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Fife Waterfield Strikes Gold With STV Communications Play

The sale of Santa Monica-based STV Communications for $66 million has provided Irvine-based Fife Waterfield & Co. with a hefty return on its investment in the streaming-technology firm.

In the deal last week, Fife Waterfield’s $1.5 million investment in STV became $11.2 million worth of shares in its buyer, Sonic Foundry of Madison, Wis. And to top it off, Sonic Foundry’s share price rose about 15% in the wake of the deal, adding another $1.7 million to Fife Waterfield’s take.

The investment firm acquired a 17% share of STV in four transactions totaling $1.5 million, the last coming six months ago when STV was valued at about $10 million.

In addition, one of the partners of Fife Waterfield, David Fife, personally had about an 8% stake in STV.

STV was sold last week for 1.07 million shares of Sonic Foundry stock at $61 dollars a share, but after the deal closed, Sonic’s share price rose sharply, reaching $72.50 by late in the week.

Fife met the CEO of STV, Jan Brzeski, when they were both working at Goldman Sachs. (All three partners of Fife Waterfield,Fife, Richard Waterfield and Randy Waterfield,are former Goldman Sachs employees.) When Brzeski left to start his company, Fife gave him some personal money to get going.

Fife Waterfield also brought in more investors for STV, some of which came from the company’s contacts at Goldman Sachs. All in all, Fife Waterfield raised about $3.3 million for STV.

When Fife Waterfield acquired its stake, STV was making kiosks displaying media and videos for retail stores such as Staples and Fry’s Electronics. The company’s products were using media-streaming technology to broadcast the video.

Fife Waterfield repositioned the company to use its encoding technology to transmit video via the Internet. Encoding is the process of changing analog content into a digital form so that it can be broadcast on the Internet. STV’s clients include Microsoft, Ifilm and Best Buy, and several record labels including EMI, Atlantic, Virgin, Colombia and Sony Music.

The STV deal goes along with Fife Waterfield’s business model, which Fife said is to take significant positions in companies that they can reconfigure or reposition.

Fife Waterfield’s first fund was worth about $35 million and was raised from private investors that Fife and the Waterfields gathered from relationships they developed while at Goldman Sachs.

Fife said that Fife Waterfield has already received interest from some institutional investors to start a second fund, which Fife said should be in the $300 million to $500 million range. n

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