Rex Bionics investors have backed a deal that will see their investment diluted to little more than a third of the company in exchange for a A$10 million (NZ$10.7m) lifeline by Australian fund manager and fellow shareholder BioScience Managers.
At a meeting in London on Monday, Rex shareholders voted in favour of a deal that would pour the company's business and assets into its Australian subsidiary, Rex Pty, which would then sell A$7.5m of shares to BioScience, lifting the fund manager's stake to 64 per cent, Rex said in a notice to the London Stock Exchange. BioScience would also commit to a further investment of A$2.5m if certain targets were met, in a rights issue that the existing Rex investors could participate in.
The second part of the transaction would see Rex sign a two-year development agreement with McLaren Applied Technologies, a unit of the luxury car maker McLaren Group, to design the next phase of the Rex product in an effort to reduce the cost of making the exoskeletons which help wheelchair-bound people walk. McLaren would be issued warrants to help pay for its services, which could dilute existing Rex shareholders down to 29.2 per cent.
In March, Rex said it would probably need external funding to keep operating after struggling to raise capital to pay for a prototype of the new product. The directors yesterday said if the transaction isn't approved the company won't be able to pay its debts and will have to stop operating or kick off an insolvency procedure immediately, which would wipe out shareholders' entire equity investment.
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The transaction will see the board and management of the Australian subsidiary assume responsibility for the strategic direction and day-to-day running. The board of Rex Pty will be made up of BioScience managing director Jeremy Curnock Cook, BioScience appointees Amanda Gillon and Bill Hunter, and current Rex Bionics chair David Macfarlane.
The notice of meeting says Rex expects there to be significant investment in staff, facilities and development programmes in Australia, where BioScience-managed funds focus their investment, while the New Zealand subsidiary will own the patents, product registrations, operating systems and other intellectual property required to operate the Rex business.
Rex has been a beneficiary of Callaghan Innovation funding, receiving research and development grants totalling $2.9m before it listed on the London Stock Exchange's AIM market in 2014 with a condition that production stayed in New Zealand until 2017.
The listed entity will delist from the AIM market around the end of June and continue as an unquoted company to provide input and support to Rex Pty through its board representative, it said in the notice.