Proposed expansion of investment policy & capital raise

BACIT Limited - Proposed expansion of investment policy & capital raise

PR Newswire

London, November 7

7 November 2016

THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION

This announcement is for information purposes only and does not contain or constitute an offer of, or the solicitation of an offer to buy, any securities referred to herein to any person in any jurisdiction, including the United States, Australia, Canada, Japan or South Africa. Neither this announcement nor anything contained herein shall form the basis of, or be relied upon in connection with any offer or commitment whatsoever in any jurisdiction.

This announcement is an advertisement and not a prospectus. It does not constitute an offer of securities for sale or subscription in any jurisdiction. Investors should not subscribe for or purchase any securities referred to in this announcement except in compliance with applicable securities laws and only on the basis of information in the prospectus (the "Prospectus") proposed to be published by BACIT Limited in connection with the issue and the proposed admission of new ordinary shares (the "New Ordinary Shares") to listing on the Premium Segment of the Official List (the "Official List") of the Financial Conduct Authority (the "FCA") and to trading on the main market for listed securities of London Stock Exchange plc (the "London Stock Exchange") (together, "Admission"). Once published, a copy of the Prospectus will be available for inspection, subject to applicable securities laws, from the Company’s website at www.bacitltd.com.

BACIT LIMITED ("BACIT" OR THE “COMPANY”)

PROPOSED EXPANSION OF INVESTMENT POLICY AND CAPITAL RAISE IN ORDER TO EVOLVE INTO A LIFE SCIENCE INVESTMENT CHAMPION

Highlights

o Acquire Syncona LLP (“Syncona”), founded by Wellcome, which owns an existing portfolio of life science investments.

o Acquire either all or a majority of the interest in the CRT Pioneer Fund currently held by Cancer Research UK.

o Place new ordinary shares with Wellcome and Cancer Research UK (the “Firm Placing”).

o Make a placing and open offer of ordinary shares to existing eligible shareholders and other new investors (the “Placing” and the “Open Offer”) subject to a cap on the Company’s net asset value of £1 billion.

o Recruit the investing team of Syncona (the “Syncona Investment Team”) (the “Proposals”).

Commenting on the Proposals, Tom Henderson, Founder of BACIT said:

“We began BACIT in order to boost drug discoveries in the fight against cancer, both as a donor and as an investor and we have enjoyed a special relationship with The Institute of Cancer Research from the outset. That aim evolved into our investment, alongside Cancer Research UK, in the CRT Pioneer Fund. The same logic has given rise to this transaction, which will create a national champion of life science investing and accelerate the achievement of our aim: to win the battle against cancer and to create great returns for our investors at the same time.” 

Also commenting on the Proposals, Martin Murphy, CEO of Syncona, said:

“Aligning with the premium charitable life science funders, Wellcome and Cancer Research UK, provides a compelling opportunity to capture significant value from the commercialisation of the UK’s best life science technology while delivering life changing outcomes for patients.”

“The UK’s world leading position in life science innovation needs the support of an expert, deep pool of long term capital that can support and develop ideas from the laboratory bench through to patient adoption. This transaction would see the creation of a UK life science champion, with the scale, capital backing and long-term vision to realise the full commercial potential of this world-class life science base.”

Dr. Jeremy Farrar, Director of Wellcome, said:

“We launched Syncona with a long term vision to offer support for some of the best innovators in life sciences and to deliver impact to patients. It has already achieved great things and this proposal, which will see it align with BACIT and Cancer Research UK, will allow it to spread its wings and expand its horizons further. We see this as a logical next step for Syncona and we look forward to watching it and the companies it supports expand and prosper.”

Sir Harpal Kumar, CEO of Cancer Research UK, said:

“This partnership with Wellcome and BACIT provides the opportunity to build a company with the vision and scale to bring significant long term capital to the development of oncology programmes, delivering new innovations faster to patients. This is an important step in our mission to bring forward the day when all cancers are beaten.”

Paul Workman, CEO of The Institute of Cancer Research, said:

“This innovative and exciting initiative is wonderful news for the discovery and development of new treatments for cancer and other diseases in the UK. This could catalyse the transformation of the entire ecosystem.”

