20th Mar 2009 07:00
MDY Healthcare plc
Acquisition of new investments
Strategic update
Issue of new shares
20 March 2009: MDY Healthcare plc ("MDY Healthcare" or the "Company"), the strategic investor in healthcare companies, today announces it has agreed to acquire two quoted healthcare investments from 3i Group plc ("3i") for a total consideration of £3 million (the "Transaction").
In the Company's operational review announcement in February 2009, the Company announced that, in conjunction with a cost reduction programme, the Board was seeking to create shareholder value by exploring wider strategic investment opportunities. The directors are therefore pleased to announce the acquisition of stakes in ProStrakan Group plc and Santhera Pharmaceuticals Holding AG and the consequent increase in the Company's investment assets. The consideration payable to 3i will be satisfied by a combination of cash, new ordinary shares in the capital of MDY Healthcare and unsecured loan notes, further details of which are set out below. The directors have continued with the Company's planned cost reduction programme and have made a significant reduction in executive management costs and other operating costs going forward.
In addition, the Company announces that in accordance with its investment strategy of investing globally in companies within the healthcare sector with a particular focus on medical technology, it is in the process of establishing a fund to invest in medtech companies in China. The directors have identified a large and growing demand in China for mid-range medical devices and equipment and therefore an opportunity for a medtech-focussed growth capital investment strategy to be deployed in China. A new specialist investment company for China medtech is being formed and will be administered and managed by MDY Healthcare. The Company, alongside other identified investors who specialise in international medical devices, will be the initial investors in the new entity.
The Company will provide a further update on the China business in due course, and an update on the Company's investment portfolio will be made at the Company's Annual General Meeting scheduled to be held on 22 April 2009.
Under the terms of the Transaction, the Company has agreed to acquire from 3i, pursuant to a sale and purchase agreement dated 20 March 2009, a total of 2,439,024 ordinary shares in ProStrakan Group plc ("ProStrakan"), at a price of £0.615 per share, and 49,362 common shares in Santhera Pharmaceuticals Holding AG ("Santhera"), at a price of CHF 49.65 (approximately £30.39) per share, for a total consideration of £3 million. The prices paid by MDY Healthcare for the shares are the respective bid prices per share of each company's shares at the close of business on 19 March 2009. These stakes represent 1.21 % of ProStrakan's issued ordinary shares and 1.40 % of Santhera's issued common shares. ProStrakan (LSE: PSK) is a rapidly growing specialty pharmaceutical company engaged in the development and commercialisation of prescription medicines for the treatment of unmet therapeutic needs in major markets. The company's development capabilities are centred at its Galashiels' headquarters and Bedminster, New Jersey, USA. Sales and marketing of ProStrakan's portfolio of products are handled by commercial subsidiaries in the UK, US, France, Germany, Spain and other EU countries. The independent directors of MDY Healthcare for the purposes of the Transaction, being David Wong and Derek Ablett (the "Independent Directors"), consider that ProStrakan's financial position is strong in an environment where many companies in this sector require near-term funding (revenues £56.1 million, pre-exceptionals loss before tax of £21.3 million and cash position of £34.7 million, (all figures in respect of year ended 31 December 2008 on an unaudited basis)).
Santhera (SWX: SANN) is a Swiss specialty pharmaceuticals company focusing on the discovery, development and marketing of small molecule pharmaceutical products for the treatment of orphan neuromuscular diseases. Santhera's vision is to become a leading specialty pharmaceutical company offering therapies for a number of indications in this area of high unmet medical need, which includes many orphan indications with no current therapy. The investment in Santhera will give MDY Healthcare exposure to a Continental European stock traded on the SWX exchange. In February 2009, Santhera announced its financial results for the year 2008 with first revenues from product sales. As of 31 December 2008, Santhera had cash and cash equivalents of CHF 75.0 million. For the year 2008, Santhera reported a net loss of CHF 44.7 million.
Neither ProStrakan nor Santhera has declared or paid a dividend in its last audited financial year.
