Velan Holding to sell its entire holdings in Velan Inc. to Birch Hill Equity Partners

Core Viewpoint - Velan Inc. announced the sale of approximately 72.1% of its outstanding shares to Birch Hill Equity Partners for C$13.10 per share, totaling approximately C$203.9 million, which is expected to enhance the company's growth potential and operational capabilities [1][3][6]. Group 1: Transaction Details - Velan Holding will sell 15,566,567 multiple voting shares and one subordinate voting share, representing about 72.1% of the company's outstanding shares and 92.8% of its voting rights [1]. - Following a pre-closing reorganization, the final sale will include 13,276,492 multiple voting shares and 2,290,076 subordinate voting shares, representing approximately 72.1% of the outstanding shares and 91.9% of voting rights [2]. - The transaction is expected to close in the first half of 2026, pending regulatory approvals and customary closing conditions [3]. Group 2: Strategic Implications - Birch Hill aims to maintain Velan's presence in Quebec and support its growth both locally and internationally [4]. - The partnership is expected to improve Velan's access to capital and strategic support, enhancing its competitive position globally [6]. - The Special Committee of independent directors recommended facilitating the transaction, indicating it is in the best interests of the company [7]. Group 3: Financial Considerations - Estimated transaction-related fees are approximately C$12 million, with additional change of control costs of about C$5 million [8]. - Velan has agreed to suspend dividend payments until the closing of the transaction or termination of the Cooperation Agreement [7]. Group 4: Governance Changes - An Investor Rights Agreement will be established, allowing Birch Hill to appoint up to four of seven nominees to the Board as long as they maintain over 40% of the voting rights [9]. - The Board size is anticipated to be reduced to seven members following the transaction [9]. Group 5: Company Background - Velan Inc. is a leading manufacturer of industrial valves, with sales of US$295 million in the last fiscal year and operations in nine countries [14]. - Birch Hill is a mid-market private equity firm with over C$6 billion in capital under management and a history of driving growth in its portfolio companies [15].