The Proposals

Following consultation with its major Shareholders, the board of directors of BACIT (the “Board”) today announces a number of measures, including the expansion of its investment policy, to allow BACIT substantially to increase its life science investments in addition to its existing commitment to the CRT Pioneer Fund. These include the acquisition of Syncona, which owns an existing portfolio of life science investments and either all or a majority of Cancer Research UK’s interest in the CRT Pioneer Fund, as well as the recruitment of the Syncona Investment Team.

To capture the significant value opportunity in UK life science and medical innovation, BACIT intends to hold and finance its life science investments until they reach commercialisation, and beyond, with a view to building standalone companies capable of achieving valuations in excess of £1 billion. 

BACIT will continue to make investments in alternative investment funds until such time as it requires financing for specific life science investments. BACIT intends to evolve over a number of years to predominantly become a life science investment company. BACIT would reserve the right to make new alternative investments on a fee bearing basis. 

Over the longer term, BACIT intends to target a shareholder return of 15 per cent. IRR net of fees and expenses1. BACIT intends to continue to pursue its progressive dividend policy. 

In addition, the Company proposes to raise new capital to finance its expansion. BACIT will issue new ordinary shares at the Offer Price on a non-preemptive basis to Wellcome and Cancer Research UK through the Firm Placing and make a placing and open offer of ordinary shares to existing Shareholders and other new investors through the Placing and Open Offer. 

BACIT will also offer a share sale facility to permit existing Shareholders who do not wish to remain invested in the Company following implementation of the Proposals to sell their shares at the Offer Price less dealing costs (the “Liquidity Facility”). 

Implementation of the Proposals will be subject to (a) Shareholders providing the requisite approvals in respect of the Proposals and (b) the number of ordinary shares sold in the Placing and Open Offer at least matching the number of ordinary shares offered for sale under the Liquidity Facility. 

The Company will also bring forward the discontinuation resolution that would otherwise have been proposed at its annual general meeting in 2017 and implementation of the Proposals will be conditional on Shareholders voting against the discontinuation resolution and removing the requirement that it is proposed in the future. The Company will also propose to amend its articles of incorporation to provide that the Company may only make a material amendment to its investment policy by way of an extraordinary resolution of its shareholders (requiring three-quarters of the votes cast on the resolution to be in favour).

BACIT expects to hold an extraordinary general meeting of Shareholders in respect of the Proposals in December and to despatch the shareholder circular (the “Circular”) in respect of that meeting later this month. 

Life science portfolio

Pursuant to the Proposals, BACIT will acquire Syncona and either all or a majority of the interest in the CRT Pioneer Fund held by Cancer Research UK.

The investments owned by Syncona, details of which follow, are principally early stage life science investments with the potential for significant upside for shareholders:

BACIT will also acquire either all or a majority of Cancer Research UK’s 35.5 per cent. stake in the CRT Pioneer Fund. BACIT currently has a £20 million commitment to the CRT Pioneer Fund therefore its pro forma interest in the CRT Pioneer Fund will be up to 64.3 per cent. The CRT Pioneer Fund is a £70 million venture life sciences fund established by Cancer Research UK and Cancer Research Technology in 2012. The fund’s objective is to bridge the investment gap between cancer drug discovery and early development by taking potential cancer drugs from discovery through to their entry into Phase II clinical trials.

Once the CRT Pioneer Fund is fully committed or at the end of its investment period, BACIT and Cancer Research UK intend to enter into a pipeline agreement, on terms materially identical to Cancer Research UK’s existing agreement in respect of The Pioneer Fund, under which Cancer Research UK would make life science investments available to BACIT on a “first look” basis, and it is expected that the investment managers of the CRT Pioneer Fund will join the Syncona Investment Team.

Capital raise

Pursuant to the Proposals, Wellcome, the sole existing investor in Syncona, has agreed to invest approximately £319 million in new ordinary shares of BACIT through the Firm Placing at the Offer Price, which equals the purchase price payable by the Company for Syncona of approximately £166 million plus the value of Wellcome’s uncalled commitment to Syncona. On implementation of the Proposals, Wellcome will own more than 30 per cent. of the Company’s issued share capital. Accordingly, the Proposals are conditional on the Company’s existing shareholders passing a Takeover Code Rule 9 “whitewash” resolution in respect of Wellcome’s investment. 

