Capital exchange with Aquiline Drones
Capital exchange with Aquiline DronesM&A /CORP. ACTION
Drone Volt will finalise the partnership with Aquiline Drones through a swap of c. 10% of their respective share bases. This second operation will effectively welcome Aquiline Drones into the Drone Volt capital and will strengthen the links between the two companies, with a partnership that we expect to be highly value creative for Drone Volt.
FACT
Drone Volt will finalise the partnership with Aquiline Drones through the signature of an investment agreement and the effective acquisition of cross-shareholdings between the two companies for up to c. 10% of their capital respectively. As such, Drone Volt will issue 19,259,415 new shares, subscribed by Aquiline Drones at a price of €0.225, i.e. 9.70% of its current capital. In exchange, Drone Volt will subscribe for 990,000 new shares of Aquiline Drones giving it an equivalent share of the capital of c. 9.90%. The payment of both subscription prices will be released by offsetting claims between the two partners. The subscription period is open from 9 December to 16 December 2020 (which may be closed early).
ANALYSIS
Reinforcement of the partnership
This second operation will effectively welcome Aquiline Drones into the Drone Volt capital and will strengthen the links between the two companies. It complements the first phase, i.e. the capital increase launched in November, which allowed current Drone Volt shareholders to participate in the deal under similar conditions.
Production ramp-up might be delayed…
Drone Volt recognised that, due to travel constraints, the ramp-up of the production might be somewhat delayed. However, we leave our current estimates unchanged on this deal as we took a rather conservative approach to it from the beginning. In addition, we could have a positive surprise on the ASP arising from the mix of the Pensar intelligent camera with the Altura Zenith drone production.
…but still a highly value accretive deal
The US market is evolving, on the back of foreign drones’ interdictions (targeting Chinese drones), which should propel Aquiline Drones’ sales. Drone Volt will receive 10% of the revenue generated from the commercialisation of its drones and cameras by Aquiline Drones over a 5-year licensing period. The company will also 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 addition, this deal will provide Drone Volt with the ability to use up to 25% of Aquiline Drones’ production capacity in the country, giving Drone Volt an additional option going forward.
IMPACT
Our estimates are unchanged, but the target price is lowered by 9%, reflecting the additional amount of equity created compared to our initial estimates.
Drone Volt SA. Drone Volt SA is a France-based company principally engaged in the aerospace industry. The Company provides civilian drone manufacturing. It specializes in the production, integration and sale of drones for professionals. Drone Volt is a provider of the audiovisual market in the field of aerial photography by drone. The Company is also present in many other markets such as security and topography, among others. The Company's main product is the Pack PRO FOR GH4 S900. It cooperates with Ministry of Internal Affaires, Ministry of Defense, CERN, Gendarmerie Transports Aeriens (aerial transport police), Dakar 2015, Spie, TF1, Bouygues, CNRS, Bonne Pioche, RAID and GEDEON Programmes, among others. It operates through Dandrone.
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