See Why Babylon Health Needs to go Public

Posted on 06/04/2021


Alkuri Global Acquisition Corporation, (NASDAQ: KURI, KURIU, and KURIW), a special purpose acquisition company (SPAC), is merging to take Babylon Holdings Limited public. Upon closing of the transaction, the combined company will operate as Babylon and plans to trade on Nasdaq under the new symbol “BBLN”. The transaction reflects an initial pro forma equity value of approximately US$ 4.2 billion. The transaction is expected to close in the second half of 2021. The transaction is expected to deliver up to $575 million of gross proceeds to fund Babylon’s pro forma balance sheet, including the contribution of up to US$ 345 million of cash held in Alkuri Global’s trust account assuming no redemptions. The combination is further supported by a US$ 230 million private placement (PIPE) – funded over 85% from new, external institutional investors including AMF Pensionsförsäkring, Sectoral Asset Management and Swedbank Robur with strategic investor Palantir (NYSE:PLTR) – at $10.00 per share. There is additional participation from Babylon founder Ali Parsa, Alkuri Sponsors, and existing Babylon investors Kinnevik (STO:KINV-B) and VNV (STO:VNV).

In addition, Babylon previously acquired an option to purchase Higi, a consumer health engagement company, and intends to acquire the remaining Higi equity stake it does not already own. The major investors in Higi, including 7wire Ventures, Flare Capital Partners and William Wrigley, Jr., have agreed to accept shares in lieu of a portion of cash consideration if Babylon exercises its option. This agreement is expected to reduce Babylon’s cash needs by approximately US$ 40 million.

Assuming no redemptions, taking existing cash and transaction fees into account, Babylon is expected to have approximately US$ 540 million net cash on its balance sheet following the transaction, which will be used to pursue organic growth strategies as well as attractive and opportunistic acquisitions. The transaction reflects an initial pro forma equity value of approximately $4.2 billion and enterprise value of approximately US$ 3.6 billion.

Existing Babylon shareholders will roll 100% of their equity into the combined company and will own approximately 84% of the pro forma company at closing.

Babylon had US$ 79.272 million in unaudited annual revenue for 2020 and US$ 16.034 million in unaudited annual revenue for 2019.

Babylon had an unaudited net loss of US$ 184.729 million in 2020. Babylon had an unaudited net loss of US$ 140.287 million in 2019.

Babylon plans to grow by building a strong contract pipeline and expanding geographic coverage with existing customers, according to its recent investor presentation. Babylon competes against Teladoc, Amwell, Oak Street Health, and Accolade.

Source of Funds
Existing Babylon Shareholder Equity – US$ 3,515 million
Alkuri Cash in Trust – US$ 345 million
Existing Cash on Babylon’s Balance Sheet – US$ 15 million
PIPE Financing – US$ 230 million

Pro Forma Capitalization and Ownership at Close
Babylon Founder and CEO – 26.2%
Kinnevik Online AB – 13.1%
Vostok New Ventures (VNV) Ltd. – 8.7%
Public Investment Fund – 8.5%
Centene Corp. – 2.1%
Other – 25.8%
Alkuri SPAC Public Shareholders – 8.3%
PIPE Investors – 5.5%
Alkuri Sponsor – 1.8%

Some PIPE Investors
Kinnevik intends to invest US$ 5 million as part of a US$ 230 million private placement bringing Kinnevik’s ownership to 13% of Babylon Health when the transaction is finalized. In Kinnevik’s Interim Report for the First Quarter 2021, Kinnevik’s stake in Babylon Health was valued at SEK 2,680 million.

US$ 5 million from VNV Global (VNV Global AB’s (publ)) has been committed through a private investment in public equity at USD 10 per share. VNV Global is an investment company with the business concept of using experience, expertise and a widespread network to identify and invest in assets with considerable potential for value appreciation. The company has a special focus on online marketplaces and businesses with strong network effects.

Advisors
Ardea Partners LP is serving as financial advisor, Citi is serving as financial and capital markets advisor, and Wilson Sonsini Goodrich & Rosati, P.C., Allen & Overy LLP and Walkers (Jersey) LLP are serving as legal counsel to Babylon. Jefferies is serving as exclusive financial advisor and Winston & Strawn LLP is serving as legal counsel to Alkuri Global. Jefferies, Citi and Pareto Securities AB served as placement agents on the PIPE.

In 2019, Babylon Health closed a US$ 550 million round of funding.

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