U.K. Government Considers Review of Hytera’s Acquisition of Sepura
Monday, April 03, 2017 | Comments

Hytera Communications’ pending US$92 million acquisition of Sepura has hit challenges, with a possible U.K. government review and changes from investors.

Sepura announced 29 March that it was notified by the U.K. Department for Business, Energy and Industrial Strategy that it is “currently minded to initiate a review of the acquisition.” The department sought representations from Sepura, which Sepura said it will provide expeditiously. Sepura continues to evaluate the potential process and implications of such a review if implemented, a statement said.

In December 2016, Chinese professional mobile radio (PMR) provider Hytera made a binding offer to buy U.K.-based PMR technology company Sepura for 20 pence (US$0.25) in cash per Sepura share.

In relation to the recommended cash offer by Project Shortway, a wholly owned subsidiary of Hytera Communications, for the entire share capital of Sepura, the January acquisition documents disclosed that Alphagen Capital provided Hytera with a letter of intent in favor of the acquisition in respect of 36.4 million Sepura shares, representing about 9.84 percent of the Sepura shares in issue at 12 January.

Hytera announced 3 April that it has been informed that Alphagen Capital is no longer able to comply with the residual commitments in the letter of intent following a transfer of the management of the relevant Sepura shares. Henderson Global Investors and Lombard Odier Asset Management entered into an agreement whereby the management of certain funds has been transferred from affiliates of Henderson to affiliates of Lombard Odier. Accordingly, Alphagen Capital is no longer able to comply with the residual commitments set out in the letter of intent, a Hytera statement said.

Sepura announced 31 March that it entered into an agreement with its lenders to defer the 31 March covenant tests to 15 May. Last November, Sepura said that it would likely require a waiver of some of its covenants from March 2017. Further to that announcement, Sepura announced the deferral with an option to further defer to 31 May in certain circumstances.

Finally, Sepura announced that it no longer needs approval from German competition authorities for the proposed takeover by Hytera, leaving the possible U.K. review and an ongoing review in Spain.

“… As it has now become apparent that Sepura's turnover in Germany for the financial year ending 31 March 2017 will be below the relevant turnover threshold for the acquisition to constitute a notifiable transaction, Sepura and Hytera have informed the German Bundeskartellamt that they have withdrawn their filing in respect of the acquisition,” Sepura said in a statement.

The filing in Spain under the Spanish merger control regime to the National Markets and Competition Commission is ongoing, and Hytera and Sepura are continuing to engage with the Spanish commission.

Hytera and Sepura shareholders previously approved the transaction.

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