(Alliance News) - KME Group Spa announced Tuesday that its subsidiary KME SE has signed a business combination agreement involving the special products business of cunova GmbH, in which KME SE itself holds a 45 percent indirect stake.

Control of cunova - 55 percent of the share capital - had been transferred from KME SE in January 2022 to The Paragon Fund III GmbH & Co. geschlossene Investment KG, a German private equity fund.

Among the signatories to the BCA are KME SE, Paragon and SDCL EDGE Acquisition Corporation - SEDA -, an acquisition vehicle company with NYSE-listed securities.

Under the terms of the BCA, cunova will be acquired indirectly by a publicly traded entity, the successor to SEDA, the company points out in a note.

As part of the transaction, cunova will also acquire KME Aerospace from KME Group, and the combined company, as a result of the merger, will be listed on the NYSE.

Upon completion of the planned Business Combination, KME SE will convert its 45 percent stake in cunova and the receivables also from cunova into shares of the combined company listed on the NYSE.

Upon completion of the transaction, KME SE will hold a majority stake in the NYSE-listed Combined Company and receive USD20 million in cash. Paragon, on the other hand, will fully exit its investment in cunova for a cash price and a vendor loan.

The Business Combination is expected to be finalized in the second quarter of 2024.

"The Business Combination has an important strategic value for the KME Group," the company points out, "because it allows it to reacquire the majority of cunova, increasing its potential through the contribution of KME Aerospace, resulting in holding control, approximately 60 percent, of a business with very strategically relevant future growth prospects.

At closing, the Combined Company is expected to have a pro-forma enterprise value of about USD736 million, including pro-forma net debt of USD289 million, and an equity value of about USD447 million, about 60 percent of which is held by KME SE.

KME Group's stock is down 0.6 percent at EUR0.89 per share.

By Chiara Bruschi, Alliance News reporter

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