On 30 June 2023, Legacy Capital, Spetses, Bacara Holdings, Lexington Holding Assets, Kleanthis G. Xanthopoulos, Panormos, Philippe Audi, and Nicolas Murat (the ”Bid Consortium”), through IR Holding Bidco Inc. (”IR Holding” or the ”Offeror”), announced a public offer to acquire all shares in IRRAS for SEK 0.18 in cash per share (the ”Offer”). The Offer values all shares in IRRAS at approximately SEK 143 million (based on 794,813,400 shares in IRRAS). IR Holding is a newly formed Delaware Corporation that currently is wholly-owned by Legacy Capital and will, at completion of the Offer, be owned by the members of the Bid Consortium.
The consideration offered in the Offer corresponds to a premium of:
- 18 per-cent compared to the closing price of the IRRAS share on Nasdaq Stockholm on 29 June 2023 of SEK 0.1531; and
- 30 per-cent compared to the volume weighted average share price of the IRRAS share on Nasdaq Stockholm during the 30 latest trading days up to and including 29 June 2023 of SEK 0.1387.
The acceptance period for the Offer commenced on 7 July 2023 and expires on 11 August 2023. IR Holding has reserved the right to extend the acceptance period for the Offer. Completion of the Offer is conditional upon, among other things, IR Holding obtaining the required regulatory clearance and that the Offer is accepted to such extent that IR Holding becomes the owner of more than 90 per-cent of the shares in IRRAS (on a fully diluted basis). IR Holding has reserved the right to waive one or more conditions, including completing the Offer at a lower acceptance level.
The Independent Bid Committee and the process for evaluating the Offer
As the Board members Marios Fotiadis and Kleanthis G. Xanthopoulos are shareholders of IRRAS and are participating in the Offer as part of the Bid Consortium, they have not participated in the Board’s evaluation of, or in the handling of or decisions regarding, the Offer. The Independent Bid Committee of IRRAS (the ”Committee”) consists of Anita Tollstadius (chairperson) and Catherine Gilmore-Lawless.
The Committee has appointed Carnegie Investment Bank AB (publ) as financial advisor and Setterwalls Advokatbyrå AB as legal advisor in connection with the Offer. The Committee has also engaged Grant Thornton Sweden AB (”Grant Thornton”) to provide a so-called fairness opinion regarding the Offer. Grant Thornton’s statement is attached to this press release.
The Committee’s perception of the Offer is based on an assessment of several factors that the Committee considers to be relevant in relation to the evaluation of the Offer. These factors include, but are not limited to, IRRAS’ current strategic and financial position, opportunities to obtain necessary financing for continued operations in the near term, prevailing market conditions, operational opportunities and challenges, the Company’s expected future development and opportunities and risks related to these factors.
In the evaluation of the Offer, the Committee has analysed the Offer using methods that are normally used to evaluate public offers regarding listed companies, including IRRAS’ valuation in relation to comparable listed companies and comparable transactions, bid premiums in previous public takeover offers on Nasdaq Stockholm, stock market expectations regarding IRRAS’ development, the Company’s share price and the Committee’s view of IRRAS’ ability to deliver value to shareholders in the long term based on the updated financial plan developed by management.
In addition, the Committee has considered that members of the Bid Consortium control 59.5 per-cent of the share capital and votes in the Company, where IRRAS’ main owners Spetses, Bacara Holdings and Lexington Holding Assets have stated that the Offer is the only alternative they are willing to support at this stage. Currently, the Company is dependent on a short-term loan facility from Bacara Holdings to finance its ongoing operations.
The Committee has also engaged with potential alternative bidders with the purpose of finding a more attractive offer. These contacts have not resulted in any competing takeover offer. The Committee notes that the significant shareholding that Spetses, Bacara Holdings and Lexington Holding Assets hold in IRRAS and the compressed timeline that the Company’s immediate capital needs entail, limit potential bidders’ interest in the Company. Therefore, as of the date of this statement, the Committee considers that the probability that another bidder will submit an alternative offer is low.
Upon written request from IR Holding, the Committee has permitted IR Holding to review limited information for confirmatory purposes in connection with preparation for the Offer. The insider information that has been exchanged in connection with the investigation was made public through a press release on 29 June 2023 by IRRAS.
The Committee’s considerations
IRRAS was listed in November 2017 and has since the listing worked according to a strategy to establish IRRAS with the main product IRRAflow as an innovative solution to manage brain haemorrhages with a focus on commercialisation and increasing sales. The increase in sales has taken significantly longer than expected, heavily influenced by external factors such as Covid-19, which has been communicated to the market and resulted in the Company revising its long-term financial goals on several occasions since the listing.
