REG - Benchmark Hlgs PLC - Disposal of the Genetics Business

Benchmark HoldingsAnnouncement

25/11/2024 07:00

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RNS Number : 4922N  Benchmark Holdings PLC  25 November 2024

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 FOR IMMEDIATE RELEASE   25(th) November 2024

 

Benchmark Holdings plc

 

Disposal of the Genetics Business

 

-     Enterprise value of up to £260 million

-     Conclusion of the Strategic Review and termination of the formal
sale process announced in January 2024

-     Enables the Company to focus on its Advanced Nutrition and Health
business areas, return capital to shareholders and creates an opportunity to
reduce complexity and streamline the business

 

Benchmark Holdings plc ("Benchmark", the "Group", or the "Company"), a market
leading aquaculture genetics, specialist nutrition, and health business, is
pleased to announce that it has entered into a binding agreement to sell the
Company's genetics business area (by way of the disposal of Benchmark Genetics
Limited and Benchmark Genetics Norway AS and their respective subsidiaries)
(the "Genetics Business") to Starfish Bidco AS ("Starfish Bidco") (a wholly
owned subsidiary of Novo Holdings A/S ("Novo Holdings")) representing an
enterprise value of up to £260 million, including an initial consideration of
£230 million and additional contingent consideration of up to £30 million
(the "Transaction" or "Disposal").

 

Transaction highlights

 

·      Enterprise value of up to £260 million, representing a multiple
of 17.9x Adjusted EBITDA

·      Initial consideration of £230 million (the "Initial
Consideration")

·     Additional contingent consideration of up to £30 million (the
"Earn-Out Consideration"), based on the trading performance of the core salmon
sub-segment of the Genetics Business for the period from 1 October 2024 to 30
September 2027 (the "Earn-Out Period")

·      The Disposal will enable the Company to focus on its Advanced
Nutrition and Health business areas (the "Continuing Business"), and creates
an opportunity to reduce complexity and streamline the current Group structure
to significantly reduce costs

·     Net proceeds from the Disposal will be used to return capital to
shareholders and to reduce the Company's leverage, by repaying the Group's
unsecured floating rate listed green bond and drawn amounts under the Group's
revolving credit facility provided by DNB Bank ASA in full, thereby
strengthening the balance sheet of the Continuing Business

·     Completion of the Disposal is expected during the first quarter of
2025 subject to shareholder approval and receipt of customary regulatory
clearances ("Completion")

 

Conclusion of the Strategic Review and termination of the formal sale process

 

The Disposal concludes the previously announced Strategic Review.  The board
of the Company (the "Board") has also decided to terminate the formal sale
process under the City Code on Takeovers and Mergers (the "Takeover Code") and
is therefore no longer in an offer period under the Takeover Code.

 

Notice of Results

 

As announced separately today, the Company expects to release its full year
results for the 12-month period ended 30 September 2024 on 12 December 2024.

 

Trond Williksen, Benchmark CEO, commented: "I am pleased to announce this
agreement to sell our genetics business to Novo Holdings.  The Transaction
will unlock significant value and enable us to return capital to shareholders.

 

"The Disposal will also allow us to focus all our efforts on developing the
significant potential of our continuing business areas, Advanced Nutrition and
Health.  In addition, it will enable us to reduce complexity and streamline
the Group structure to significantly reduce costs.

 

"I would like to thank all our colleagues who have been working tirelessly
this year to deliver a robust performance amidst difficult market
conditions.  Novo Holdings will be an excellent new owner of the genetics
business and is in an ideal position to take the business forward."

 

Aleks Engel, Partner at Novo Holdings, commented: "We are very pleased to
announce plans to acquire the Benchmark genetics business from Benchmark
Holdings. Both animal and plant genetics hold immense potential to transform
the global food industry, enabling more efficient and sustainable ways to feed
a growing population. In particular, advancements in aquaculture genetics,
such as those in the salmon industry, present significant opportunities to
improve productivity, resilience, and environmental outcomes."

 

Background and rationale for the Disposal

 

As a result of discussions with its major shareholders, the Company announced
on 22 January 2024 that it would undertake a formal review of the Company's
strategic options (the "Strategic Review") including, but not limited to, a
sale of the Company as a whole or alternatively the potential sale of one or
more individual business units.