In the event that the Company acquires a majority of the interest in the CRT Pioneer Fund held by Cancer Research UK, Cancer Research UK has agreed to invest approximately £17 million in new ordinary shares of BACIT through the Firm Placing at the Offer Price, of which approximately £7 million is in respect of the value of its interest in the CRT Pioneer Fund which will be purchased by BACIT as at 30 September 2016, and the remainder is the value of its uncalled commitment to that interest.

In addition to the Firm Placing, BACIT will make the Placing and Open Offer to existing eligible shareholders and other new investors. Neither the Firm Placing nor the Placing and Open Offer are being underwritten. 

Shares will be issued and sold in the Firm Placing and the Placing and Open Offer at an Offer Price per ordinary share equal to 101.35 per cent. of the Company’s prevailing unaudited net asset value per share to avoid dilution of existing Shareholders’ economic interest in the Company.

By way of example, taking the Company’s unaudited net asset value per share of 125.88p as at 30 September 2016 as the prevailing unaudited net asset value per share, the Offer Price would be 127.58p. At this price the Placing and Open Offer would raise up to, approximately, £184.7 million. In this example, under the Open Offer, each qualifying shareholder (being shareholders who are not located in territories in which the extension or availability would breach applicable law) would be offered the opportunity to subscribe for ordinary shares at the Offer Price on the basis of 1 ordinary share for every 2.66732 ordinary shares held and registered in their name as at the close of business on the record date for the Open Offer, and so on in proportion to any greater or lesser number of ordinary shares then held. To the extent that qualifying shareholders do not take up their entitlement under the Open Offer, those shares may be acquired under the Placing. Qualifying shareholders who apply for their Open Offer entitlements in full may apply to acquire additional ordinary shares that are not otherwise taken up under the Open Offer. It is expected that the Offer Price will be based on the Company’s unaudited net asset value per share as at 31 October 2016. The full terms of, and timetable for, the Open Offer will be announced in conjunction with publication of the Circular and Prospectus. 

BACIT will also offer its existing Shareholders the opportunity to sell their existing ordinary shares to incoming investors through the Liquidity Facility at the Offer Price, subject to dealing costs, conditional on the Proposals being approved by Shareholders. These existing ordinary shares may be utilised to satisfy demand under the Placing and Open Offer in substitution for the issue of new ordinary shares.

Implementation of the Proposals, including completion of the Firm Placing and the Placing and Open Offer, is conditional on demand for ordinary shares under the Placing and Open Offer at least matching the number of existing ordinary shares which Shareholders elect to sell under the Liquidity Facility.

Investment management arrangements

On implementation of the Proposals, the existing Syncona investment management team will become employees of a new wholly-owned management subsidiary of BACIT whose chief executive officer will be Martin Murphy, currently the chief executive officer of Syncona. On receipt of the relevant regulatory authorisation, this new subsidiary will become BACIT’s alternative investment fund manager with investment discretion regarding the allocation and investment of BACIT’s portfolio between life science investments and alternative investment funds.

BACIT UK will continue as investment manager of the alternative investment funds portfolio, both before and after the new wholly-management subsidiary becoming the Company’s alternative investment fund manager.

The costs of the new subsidiary (including employee remuneration) are not expected to exceed 1 per cent. of net asset value per annum. In addition, a long term incentive plan will be put in place for the life science investment management personnel. BACIT UK will continue to be paid an investment management fee of 0.19 per cent. of net asset value per annum such fee to be reduced to 0.15 per cent. after an initial fixed period of 5 years and subject to a review of performance. Adoption of the long term incentive plan and the amendments to the BACIT UK investment management agreement will be subject to Shareholder approval.

The Company will also propose BACIT changes its name to Syncona Limited.

Additional BACIT directors

Conditional on the Proposals being approved by Shareholders, the Board will expand to include several new appointments designed to broaden the skillset of the Board and enhance its life science expertise.

Continuance of charitable donation

Following implementation of the Proposals, BACIT will continue to make an annual charitable donation, half donated to The Institute of Cancer Research and half donated to The BACIT Foundation for onward distribution among other charities. To take account of the increased size of the Company, the relevant percentage to be donated will be reset at 0.3 per cent. per annum of BACIT’s net asset value. Assuming that the Proposals are implemented, BACIT will ensure that, for the two financial years following the financial year ending 31 March 2016, the annual charitable donation per year will not be less than the amount donated for the financial year ending 31 March 2016.