The slow increase in sales combined with high costs for regulatory preparations, developing production capacity and supporting clinical evaluations has resulted in a lack of profitability, and since the listing, the Company has financed its operations through the public capital market through both rights issues and directed share issues corresponding to a total amount of SEK 893 million. The latest capital raise, conducted as a rights issue, was completed in August 2022 and provided the Company with gross proceeds of SEK 215 million. Participation from IRRAS’ shareholders, excluding the main shareholders Bacara Holdings and Lexington Holding Assets, amounted to approximately 40 per-cent.
In the year-end report for the fourth quarter of 2022, the Company reported that they did not have sufficient funds to cover the planned operations for the next 12 months and that the Board of IRRAS had initiated a process to evaluate possible financing alternatives. An extensive process to secure continued financing for the Company has been ongoing during the spring 2023. As part of this process, Legacy Capital among many others was contacted to probe their interest in investing in IRRAS. After extensive discussions regarding a capital raise in the spring of 2023, Legacy Capital announced in June 2023 that it instead intended to, together with certain large shareholders of the Company, explore the possibilities of a take-private transaction, which ultimately resulted in the current Offer. Otherwise, the evaluation conducted during the spring of 2023 to find a financing solution has not resulted in any alternatives.
On 29 June 2023, IRRAS announced a change in its commercial strategy to focus resources towards market opportunities in the United States, including the closure of its wholly owned commercial subsidiaries in Europe. In line with the updated financial plan that the Company’s management has produced, it is estimated that additional funding of at least SEK 250 million is required to reach cash flow break-even and that break-even is not expected to be reached before 2026. Regardless of the Committee’s view of IRRAS’ ability from a long-term perspective, shareholders must be aware of the fact that all assumptions of future growth and profitability are associated with uncertainty regarding a number of factors, which individually or in combination, may cause the actual growth or profitability to deviate from the forecasted growth or profitability. Particular emphasis should be placed on uncertainty in forecasting the market’s acceptance of the Company’s main product IRRAflow.
IRRAS’ share price has over time reflected the market’s assessment of the Company’s results and growth prospects, and the Committee sees the negative share price development that has followed over time as a consequence of the uncertainty that exists among market participants as a result of the lack of sales growth in relation to the Company’s communicated financial targets from time to time, as well as the Company’s future financial development and immediate financing needs.
The Offer of SEK 0.18 per share implies a premium compared to the share price before the publication of the Offer and the Offer is also above the target price published before the publication of the Offer by the equity research analyst who covers IRRAS.
The Independent Bid Committee’s recommendation
The Board has a strong belief in the Company’s long-term prospects but is estimated to need additional funding of at least SEK 250 million to reach a positive cash flow.
The Committee also notes that the Company is in immediate need of funding. An extensive evaluation of different financing alternatives was conducted during the spring of 2023, which did not result in any concrete alternatives other than the Offer. The Company is currently dependent on a short-term loan facility from Bacara Holdings, which is part of the Bid Consortium. Unless the short-term loan facility is extended, there is a high risk of the Company becoming insolvent.
Risks associated with the development of the Company’s sales growth and future profitability, as well as the difficulty for the market to estimate the Company’s opportunities for financing, are factors that were reflected in IRRAS’ share price prior to the publication of the Offer. The same elements are reflected in Grant Thornton’s fairness opinion that considers the Offer to be reasonable from a financial perspective for the shareholders of IRRAS.
Consequently, the Committee has decided to recommend the shareholders of IRRAS to accept the Offer.
Effects for IRRAS and its employees
According to the Takeover rules, the Board must report its opinion on the impact that the fulfilment of the Offer may have on IRRAS, particularly employment, and its opinion on IR Holding’s strategic plans for the company and the effects that these can be expected to have on employment and the places where IRRAS conducts its business. IR Holding states the following in the press release regarding the Offer:
”The Consortium and IR Holding support the strategy set by the management team of focusing on developing a strong U.S. presence. Given the Consortium members’ and IR Holding’s knowledge of IRRAS, the Consortium and IR Holding do not intend to implement any material changes to IRRAS’ employees and management team, nor to the existing organisation and locations of the operations, except to optimise current spending plans and better align this with IRRAS’ long term strategy which, among other things, may involve an evaluation of IRRAS’ operational presence in Europe and Sweden going forward. As a result of the depressed stock price and IRRAS being incorporated in Sweden, the talented U.S. based management team is unable to receive stock based compensation at levels commensurate with their market value. The Consortium and IR Holding regard the continuity of management as vital to the ongoing growth and development of IRRAS’ business, and accordingly plan to retain the management team on competitive and attractive terms.”
The Committee assumes that IR Holding’s description is correct and, in relevant respects, has no reason to have any other opinion.
This statement by the independent committee is governed by and shall be interpreted in accordance with Swedish law. Disputes arising from this statement shall be settled exclusively by a Swedish court.
Stockholm the 23 of July 2023
The Independent Bid Committee for IRRAS AB (publ)
For additional information, please contact:
Anita Tollstadius, chairperson of the Independent Bid Committee for IRRAS AB, email email@example.com
This information is information that IRRAS AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the above contact person, at 22:30 CET on 23 July 2023.