Consolidated pro forma net debt8 would have been $39.1 million as of June 30, 2018, representing 1.6x pro forma EBITDA for the twelve months ended June 2018, prior to implementation of anticipated synergies, or 1.1x including the full implementation of expected synergies estimated at $10 million.
A new cornerstone investor supporting future development and strategy
OEP will become a new cornertorne investor of Inside Secure.
OEP is a middle-market private equity firm focused on the industrial, healthcare, and technology sectors in North America and Europe. The firm builds market-leading companies by identifying and executing transformative business combinations. OEP is a trusted partner with a differentiated investment process, a broad and senior team, and an established track record of generating long-term value for its partners. Since 2001, the firm has completed more than 170 transactions worldwide. OEP, founded in 2001, spun out of JP Morgan in 2015. The firm has offices in New York, Chicago, and Frankfurt.
Inside Secure business outlook for 2018
The Company confirms its business outlook for 2018 based on performance in the first nine months and current business activity: top line growth in 2018 is expected to more than offsetting the anticipated decline of a U.S. customer which generated an exceptionally high level of revenue from royalties in the second half of 2017. Adjusted operating expenses in 2018 are expected to be in the lower end of the previously communicated $36 million to $37 million range. The Company confirms it will generate positive EBITDA in 2018 before getting back to a normative EBITDA margin greater than 20% (on a stand-alone basis).
Governance
As from the completion of the EUR 30 million bond issue reserved for OEP, OEP will have the right to designate one director (administrateur) to the board of directors of Inside Secure and one board observer (censeur) for so long as it shall hold, together with its affiliates, a minimum fully-diluted (i.e. assuming the redemption of the redeemable bonds) shareholding in the Company equal to 15%, provided that, upon redemption of the redeemable bonds, OEP will have the right to request that its board observer be appointed as director.
The general shareholders’ meeting that will be convened to vote on the above-mentioned equity transactions will be asked to vote on such appointments.
Issuance of performance shares and stock options
In order to align interests of key employees and executives of the future combined group with those of the shareholders over the long term, the board also decided to request that shareholders authorize the grant of additional stock options and performance shares in an aggregate maximum of 1.3 million shares.
Upon recommendation of the nomination, compensation and governance committee and using the authorization given by the general shareholders’ meeting of May 16, 2018, the board of directors of the Company granted 220,000 performance shares (actions gratuites) to Mr. Amedeo D’Angelo, the Chairman and CEO of Inside Secure. The acquisition of 100,000 of these performance shares is subject to a service condition with Inside Secure as corporate officer or employee in the coming two years, and the vesting of the remaining 120,000 performance shares is subject to the completion of the contemplated acquisition of Verimatrix, it being specified that the board of directors may relieve Mr. Amedeo D’Angelo of one or more of the aforementioned conditions for all or some of the performance shares if it considers it in the interest of the company.
Next steps
Prior to the signing of the acquisition agreements, Inside Secure’s works council in France will be consulted with respect to the debt financing and the equity transactions contemplated in the context of the acquisition of Verimatrix.
The transaction is intended to be signed in January 2019 subject primarily to (i) completion of an “information and consultation” process with Inside Secure’s works council in France and, (ii) vote of Inside Secure’s shareholders on the equity transactions. It is expected to close in the first quarter of 2019, subject to customary closing conditions.
In the context of the above-mentioned equity transactions, Inside Secure will issue two prospectuses to be cleared (visés) by the French financial market authority (the Autorité des marchés financiers – the “AMF”) in respect of the redeemable bond issue and the rights issue.
About Inside Secure
Inside Secure (Euronext Paris – INSD) is at the heart of security
solutions for mobile and connected devices, providing software, silicon
IP, tools, services, and know-how needed to protect customers’
transactions, ID, content, applications, and communications. With its
deep security expertise and experience, the company delivers products
having advanced and differentiated technical capabilities that span the
entire range of security requirement levels to serve the demanding
markets of network security, IoT and System-on-Chip security, video
content and entertainment, mobile payment and banking, enterprise and
telecom. Inside Secure’s technology protects solutions for a broad range
of customers, including service providers, operators, content
distributors, security system integrators, device makers and
semiconductor manufacturers. For more information, visit
www.insidesecure.com
