REG - Tern PLC - Device Authority Fund raise

TernAnnouncement

27/12/2023 07:00

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RNS Number : 9042X  Tern PLC  27 December 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE
EUROPEAN UNION (WITHDRAWAL) ACT 2018).  UPON THE PUBLICATION OF THIS
ANNOUNCEMENT THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE WITHIN THE PUBLIC
DOMAIN.

 

27 December 2023

 

Tern Plc

("Tern" or the "Company")

 

Device Authority Fund raise

 

Tern Plc (AIM:TERN), the investment company specialising in supporting high
growth, early-stage, disruptive Internet of Things ("IoT") technology
businesses, announces that Device Authority Limited ("Device Authority"), a
company in which Tern had a 53.8% shareholding at 21 November 2023, has agreed
a Series B type fundraising round (the "Fundraising"), securing up to US$7.0
million in new equity investment from Ten Eleven Ventures, and US$0.3 million
from Alsop Louie Capital 3, L.P via conversion of short-term loans.  Of the
Fundraising, Tranche One ("T1") of US$4.0 million is expected to be completed
before the end of 2023.  Tranche Two ("T2") of US$3.3 million, is contingent
on approval pursuant to the National Security and Investment Act 2021 ("NASI")
and acceptance of the approval by Ten Eleven Ventures.

 

Highlights

 

·    Device Authority has agreed US$4.0 million of a planned US$7.3
million total Fundraising, US$3.7 million from Ten Eleven Ventures and US$0.3
million from Alsop Louie Capital 3, L.P via conversion of short-term loans.
The remaining US$3.3 million from Ten Eleven Ventures is contingent on
approval pursuant to the NASI and acceptance of the approval by Ten Eleven
Ventures

 

·    The total Device Authority Fundraising is intended to provide Device
Authority with sufficient funding to enable to grow in line with its strategy
beyond the end of 2024, including expanding its US activities

 

·    In conjunction with the Device Authority Fundraising, US$2.1 million
of Device Authority convertible loan notes are to be converted into equity
with reference to the Fundraising price, in line with the conversion terms of
these loan notes

 

·    Tern is to convert all of its Device Authority convertible loan notes
together with all accrued interest (representing a total of US$1.0 million),
into equity, in line with the terms of these loan notes but will invest no new
money in this Device Authority Fundraising

 

·    Device Authority will, from the proceeds of the Fundraising, repay in
cash the US$175,000 of short-term loans provided by Tern in full, with accrued
interest to date

 

·    From completion of T1 of the Device Authority Fundraising, including
the conversion of Tern's Device Authority convertible loan notes to equity,
Tern will hold 35.7% of Device Authority's equity (before any dilution on
exercise of share options), valued at approximately US$7.7m (approximately
£6.1m) at the valuation implied by the Device Authority Fundraising issue
price

 

·    On acceptance of the NSAI approval by Ten Eleven Ventures and
completion of T2 of the Device Authority Fundraising, Tern will hold 29.5% of
Device Authority's equity (before any dilution on exercise of share options),
which would be valued at approximately US$7.4 million (approximately £5.9
million) at the valuation implied by the Device Authority Fundraising issue
price

 

Commenting Ian Ritchie, Chairman of Tern, said:

"We are pleased with the progress Device Authority is continuing to make and
with a substantial investment from astute investors we, and the other
shareholders in the business, believe that Device Authority's progress will be
accelerated, particularly in the US.

 

"The Board of Tern are constantly assessing all of our portfolio companies for
the value that can be achieved from an immediate exit versus that potentially
achievable with further growth capital.  We do not believe that now is the
right time for Tern to sell its interest in Device Authority given the current
valuation landscape and with the further progress that Device Authority can
make with this investment.

 

"Whilst the valuation of the Device Authority Fundraising reflects the current
venture capital market conditions, importantly we believe that it will provide
the growth platform that will enable a premium valuation on exit and a
substantially greater return for Tern's shareholders in the future.  Cyber
security is essential for global commerce and the completion of the total
series B type funding will give Device Authority a sufficient runway to
achieve its potential during 2024 and beyond.

 

"Ten Eleven Ventures has a strong track record of providing a hands-on
approach to develop cybersecurity technology businesses to the stage when a
valuable exit can be achieved.  We look forward to working with the Ten
Eleven team to maximise the investment value for Tern shareholders from Device
Authority and I look forward to making further announcements in due course."

 

Device Authority Series B type Fund raise

 

Prior to the Device Authority Fundraising, Tern had a holding of 53.8% in
Device Authority, plus had loans convertible into Device Authority equity of
US$0.9 million, with accrued interest of US$0.1 million and short-term,
non-convertible, unsecured loans of US$175,000.  As at 30 June 2023, the date
of Tern's last published book valuation, this investment had an unaudited book
value of £11.9 million.

