Clearing all waivers ahead of structural partnership with Aquiline Drones
Drone Volt has announced the launch of a capital increase with preferential subscription rights for an amount of c.€3.5m, which may be increased to €4.1m in the event that the extension clause is fully exercised. This operation clears all the necessary steps to implement the partnership with Aquiline Drones.
Drone Volt has launched a capital increase with preferential subscription rights for an amount of c.€3.5m on a 10-for-1 basis at €0.22. The operation aims at clearing all the necessary steps to implement the partnership with Aquiline Drones and is backed 90% by the founders and managers of the company. The subscription period will run from 16 November 2020 to 27 November 2020 (inclusive).
All lights are green for the Aquiline Drones partnership
This capital increase enables the last pending condition to be waived before implementing the partnership with Aquiline Drones. Under its terms, Aquiline Drones will produce and commercialise the Hercules 2, the Altura Zenith, and its Pensar camera, at a rate of 1,000 units per month in the early life of the contract. Aquiline Drones targets ambitious volumes and would have to increase its production line by 3,000 units monthly, to reach a steady 10,000 units per month in total. Aquiline Drones’ strategy is to become the Uber of the drone, addressing the entire US market and benefiting from the banning of Chinese drones.
For its part, Drone Volt would be granted a 10% cut in revenue from the commercialisation of its drones and cameras over a 5-year licensing period. Drone Volt would be entitled to receive a minimum of $100k per month (which started in October 2020). On an annual basis, this would grant Drone Volt $1.2m per year, to be revised by +10% annually, for a minimum total value of $7.7m until 2025. In addition, Drone Volt should receive an upfront payment of $450k by the end of this year to compensate for the transfer of know-how. This also represents a unique way to address the US market, without the need to invest in either opex or capex.
In order to strengthen the partnership and benefit further from the value-added of the deal, both companies will swap their shares for 10% of their respective share base.
On our side and based on a conservative monthly run rate of 1k units in 2021, 1.5k units in 2022 and 3k unit in 2023, we model a positive impact on Drone Volt’s revenue of respectively €2m/€3.4/€7.4m over this period.
What it means for shareholders
This operation should allow current shareholders to increase their stakes in the capital of their companies on the same financial terms as those used for the exchange of shareholdings (10% of the respective capital of the two companies) between Drone Volt and Aquiline Drones, an operation which must be finalised before the end of January 2021. More concretely, based on the price pre-announcement (€0.254) and the parity of the deal (1 new share at €0.22 for 10 subscription rights), the current shareholder will receive on 12 November a subscription right theoretically valued at €0.003 for each share. This leads to a neutral economic situation for current shareholders since, in spite of a discount of c. 13% on the pre-announced price, the price to participate in the capital hike for new shareholders will be the subscription price topped by the need to purchase 10 subscription rights.
Lastly, in order to guarantee the success of the deal, the founder and managers of the company are backing the operation, up to 90% of its value should there be less interest.
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