TIDMTERN
RNS Number : 3676U
Tern PLC
02 December 2021
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
2 December 2021
Tern Plc
("Tern" or the "Company")
Device Authority Strategic Investment from Venafi, Capital
Restructuring and Additional Funding
Tern Plc (AIM:TERN), the investment company specialising in the
Internet of Things ("IoT"), is pleased to announce that as part of
a US$2.91 million funding package for Tern's portfolio company,
Device Authority Limited ("Device Authority") has received a
US$1.25 million strategic investment from Venafi Inc ("Venafi"), a
leader in providing machine identities, alongside a further US$1.25
million investment from Tern (the "DA Fund Raise").
Highlights
-- US$2.91 million equity funding of Tern's portfolio company,
Device Authority, including a US$1.25 million strategic investment
from Venafi, a leading provider of machine identity protection who
Device Authority has been working with since 2019, and a US$1.25
million (GBP0.94 million) investment by Tern, alongside $0.41
million from other existing Device Authority shareholders, Alsop
Louie Partners and a Samenuk Family Trust.
-- Device Authority has simplified its capital structure,
involving, inter alia, the conversion of loan notes into equity,
including the US$4.3 million of convertible loan notes held by
Tern, plus interest of US$0.6 million accrued to date.
-- Following these initiatives Tern now holds 53.8% of Device
Authority's equity, with a book value of US$19.8 million
(approximately GBP14.8 million) as implied by the price at which
this latest funding has been undertaken. This compares to an
unaudited book value of GBP12.9 million as at 30 June 2021 and
Tern's investment of GBP0.94 million in the DA Fund Raise.
Commenting, Al Sisto, CEO of Tern, said: "I am very pleased that
Device Authority has been able to secure this strategic investment
from Venafi, uniting leading solutions to ensure IoT security from
the device to the data centre. The combination of the complementary
market positions of Device Authority and Venafi has already
delivered significant benefits for both companies and this
deepening of the relationship will, we believe, help deliver
increased future shareholder value.
"This strategic investment from Venafi has been structured to
maximise the commercial benefit to Device Authority, minimise the
impact to the current stakeholders and provide Device Authority
with sufficient capital for at least the next 12 months, given its
2022 growth plans. Alongside the strategic investment from Venafi
the capital structure of Device Authority has also been simplified
to make it more appropriate as the business matures. We look
forward to Tern continuing as Device Authority's majority
shareholder and benefiting from the results of the deeper
partnership with Venafi."
Commenting Darron Antill, CEO of Device Authority said: " Over
recent months we have been delighted to work with new customers in
industries such as automotive where IoT security is becoming even
more crucial as the C-suite continues to prioritize managing risk
within their organizations and their supply chains to protect
customers. We continue to see an increase in customers who require
a retrofit solution for legacy devices already deployed in the
field, as well as those who make security an important part of
their planning and development phase of a new IoT solutions. As the
requirement for a Software Bill of Materials (SBOM) becomes
mandatory in the US for software vendors contracting with the
federal government in 2022, the drive for transparency of security
within IoT products will force manufacturers to take action.
"I am delighted to welcome Venafi as a new strategic investment
partner to Device Authority and we are grateful for the continued
support of our existing investors."
Jeff Hudson, CEO of Venafi, commented "Since IoT devices are
critical business enablers for a wide range of organizations, this
investment is perfectly aligned with Venafi's mission to ensure all
machine identities are managed and protected. Venafi has always
been laser focused on innovation so we're excited about the
opportunity to deepen our relationship with Device Authority in
order to accelerate the delivery of fast, frictionless solutions
that secure the machine identities of edge and IoT devices against
devasting supply chain attacks."
Strategic investment by Venafi
Venafi has invested US$1.25 million in the DA Fund Raise to
secure a 3.4% equity stake in Device Authority to further deepen
the strategic relationship.
Venafi is a privately held cybersecurity company that develops
software to secure and protect cryptographic keys and digital
certificates. In December 2020, Thoma Bravo, a leading private
equity investment firm focused on the software and
technology-enabled services sectors, acquired a majority stake in
Venafi in a deal valuing Venafi at US$1.15 billion.
Device Authority has been working closely with Venafi since
joining its Machine Identity Protection Development Fund in late
2019, as announced by Tern on 31 October 2019. The fund was used to
provide a new turnkey code signing and update delivery extension to
Device Authority's KeyScaler product, powered by Venafi CodeSign
Protect, to connect security team policy and controls, securing the
code signing process. Device Authority has since created a security
certificate authority service connector for the Venafi Platform,
which will allow KeyScaler customers to use the Venafi platform as
a source for certificate issuance.
Investment by Tern, capital restructuring, warrant issue and
conversion of loan notes
The structure of the DA Fund Raise, which comprises the issue of
" Class A" shares in DA, is intended to support Device Authority's
2022 plans and provide them with an operational runway for at least
the next 12 months. Alongside the US$1.25 million investment from
Venafi and a further US$0.41 million investment by existing Device
Authority shareholders, Alsop Louie Partners and a Samenuk Family
Trust, Tern has invested US$1.25 million in the DA Fund Raise. The
amounts invested by the existing Device Authority shareholders,
including Tern, incorporate short term loans advanced to Device
Authority against such shareholders' commitment under the DA Fund
Raise whilst the transaction was being negotiated.
The opportunity has also been taken to simplify the capital
structure of Device Authority by removing the rights of the "Class
B" shares and the "Class C" shares to receive, in aggregate, 25% of
the total sale proceeds on a liquidity event.
Device Authority's existing outstanding convertible loan notes
have been converted into "Class A" shares, in line with their
terms. Tern held US$4.9 million of loan notes and interest accrued
to date, all of which has been converted to equity. US$2.4 million
of convertible loan notes, including interest, outstanding to other
Device Authority shareholders has also been converted to equity on
the same terms.
The investors in the DA Fund Raise, together with the holders of
the loan notes that have been converted, have been issued with
warrants over Device Authority ordinary shares. All the Device
Authority warrants in issue are now exercisable only in the event
that the company is sold at a valuation in excess of US$50 million.
Tern holds 54% of the Device Authority warrants in issue, with an
aggregate exercise cost of approximately GBP0.63 million.
Following the DA Fund Raise and capital reorganisation the
implied post money valuation of Device Authority, at the DA Fund
Raise price, is US$36.7 million (approximately GBP27.5 million).
Tern holds 53.8% of Device Authority's equity which has a book
value of US$19.8 million (approximately GBP14.8 million) based on
this valuation. This compares to an unaudited book value of Tern's
holding in Device Authority of GBP12.9 million as at 30 June 2021
and Tern's investment of GBP0.94 million in the DA Fund Raise. On a
full exercise of all the warrants issued by Device Authority, but
not including the exercise of any share options granted to Device
Authority employees, Tern would own 54.0% of Device Authority's
then diluted equity.
Enquiries
Tern Plc via IFC Advisory
Al Sisto (CEO)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
David Worlidge / Alex Brearley (Corporate
Finance)
Matt Butlin / Kelly Gardiner (Sales
and Corporate Broking)
IFC Advisory Tel: 0203 934 6630
(Financial PR and IR) tern@investor-focus.co.uk
Tim Metcalfe
Graham Herring
Florence Chandler
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END
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