 

The Board engaged professional advisers and launched a process to establish
whether there would be a bidder or bidders prepared to offer a value for the
Company or its individual business areas that it would consider attractive
relative to the Board's view of intrinsic value.

 

Having conducted a targeted but extensive process, Benchmark received a number
of approaches from parties potentially interested in buying the Company and/or
each of its individual business areas.  Selected parties were invited to
enter into a thorough due diligence process.  Following a review of the
proposals received, the Board resolved that the offer from Novo Holdings to
acquire the Genetics Business represented the best option to unlock
significant value for shareholders, and to best position the Company to
realise the potential of the Continuing Business.

 

In reaching an agreement with Novo Holdings, the Board believes that it has
achieved an attractive result for the Company and its shareholders.  The
Disposal represents an enterprise value of up to £260 million and a multiple
of 17.9x Adjusted EBITDA.

 

Financial information in relation to the Genetics Business

 

For the last twelve months to 30 June 2024, the Genetics Business generated
revenue of £57.0 million and adjusted EBITDA of £14.5 million (the "Adjusted
EBITDA").  The net assets of the Genetics Business as at 30 June 2024
amounted to £52.8 million.

 

Strategy of the Continuing Business following the Disposal

 

The Disposal will enable the Company to focus on its Advanced Nutrition and
Health business areas,  which both have leading positions.  The Group will
maintain the strong financial discipline and commercial focus demonstrated
over the recent years.  The Disposal also creates an opportunity to reduce
complexity and streamline the current Group structure to significantly reduce
costs.

 

The Group's strategy in Advanced Nutrition will continue to be focused on
delivering specialist nutrition and health solutions that leverage our
technical and innovation capabilities to aquaculture farmers globally.  While
conditions in the Company's core cyclical shrimp market have been challenging
in FY24, the business has delivered a solid performance year to date
demonstrating resilience and commercial focus.  Looking forward, we expect
the business to benefit strongly as the shrimp markets recover.

 

In Health, following the significant reorganisation undertaken in FY24 to
pivot the Company's innovative sea lice solution, Ectosan® Vet and
CleanTreat®, to a less capital-intensive model, we now have a profitable
organisation.  Our longstanding solution, Salmosan Vet®, continues to be a
well-established sea lice treatment in the industry, and with Ectosan® Vet
and CleanTreat®, we have strong potential for growth once a suitable
customer-owned infrastructure is in place.  We will continue to work with
interested customers to develop the new business model.

 

The fundamentals of the Group's business remain strong and with the Group's
leading positions, ongoing innovation and talented team there is substantial
opportunity ahead.

 

It is currently expected that following the Disposal, the Company's ordinary
shares will remain admitted to trading on AIM and on Euronext Growth Oslo.

 

Further details on the strategy of the Continuing Business will be provided in
due course.

 

Transaction and use of proceeds

 

The Transaction will be effected through the sale of the entire issued share
capital of Benchmark Genetics Norway AS by Benchmark Genetics Limited to
Starfish Bidco and the sale of the entire issued share capital of Benchmark
Genetics Limited by the Company to Starfish Bidco.  Completion is expected to
occur, subject to shareholder approval and receipt of customary regulatory
clearances, during the first quarter of 2025.

 

The Initial Consideration of £230 million is subject to customary adjustments
by reference to completion accounts, based on the cash, debt and working
capital position of the Genetics Business, as well as certain other specified
liabilities agreed between Starfish Bidco and the Company.

 

After adjusting for the above (before any Earn-out Consideration is paid), the
Transaction is expected to realise gross proceeds of approximately £200
million, payable in cash at Completion.

 

Following Completion, it is the Board's intention to use the proceeds from the
Disposal to reduce leverage and return capital to shareholders.  The Company
will repay in full the Group's NOK750 million unsecured floating rate listed
green bond and associated make-whole and swaps as well as the drawn amount,
representing approximately £16 million as of 30 September 2024, under the
Group's revolving credit facility provided by DNB Bank ASA.  Further details
of the capital return including the exact amount, its form and timing will be
announced in due course.

