BioLight (TA:BOLT) has announced in the last week that the Chinese investor (the Fund), which signed a non-binding letter of intent (LOI) to privatise BioLight, is unable to implement the deal as planned in its original format. BioLight indicates that this is due to recently adopted policies by Chinese authorities that can restrict Chinese investors’ ability to invest capital outside China. The LOI proposed the acquisition of 45% of BioLight’s currently outstanding shares (COS) at a price of NIS16.50 per share. BioLight is holding discussions with the Fund to examine various alternatives that could allow the transaction to continue in its original form or another, but there is no certainty that such a transaction will proceed.
We estimate that the original LOI offer to purchase 45% of BioLight’s 2.6m COS at NIS16.50/share would have cost c NIS19.4m (c $5.1m). To account for the scenario where the Fund may not be in a position to proceed with the LOI transaction, we believe that BioLight management is also seeking other avenues to financing for the firm and extend BioLight’s financial runway. Given its NIS31.8m Q316 net cash position and our projected 2017 NIS31.7m burn rate, we believe the firm would likely need to raise capital in H117, if an acquisition were not to proceed.
Given its current market capitalisation, the level of dilution that would arise from an equity raise could be substantial. Hence, we believe that strategic partnerships, a sale/privatization of the company or debt financings are preferred by management to equity issuances, at this stage.
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