Information on Syncona

Syncona is an evergreen healthcare investment company that identifies, develops and finances innovative life science technologies with the potential of delivering transformative healthcare products. Syncona was founded in 2012 by Wellcome and has seven current investments spanning areas such as gene therapy, cell therapy and patient stratification technologies.

Information on Cancer Research UK

Cancer Research UK is the world’s leading cancer charity dedicated to saving lives through research and whose vision is to bring forward the day when all cancers are cured. In the year 2015/16, Cancer Research UK committed a total of £432 million to cancer research projects and is the world’s largest independent supporter of cancer research.

Information on the Wellcome Trust

Wellcome exists to improve health for everyone by helping great ideas to thrive. It is a global charitable foundation, both politically and financially independent. It supports scientists and researchers, take on big problems, fuels imaginations and sparks debate.

Further information

The Circular and Prospectus are intended to be made available as soon as practicable. It is anticipated that an extraordinary general meeting of Shareholders to obtain these approvals would be held in December 2016 and the Proposals implemented before the end of 2016. 

For further information please contact:

Northern Trust International Fund Administration Services (Guernsey) LimitedTel: +44 (0) 1481 745 368J.P. Morgan Cazenove, BookrunnerWilliam SimmondsJames MitfordTel: +44 (0) 207 588 2828Tulchan CommunicationsDoug CampbellSiobhan WeaverTel: +44 (0) 207 353 4200Temple Bar AdvisoryEd OrlebarTel: +44 (0) 7738 724 630

Important Notices

Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"), or distributed, directly or indirectly, in the United States. Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended. In addition, the New Ordinary Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and, subject to certain exceptions, may not be offered, sold, pledged, or otherwise transferred, directly or indirectly, in or into the United States or to or for the account or benefit of US persons (as such terms are defined in Regulation S under the Securities Act ("Regulation S")). There will be no public offer of the New Ordinary Shares in the United States.

The securities to which this announcement relates have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any United States regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy of adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States.

The securities referred to herein have not been registered under the applicable securities laws of Australia, Canada, Japan or South Africa and, subject to certain exceptions, may not be offered or sold within Australia, Canada, Japan or South Africa or to any national, resident or citizen of Australia, Canada, Japan or South Africa.

Marketing for the purposes of the Directive 2011/61/EU (the “AIFMD”) by the Company and/or a third party on its behalf in relation to the Placing and Open Offer will only take place in an EEA Member State if the Company is appropriately registered or has otherwise complied with the requirements under AIFMD (as implemented in the relevant EEA Member State) necessary for such marketing to take place.

Any purchase of ordinary shares in the Placing and Open Offer should be made solely on the basis of the information contained in the Prospectus, which will contain detailed information about the Company and its management.

This announcement contains statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "continues", "estimates", "plans", "projects", "prepares", "anticipates", "expects", "intends", "aims", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. The forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth and strategies. The forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

The timetable for the implementation of the Proposals, including the date of admission of the New Ordinary Shares, may be influenced by a range of circumstances such as market conditions. There is no guarantee that the Proposals will be implemented and that admission will occur. Therefore, no investment decisions should be on the Company's intentions in relation to the Proposals at this stage. Acquiring the shares to which this announcement relates may expose an investor to a significant risk of losing all or part of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments and should ensure they fully understand and accept the risks which will be set out in the prospectus when published. This announcement does not constitute a recommendation concerning the Proposals. The value of shares and any income from them can decrease as well as increase. Past performance is not a guide to, and should not be relied upon as a guide to, future performance. Potential investors should consult a professional adviser as to the suitability of the Proposals for the person concerned.

J.P. Morgan Cazenove is authorised by the Prudential Regulation Authority (the "PRA") and regulated in the United Kingdom by the PRA and the FCA. J.P. Morgan Cazenove is acting exclusively for the Company and no one else in connection with the Proposals, and will not regard any other person as their respective clients in relation to the Proposals and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients nor for providing advice in relation to the Proposals, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

[1] Assuming implementation of the Proposals. This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indication of the Company’s expected or actual future results. Investors and potential investors should decide for themselves whether or not this target rate of return for the Company is reasonable or achievable in deciding whether to invest in the Company.

[2] This is an estimate only and not a profit forecast. There can be no assurance that this estimate will be met and it should not be taken as an indication of the Company’s expected or actual future results. Potential investors should decide for themselves whether or not this estimation is reasonable or achievable in deciding whether to invest in the Company.