 

As part of the Transaction, contingent Earn-Out Consideration of up to £30
million may also be payable by Starfish Bidco in cash subject to satisfaction
of certain revenue-based milestones within the core salmon sub-segment of the
Genetics Business, which incorporate revenue from salmon eggs and harvest
income excluding Benchmark Genetics Chile SpA, during the Earn-Out Period.
Any Earn-Out Consideration will be payable in a single instalment following
the end of the Earn-Out Period.

 

Should the Company receive any or all of the Earn-Out Consideration, the
Board, in consultation with shareholders as is practicable, will consider all
options open to the Company at the time, including a return of capital to
shareholders.

 

The Company has provided certain warranties and a tax covenant which are
typical for a transaction of this nature, in respect of which the Company's
liability is limited to £1, with Starfish Bidco's sole recourse being under a
warranty and indemnity insurance policy.

 

The Company has entered into a transitional services agreement for the
provision by the Company of limited operational (business as usual) services
and migration services (transition assistance) to the Genetics Business and
the provision by the Genetics Business of limited reverse services to the
Company, in each case for a period of up to three months from Completion with
options for the Genetics Business to renew for a period of a further six
months subject to certain conditions following Completion

 

On Completion, the Company will enter into certain agreements, including a
non-exclusive, worldwide, non-transferable, non-sublicensable, royalty-free
and fully paid up licence, on a perpetual and (subject to termination rights
under the licence) irrevocable basis, to the Genetics Business to exploit the
trademarks relevant to the "Benchmark" name.

 

In view of the size of the Genetics Business, relative to the Company, the
Disposal will result in a fundamental change of business of the Company for
the purpose of Rule 15 of the AIM rules and it is therefore conditional upon
the approval of shareholders at a general meeting, amongst other matters.

 

Certain shareholders have irrevocably undertaken to vote or procure to vote in
favour of the resolution to be proposed at the general meeting in respect of
526,403,136 ordinary shares, in aggregate representing approximately 71.16 per
cent. of the issued ordinary share capital of the Company as at 22 November
2024 (being the latest practicable date prior to the date of this
announcement).

 

The resolution for the approval of the Disposal to be proposed at the general
meeting is an ordinary resolution, requiring a simple majority only.  Given
the irrevocable undertakings received, it is expected that the resolution will
be passed at the general meeting and that this condition therefore will be
satisfied. Shareholders are reminded that the Disposal is also conditional
upon receipt of merger control and foreign investment clearances.

 

A circular containing the notice of the general meeting will be published and
a further announcement will be made in due course.

 

Enquiries:

For further information please contact:

 

 Benchmark Holdings plc                                                  Tel: 0114 240 9939
 Ivonne Cantu, Investor Relations

 Evercore (Financial Adviser to Benchmark)                               Tel: 020 7653 6000
 Julian Oakley, Simon Elliott, Julien Baril

 Rabobank (Financial Adviser to Benchmark)                               Tel: +31 30 7122755

 Reinier Henneman, Hans Pronk, Benny Vossen

 Deutsche Numis (Broker and NOMAD to Benchmark)                          Tel: 020 7260 1000
 Freddie Barnfield, Duncan Monteith, Sher Shah

 MHP Group (Press Enquiries)                                             Tel: +44 7890 952 661
 Katie Hunt, Reg Hoare, Samuel Garner                                    benchmark@mhpgroup.com

 

ABOUT BENCHMARK

 

Benchmark is a market leading aquaculture biotechnology company.  Benchmark's
mission is to drive sustainability in aquaculture by delivering products and
solutions in genetics, advanced nutrition and health which improve yield,
growth and animal health and welfare.

 

Through a global footprint in 26 countries and a broad portfolio of products
and solutions, Benchmark addresses many of the major aquaculture species -
salmon, shrimp, sea bass and sea bream, and tilapia, in all the major
aquaculture regions around the world.  Find out more at www.benchmarkplc.com
(http://www.benchmarkplc.com/)

 

ABOUT NOVO HOLDINGS A/S

 

Novo Holdings is a holding and investment company that is responsible for
managing the assets and the wealth of the Novo Nordisk Foundation.

 

The purpose of Novo Holdings is to improve people's health and the
sustainability of society and the planet by generating attractive long-term
returns on the assets of the Novo Nordisk Foundation.

