2017-04-28 14:43 ET - News Release
Mr. David Wolf reports
HAMILTON THORNE ANNOUNCES THE ACQUISITION OF GYNEMED GMBH & CO. KG AND RELATED FINANCING TRANSACTIONS; SIGNIFICANTLY EXPANDS PRODUCT OFFERINGS AND PRESENCE IN A KEY EUROPEAN MARKET; TRANSACTION IS EXPECTED TO BE MATERIALLY ACCRETIVE TO REVENUE AND EBITDA
Hamilton Thorne Ltd. has completed the acquisition of Gynemed GmbH & Co. KG for total consideration of 13.9 million euros (approximately $15.1-million (U.S.)).
Gynemed, based in Lensahn, Germany is a leading manufacturer and distributor of consumables and equipment for the in vitro fertilization ("IVF") clinic and laboratory markets. The Transaction results in the significant expansion of Hamilton Thorne's product offerings and provides the Company with profitable operations in the well-established European ART market. For the year ended December 31, 2016, Gynemed had revenues of approximately Euro 8.8 million (approximately US$9.6 million), net income of approximately Euro 2.2 million (approximately US$2.4 million) and EBITDA of approximately Euro 2.6 million (approximately US$2.8 million).
Key Benefits of the Transaction:
- Addition of a profitable portfolio of premium products that are highly complementary to Hamilton Thorne's existing product and service offerings
- Expected to be materially accretive to revenue and EBITDA
- Diversifies and increases product offerings and recurring revenue
- Opportunity to expand Gynemed product offerings into additional international markets and to increase European sales of existing Hamilton Thorne products
- Financed through the expansion of an existing credit facility and an equity offering
Dr. Fabian Sell, CEO of Gynemed commented, "My co-founders and I founded Gynemed 20 years ago to provide premium products backed by the highest quality scientific data. We are very pleased to be joining Hamilton Thorne who shares our belief in quality and service. We believe that the combination of the businesses can significantly accelerate the growth of both the Hamilton Thorne and Gynemed operations around the world. The management and board of Hamilton Thorne have been strong partners during this process and we look forward to the future of the combined Company."
Pursuant to the Transaction, Hamilton Thorne indirectly acquired 100% of the partnership interests of Gynemed and its general partner under the terms and conditions of share purchase and transfer agreement (the "Purchase Agreement") dated April 28, 2017 between a wholly owned subsidiary of the Hamilton Thorne, Gynemed's general partner and the limited partners and shareholders of Gynemed and its general partner (the "Sellers").
On closing, Hamilton Thorne paid aggregate consideration of approximately Euro 13.9 million (approximately US$15.1 million). The consideration consisted of approximately Euro 8.6 million (approximately US$9.3 million) in cash, the issuance of an aggregate of 5,525,523 common shares (the "Seller Shares") of Hamilton Thorne at a deemed issuance price of C$0.57 per share with a deemed aggregate value of approximately Euro 2.1 million (approximately US$2.3 million), and the issuance of 3 year, unsecured convertible debentures of Hamilton Thorne in the principal amount of approximately Euro 3.2 million (approximately US$3.5 million) (the "Debentures"). The Debentures will accrue interest at a rate of 4.25% per annum and are convertible, at the option of the holder, into common shares of Hamilton Thorne ("Conversion Shares") at a conversion price equal to the Euro equivalent of C$0.63 per Conversion Share based on a staged, 3-year optional conversion schedule (with 20%, 25% and 55%, respectively, of the outstanding principal amount of Debentures becoming convertible on each anniversary of the closing, subject to acceleration in certain circumstances). The Seller Shares will be subject to a 1-year escrow pending final calculation of certain closing adjustments and to satisfy any possible indemnity claims.
The seller was advised by Dr. Claus Michelfelder of CMC Medical AG.
Concurrent Financing Details
The aggregate cash component of this transaction was financed with the Company's cash on hand, an expanded secured credit facility from our existing senior lender Middlesex Savings Bank and through brokered and non-brokered private placements of common shares of Hamilton Thorne ("Offered Shares) at a price of C$0.54 per Offered Share for aggregate gross proceeds of C$12.5 million (approximately US$9.2 million) (the "Private Placement"). The expanded credit facility includes a new term loan of US$4.0 million (the "Term Loan"). The Term Loan bears interest at a rate of 4.49% per annum, amortizes over the life of the loan, and matures five years from the closing date. This Term Loan augments Hamilton Thorne's existing US$5.5 million term loan put in place to finance the acquisition of Embryotech Laboratories, Inc. (approximately US$5.0 of which is currently outstanding) and the Company's US$2.5 million line of credit (approximately US$1.3 million of which was outstanding as of closing). The Private Placement included the issuance of an aggregate of 15,774,068 Offered Shares (approximately C$8.5 million) on a best efforts agency basis (the "Brokered Private Placement") and an aggregate of 7,374,073 Offered Shares (approximately C$4.0 million) on a non-brokered basis (the "Concurrent Private Placement").
