SalvaRx Group plc (AIM: SALV), a biotechnology company focused on discovering and developing immunotherapies for cancer, announces that it has entered into a conditional sale agreement (the “Sale Agreement”) for the disposal of its interest in SalvaRx Limited, its 94.2 per cent. owned subsidiary, to Portage Biotech Inc. (“Portage”), a company listed on the Canadian Securities Exchange (“CSE”) for a consideration of US$67.5 million (the “Consideration”), to be satisfied by the issue of 757,943,784 new shares in Portage (the “Consideration Shares”) (the “Disposal”).
Concurrent with the Disposal, it is proposed that not less than 656,399,142 of the Consideration Shares (the “Demerger Shares”) will be transferred to Shareholders on a pro-rata basis, as explained below (the “Demerger”). Of the balance of the Consideration Shares, it is proposed that 40,692,698 Consideration Shares will be transferred to Option Holders in consideration of the purchase of their Redemption Options (the “Option Redemption”) (as explained below), and up to 60,851,944 Consideration Shares will be retained by the Company.
The Company will be seeking the approval of Shareholders to undertake the Disposal and the Demerger at the 2018 AGM, which will be scheduled shortly.
Highlights
· Consideration Shares valued at approximately US$75.8 million, representing a premium of over 250% to the current market valuation of SalvaRx*
· Shareholders who continue to hold SalvaRx shares will also receive 18 Demerger Shares (i.e. Portage shares) for every share in SalvaRx held on the Demerger Record Date, equivalent to approximately US$1.80* per SalvaRx share
· Portage has existing interests in four promising biotech companies and cash resources of approximately US$7.3 million which will be used to fund the ongoing development of the portfolio of oncology assets owned by SalvaRx Limited
· Portage has a history of creating value for its shareholders – one of its portfolio companies, Biohaven Pharmaceutical Holding Company Ltd (“Biohaven”) (NYSE:BHVN), was the second largest biotech IPO on NASDAQ in 2017. Portage subsequently announced a distribution in specie of its stock in Biohaven to its shareholders
· Portage intends to utilise the SalvaRx Limited management team, including Ian Walters, MD, CEO of SalvaRx, who is also on the board of Portage, to support the development of its expanded portfolio of immuno-oncology assets
· The Disposal and the Demerger constitute a fundamental change of business under the AIM Rules and will result in the Company becoming an AIM Rule 15 cash shell
· Following the Disposal and the Demerger, Ian Walters, Kam Shah, Richard Armstrong and Colin Weinberg shall each resign as directors of the Company and it is proposed that Denham Eke will be appointed to the Board
*Based on the Portage share price of US$0.10 (being the price of the last trade on the OTC on 10 August 2018, the last practicable trading date on the OTC prior to announcement of the Disposal)
Given the relatively disappointing performance of the Company’s share price on AIM, the Directors have determined that the Disposal and the Demerger is the best way to unlock and maximise value for Shareholders without causing dilution through raising additional funds at a price which they believe does not reflect the value of the Company’s underlying assets.
Ian Walters, CEO of SalvaRx, said: “I am pleased to sign a deal to sell our assets to Portage and at the same time crystallise value for the Company’s shareholders. Given Portage’s recent success and strong balance sheet, I believe it will be well placed to fund the assets of SalvaRx Limited through the next set of milestones.”
Declan Doogan, CEO of Portage, commented “We are excited about acquiring an additional portfolio of immuno-oncology assets. The SalvaRx team has assembled a diverse group of pharmaceutical products, and has demonstrated success in getting new products into the clinic. We have made an early investment in Stimunity, another Immuno-oncology platform, which is very complementary to SalvaRx’s products. With the combined team, we hope to accelerate the timeline to the clinic for these new drugs, and see if we can repeat the success achieved with Biohaven.”
The Disposal, which is also subject to approval by Portage shareholders, constitutes a reverse takeover of Portage (as the number of Consideration Shares exceeds 100 per cent. of the current issued share capital of Portage). The Portage shareholder circular is required to be reviewed by the CSE and therefore the transaction timetable, including the timing of the Company’s 2018 AGM, cannot yet be confirmed. On completion of the CSE review, both Portage and the Company will publish their respective shareholder circulars and a further announcement will be made by the Company.
On completion of (and subject to) the Demerger, the Company has also approved the proposed purchase of, in aggregate, 2,767,470 vested and unvested options and warrants (the “Redemption Options”) outstanding as at the date of execution of the Sale Agreement, in consideration of the transfer to relevant holders of, in aggregate, 40,692,698 Consideration Shares received by the Company on completion of the Disposal (in each case, the consideration is equal to the value of the Redemption Options based on the respective exercise price of each Redemption Option). The Redemption Options comprise all of the outstanding options and warrants of the Company other than options held by Mr James Mellon (the Chairman of the Company), Dr Greg Bailey (a Non-Executive Director of the Company), Northland (the Company’s nominated adviser) and Cornhill Capital Ltd.