 

Wholly owned by the Novo Nordisk Foundation, Novo Holdings is the controlling
shareholder of Novo Nordisk A/S and Novonesis A/S (Novozymes A/S) and manages
an investment portfolio with a long-term return perspective.

 

In addition to managing a broad portfolio of equities, bonds, real estate,
infrastructure and private equity assets, Novo Holdings is a world-leading
life sciences investor. Through its Seed, Venture, Growth, Asia, Planetary
Health and Principal Investments teams, Novo Holdings invests in life science
companies at all stages of development.

 

As of year-end 2023, Novo Holdings had total assets of EUR 149 billion.
www.novoholdings.dk

 

MAR

 

The information contained within this announcement is considered by the
Company to constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 ("MAR"), and the UK version of MAR which is part
of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.
Upon the publication of this announcement via a Regulatory Information Service
and Newspoint, this inside information will be considered to be in the public
domain.

 

PUBLICATION ON WEBSITE

 

A copy of this announcement will be made available at
https://www.benchmarkplc.com/ (https://www.benchmarkplc.com/) no later than
12:00 noon (London time) on 26 November 2024 (being the business day following
the date of this announcement) in accordance with Rule 26.1 of the Takeover
Code.  The content of the website referred to in this announcement is not
incorporated into and does not form part of this announcement.

 

OTHER NOTICES

 

This announcement is not intended to and does not constitute an offer to buy
or the solicitation of an offer to subscribe for or sell or an invitation to
purchase or subscribe for any securities or the solicitation of any vote in
any jurisdiction.  The release, publication or distribution of this
announcement in whole or in part, directly or indirectly, in, into or from
certain jurisdictions may be restricted by law and therefore persons in such
jurisdictions should inform themselves about and observe such restrictions.

 

Evercore Partners International LLP ("Evercore"), which is authorised and
regulated by the Financial Conduct Authority ("FCA") in the UK, is acting
exclusively as financial adviser to Benchmark and no one else in connection
with the matters described in this announcement and will not be responsible to
anyone other than Benchmark for providing the protections afforded to clients
of Evercore nor for providing advice in connection with the matters referred
to herein.  Neither Evercore nor any of its subsidiaries, branches or
affiliates owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Evercore in connection with
this announcement, any statement contained herein, any offer or otherwise.
Apart from the responsibilities and liabilities, if any, which may be imposed
on Evercore by the Financial Services and Markets Act 2000, or the regulatory
regime established thereunder, or under the regulatory regime of any
jurisdiction where exclusion of liability under the relevant regulatory regime
would be illegal, void or unenforceable, neither Evercore nor any of its
affiliates accepts any responsibility or liability whatsoever for the contents
of this announcement, and no representation, express or implied, is made by
it, or purported to be made on its behalf, in relation to the contents of this
announcement, including its accuracy, completeness or verification of any
other statement made or purported to be made by it, or on its behalf, in
connection with Benchmark or the matters described in this document.  To the
fullest extent permitted by applicable law, Evercore and its affiliates
accordingly disclaim all and any responsibility or liability whether arising
in tort, contract or otherwise (save as referred to above) which they might
otherwise have in respect of this announcement, or any statement contained
herein.

 

Coöperatieve Rabobank U.A., acting through its Corporate Finance Advisory
M&A department, is supervised by the European Central Bank and is acting
as exclusive financial adviser to Benchmark and to no other party in relation
to the matters described in this announcement. Coöperatieve Rabobank U.A. is
not responsible or liable to any other person in relation to the matters
described in this announcement and third parties shall have no (direct or
indirect) rights against Coöperatieve Rabobank U.A.

 

Numis Securities Limited (trading as "Deutsche Numis") is authorised and
regulated by the FCA in the UK and is acting as nominated adviser to the
Company and no one else in connection with the matters described in this
announcement and will not be responsible to anyone other than the Company for
providing the protections afforded to clients of Deutsche Numis nor for
providing advice in connection with the matters referred to herein. Neither
Deutsche Numis nor any of its affiliates (nor any of their respective
directors, officers, employees or agents), owes or accepts any duty, liability
or responsibility whatsoever (whether direct or indirect, whether in contract,
tort, under statute or otherwise) to any person who is not a client of
Deutsche Numis in connection with the matters set out in this announcement.

 

 

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