, which is a part of the Open Society family of foundations, played a noticeable role supporting civil society during the Euromaidan protests, and continues to “work with civil society to achieve essential reforms and help citizens” from annexed or war-torn areas of Ukraine.
Soros believes that “the new Ukraine is the most valuable asset that Europe has.” Earlier this year, he developed what he called “a winning strategy for Ukraine” and circulated it among the European authorities – with some influence, if judging by the reaction of pro-Russian activists who view Soros as a “behind-the-scene puppet-master” in Ukraine.