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Tuesday, October 12, 2004 5:08:29 PM
In the initial PR, DNAP announces that they will acquire 'Majority Ownership'. They will do this by obtaining 68% of the series B shares for $25 million. We are told that this equates to 51.77% of the 'equity' ownership. Additionally we learn that this increases Biofrntera's capitalization to $51 million.
My question has to do with the semantics of these statements. It is assumed by most of the members here that 'Majority Ownership' translates to 'Controlling Interest' [I know that's how I interpret it]. Interestingly enough there is no mention of 'control' in any of the PR's from either side. In fact, Biofrontera announces just exactly how they will spend the money, when one might assume that DNAP would, upon gaining control, decide where to spend the money.
Now $25 million only buys 49% of a $51 million dollar company. Furthermore if 68% of Series B shares is equal to 51.77% of equity, then 100% of series B shares is worth 76% of that equity. That means that some other Series of shares accounts for at least 24% of the equity. Have all shares been released yet?
My next question has to do with ownership dilution. Assuming that $25 million buys 51.77% of a company today and realizing that the deal will take 24 months to complete, what would be the effect on the 'ownership fraction' if someone else comes along in that time frame and buys another $25 million dollars worth of newly released shares?
I base this question on the Biofrontera statement that lists it's major shareholders as Heidelberg Innovation and the 3i group, and lists DNAP as a company that has agreed to obtain a 'significant stake' in Biofrontera. When the DNAP deal is completed do Heidelberg and 3i suddenly become minor shareholders? What happens to DNAP when the next investor comes along?
Anybody got any insight?
regards,
frog
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