Bloom Burton Securities Inc. ("Bloom Burton") acted as financial advisor of Hamilton Thorne in connection with the Transaction and acted as sole agent in connection with the Brokered Private Placement. In connection with the Brokered Private Placement, the Agent received a total cash commission of $583,029.77 and 1,079,684 non-transferable broker warrants ("Broker Warrants"). Each broker warrant is exercisable for a period of 12 months into one common share of Hamilton Thorne at a price of C$0.54 per common share. The net proceeds were used by Hamilton Thorne to fund a portion of the cash component of the purchase price for the Transaction, and will be used for working capital and general corporate purposes and to fund potential future acquisitions.
All securities issued under the Private Placement and the Transaction will be subject to a four month hold period from the closing date under applicable Canadian securities laws. The Private Placement is subject to receipt of final acceptance from the TSX Venture Exchange.
Related Party Transaction
An aggregate of 2,600,000 Offered Shares representing gross proceeds of approximately C$1,404,000 were issued to certain "related parties" (as such term is defined in Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101")) to the Company pursuant to the Non-Brokered Private Placement. In accordance with MI 61-101, such related party subscriptions constitute a "related party transaction." The Company is exempt from the formal valuation requirement of MI 61-101 in connection with the related party subscriptions in reliance on section 5.5(b) of MI 61-101, as no securities of the Company are listed or quoted for trading on the Toronto Stock Exchange, the New York Stock Exchange, the American Stock Exchange, the NASDAQ stock market or any other stock exchange outside of Canada and the United States. Additionally, the Company is exempt from obtaining minority shareholder approval in connection with the related party subscriptions in reliance on section 5.7(1)(a) of MI 61-101, as the aggregate value of the related party subscriptions does not exceed 25% of the market capitalization of the Company.
Due to the expedited timeline of the Transaction and the Private Placement, there will be less than 21 days between the date the Company files its material change report in respect of the Private Placement and the Transaction and the completion date of the Private Placement.
Option Grant The Company also announced that it has granted a total of 550,000 stock options to Gynemed's employees to purchase common shares pursuant to the Company's incentive stock option plan. The options are exercisable at Cdn$0.63 per share, and expire ten years from the date of grant. Grants to employees vest over four years.
About Hamilton Thorne Ltd. (www.hamiltonthorne.com)
Hamilton Thorne is a leading world-wide provider of precision instruments, consumables, software and services that reduce cost, increase productivity, improve results and enable breakthroughs in Assisted Reproductive Technologies (ART) and developmental biology research markets. Hamilton Thorne's laser products attach to standard inverted microscopes and operate as micro-surgical devices, enabling a wide array of scientific applications and In Vitro Fertilization (IVF) procedures. Its image analysis systems are designed to bring quality, efficiency and reliability to studies of reproductive cells in the human fertility, animal sciences and reproductive toxicology fields. Hamilton Thorne's standardized toxicology assays and quality control testing services help to improve outcomes in human IVF clinics. Hamilton Thorne's growing worldwide customer base consists of pharmaceutical companies, biotechnology companies, fertility clinics, university research centers, animal breeding companies, and other commercial and academic research establishments, including Harvard, MIT, Yale, McGill, Oxford, Cambridge, the Smithsonian Institution, Charles River Labs, Covance, ABS Global, Sexing Technologies, Merck, Cook Medical, Novartis, Pfizer, and Dow Chemical.
About GYNEMED GmbH & Co. KG (http://www.gynemed.de)
GYNEMED GmbH & Co. KG is a leading manufacturer and distributor of products for reproductive medicine, including clinical and laboratory equipment and disposables, as well as complete installations of ART clinics. Gynemed offers a complete range of cell culture media for the embryology and andrology laboratory in the ART clinic. Founded in 1998, Gynemed's has, since inception, demonstrated a commitment to quality products and services in Germany, Austria and Switzerland and is expanding across other European markets and internationally.
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