 

Device Authority has agreed the Fundraising, securing up to US$7.0 million in
new equity investment from Ten Eleven Ventures and US$0.3 million from Alsop
Louie Capital 3, L.P via conversion of short-term loans.  Of the Fundraising
T1 of US$4.0 million is expected to be completed before the end of 2023.  T2
of US$3.3 million, is contingent on approval pursuant to the NASI and
acceptance of the approval by Ten Eleven Ventures. T2 will be completed at
such date as may be notified by Ten Eleven Ventures (in their absolute
discretion) to Device Authority on or prior to 30 September 2024, provided
that such date shall be: (i) no earlier than the fifth Business Day after NSIA
approval has been obtained; and (ii) no later than the fifth Business Day
after the date that Device Authority was notified by Ten Eleven Ventures.

 

Following T1 of the Fundraising, the conversion of Tern's US$0.9 million of
loan notes and the conversion of US$1.2 million of loan notes held by other
investors, Device Authority is now valued in total, at the price implied by
the Device Authority Fundraising, at US$21.7 million on a post-money basis and
Tern will have a holding of 35.7% in Device Authority (before any dilution on
exercise of share options), with an unaudited book valuation of approximately
US$7.7 million (approximately £6.1 million).  On acceptance of the NSAI
approval by Ten Eleven Ventures, Device Authority will be valued in total, at
the price implied by the Device Authority Fundraising, at US$25 million on a
post-money basis and Tern will hold 29.5% of Device Authority's equity (before
any dilution on exercise of share options), which would have an unaudited book
valuation of approximately US$7.4 million (approximately £5.9 million) at the
valuation implied by the Device Authority Fundraising issue price.

 

Further information on Device Authority

 

Device Authority is a global leader in Identity and Access Management ("IAM")
for the IoT; focused on the automotive, medical device ("IoMT") and industrial
("IIoT") sectors. Device Authority's KeyScaler™ platform provides zero touch
provisioning and complete automated lifecycle management for securing IoT
devices and data at scale, with frictionless deployment across device
provisioning, authentication, credential management, policy based end-to-end
data security/encryption and secure OTA (over the air) and HSM (hardware
security module) updates.

 

Device Authority has recently received further recognition of its market
position, being positioned, for the fifth year in a row, as a 'Leader' in the
2023 SPARK Matrix™ for IoT Identity and Access Management (IoT IAM) released
by Quadrant Knowledge Solutions on 11 December 2023.

 

According to Swathi Suresh, Analyst, Quadrant Knowledge Solutions, "Device
Authority offers an IoT security platform titled KeyScaler to enhance and
streamline security measures within an IoT environment. The platform serves as
a centralized hub engineered to oversee the lifecycle of cryptographic keys
and credentials across a spectrum of IoT devices. The KeyScaler platform
empowers organizations by seamlessly integrating with existing security
setups, ensuring a cohesive approach to access control, authentication, and
encryption across connected devices. Its advanced features enable secure key
generation, distribution, and revocation, bolstering the overall resilience
and reliability of IoT networks. This innovative solution not only protects
sensitive data but also optimizes operational efficiency, presenting a
comprehensive, scalable, and adaptable security framework for the
ever-evolving IoT landscape. Device Authority has received strong ratings
across technology excellence and customer impact and has been positioned as a
leader in the SPARK Matrix™: IoT Identity and Access Management (IoT IAM),
2023."

 

Device Authority also won the 'IoT Security Champion' award at the recent
TechWorks Awards held in Manchester on 7 December 2023.

 

Based on Device Authority's latest statutory accounts for the year ended 31
December 2022, as at that date it had net assets of £1,257,622 and incurred a
loss for the year of £2,566,776.  Given the historic nature of these figures
Tern does not consider this to be representative of the current business and
trading performance of Device Authority.

 

Further Information on Ten Eleven Ventures

 

Ten Eleven Ventures is a multi-stage global specialist venture capital
investor focused on the cybersecurity sector, headquartered in the USA.  Ten
Eleven was founded in 2014, has raised over U$1 billion in capital and has a
track record of successful investments and exits.  These include Darktrace,
where Ten Eleven first invested in 2016, before guiding the business to an IPO
on the London Stock Exchange in 2021 valuing Darktrace at US$3 billion.

 

Further information on Ten Eleven may be found at: https://www.1011vc.com
(https://www.1011vc.com)

 

Enquiries

 

 Tern Plc                                                       via IFC Advisory

 Ian Ritchie (Chairman)

 Allenby Capital Limited                                        Tel: 0203 328 5656

 (Nominated Adviser and Broker)

 Alex Brearley / Dan Dearden-Williams (Corporate Finance)

 Kelly Gardiner / Guy McDougall (Sales and Corporate Broking)

 IFC Advisory                                                   Tel: 0203 934 6630

 (Financial PR and IR)                                          tern@investor-focus.co.uk (mailto:tern@investor-focus.co.uk)

 Tim Metcalfe

 Graham Herring

 Florence Chandler

 

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