Further details of the Transaction
The consideration for the Transaction payable by MDY Healthcare is to be satisfied by (i) the payment to 3i at any time on or before 30 June 2009 of £1 million in cash; (ii) the issue to 3i on completion of the Transaction of 1,648,565 new ordinary shares in the capital of the Company at a price of 25 pence per share; and (iii) the issue to 3i on completion of the Transaction of £1,587,842 fixed rate unsecured loan notes (the "Loan Notes").
3i has committed to invest $1 million as a cornerstone investor in MDY Healthcare's new international business, subject, amongst other things, to the finalisation of documentation relating to its structure and the receipt by 3i from MDY Healthcare of the total £3 million consideration in respect of the Transaction.
At a board meeting on 20 March 2009, a total of 1,648,565 new ordinary shares of 1 pence each (the "Consideration Shares"), representing 10.13% of the Company's enlarged issued ordinary share capital, were allotted to 3i, subject to Admission, as part consideration for the Transaction, at a price of 25 pence per share, being the bid price of an ordinary share of the Company at the close of business on 19 March 2009. Application has been made to the London Stock Exchange for admission of the Consideration Shares to trading on AIM with admission expected to occur on 23 March 2009, when completion of the Transaction will occur. Following the Transaction, 3i will hold 4,865,231 ordinary shares in the Company, representing 29.90% of the Company's issued ordinary shares and the Company's issued ordinary share capital will comprise a total of 16,271,676 ordinary shares.
The Loan Notes are constituted by a loan note instrument dated 20 March 2009. The Loan Notes will be redeemable as to 50% on 31 December 2011, with the remaining 50% to be redeemed on 31 December 2012. However, the Company may, at its election, redeem the Loan Notes (in whole or in part) at any time on notice. Until the Loan Notes are redeemed or cancelled in accordance with their terms and conditions, interest will accrue on the principal amount of Loan Notes at the rate of 8% per annum and will be payable quarterly in arrears.
The acquisition of the healthcare investments from 3i constitutes a transaction with a related party for purposes of rule 13 of the AIM Rules for Companies (the "AIM Rules") by virtue of the fact that 3i is an existing substantial shareholder of the Company (owning approximately 22% of MDY Healthcare's issued ordinary share capital prior to the Transaction). Furthermore, Alan MacKay, a non-executive Director of the Company, is an employee of 3i. In accordance with the AIM Rules, the Independent Directors, having consulted with the Company's Nominated Adviser, Brewin Dolphin Limited, consider that the terms of the Transaction are fair and reasonable insofar as the Company's shareholders are concerned. In advising the Board, Brewin Dolphin Limited has taken account of the Independent Directors' commercial assessment of the Transaction.
David Wong, Chairman, said:
"The acquisition of these healthcare assets demonstrates that in difficult markets we can continue to build our investment portfolio and consolidate our position as a strategic investor in healthcare companies. These assets will enhance the overall liquidity of our portfolio of quoted companies."
For further information, please contact:
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MDY Healthcare plc |
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David Wong, Chairman |
+44 (0) 207 647 1800 |
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Financial Dynamics |
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Ben Atwell, Susan Quigley |
+44 (0) 207 831 3113 |
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Brewin Dolphin Limited (Nomad) |
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Matt Davis, Alison Barrow |
+44 (0) 845 213 4730 |
Notes for editors:
About MDY Healthcare
MDY Healthcare plc is a sector specialised strategic investing company quoted on AIM (ticker symbol: MDY). The company seeks to achieve superior returns for shareholders by investing globally in companies, both public and private, across the healthcare sector. The directors, executives and senior advisors have significant operational and investment experience in the sector and therefore the ability to identify and review a wide range of potential investments.
MDY Healthcare intends to publish its annual report and accounts for the year ended 30 September 2008 by the end of March 2009. When available, shareholders will be able to download the report and accounts from the Company's website. Further information can be found on the website www.mdyhealthcare.com.
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Related Shares:
3i Group