Date: 2012-12-21
Type of information: Company acquisition
Acquired company: minority share in Karolinska Development’s holdings in 13 of its 25 portfolio companies
Acquiring company: Rosetta Capital (UK)
Amount: SEK 220 million (€25.5 million)
Terms: * On March 8, 2013, Karolinska Development and the life science investor Rosetta Capital Limited have announced that Rosetta Capital IV LP has now acquired the minority share in Karolinska Development’s holdings in 13 of its 25 portfolio companies for SEK 220 million, in line with the previous announcement on December 21, 2012. In February 2013, Karolinska Development transferred 13 of its portfolio company holdings to a new private holding company, KDev Investments AB. Rosetta acquired 7.33% of the common shares in KDev Investments AB for SEK 110 million and all of the preference shares in the same company for a further SEK 110 million, giving Rosetta 13.66% of the votes in KDev Investments AB. The terms of the preference shares provide for gradually reducing returns for Rosetta.
Karolinska Development received the first tranche of € 23 million at closing, which is approximately SEK 190 million at current exchange rate. The balance up to SEK 220 million will be received in a second tranche when the total accumulated return from KDev Investments AB has reached that amount.
* On December 21, 2012, Karolinska Development has announced that a syndicate led by the life science investor Rosetta Capital Limited will acquire a minority share in Karolinska Development’s holdings in 13 of its 25 portfolio companies for SEK 220 million. For the purpose of the transaction, Karolinska Development will transfer 13 of its portfolio company holdings to a new private holding company, KDev Investments AB. The KDev Investments portfolio will include both early and clinical stage pharmaceutical assets as well as some technology assets. Rosetta will acquire 7.33% of the common shares in KDev Investments AB for SEK 110 million and preference shares in KDev Investments AB for a further SEK 110 million. The terms of the preference shares, which are set out below, provide for gradually reducing returns for Rosetta, limiting Rosetta’s upside in return for partial protection of its downside.
The consideration to be paid by Rosetta implies a total value of the KDev Investments portfolio of approximately SEK 1,500 million, about two times Karolinska Development’s investment in the same portfolio and a 23% premium to the reported fair value. After the transaction, Karolinska Development’s cash and short-term investments will be approximately SEK 500 million.
Karolinska Development will receive the SEK 220 million cash consideration in two tranches. The first tranche of SEK 203 million will be received on completion of the deal, planned to close on January 31, 2013, and the second tranche is due when the total accumulated return from KDev Investments AB has reached SEK 17 million.
Rosetta’s preference shares will have a priority on future returns from the entire KDev Investments portfolio as outlined below. All remaining total return is to be divided between the common shareholders, with 92.67% to Karolinska Development and 7.33% to Rosetta.
(i) 100% of the total future return up to SEK 220 million*;
(ii) 30% of the total future return between SEK 220 million and SEK 880 million;
(iii) 18.33% of the total future return between SEK 880 million and SEK 1,320 million; and
(iv) 0% of the total future return over SEK 1,320 million.
KDev Investments AB consists of 13 of Karolinska Development’s holdings in portfolio companies; Akinion Pharmaceuticals AB, Aprea AB, Axelar AB, Biosergen AS, Clanotech AB, Dilafor AB, Dilaforette Holding AB, Inhalation Sciences in Sweden AB, NeoDynamics AB, NovaSAID AB, Pergamum AB, Promimic AB, and Umecrine Mood AB. Following the transaction, KDev Investments AB will be 92.67% owned by Karolinska Development AB and 7.33% by Rosetta Capital IV LP.
The KDev Investments group will become a joint venture of Karolinska Development presented at Fair value. Several existing subsidiaries in the Karolinska Development Group will be part of the KDev Investments group. As KDev Investments group is a joint venture, these companies will also be presented at Fair value. The impact on the balance sheet and income statement of Karolinska Development group resulting from this transaction will be accounted for accordingly.
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