WISeKey International Holding Ltd and OpenLimit Holding AG announced that they have signed a Memorandum of Understanding (“MoU”) regarding a contemplated business combination to be executed via a statutory merger under Swiss law, whereby OpenLimit would be merged with and into WISeKey, with WISeKey thus being the surviving entity. The entry into definitive agreements is in particular subject to satisfactory reciprocal confirmatory due diligence, to be conducted over the next month, and other conditions as are customary. In addition to the MoU, WISeKey has agreed to provide interim financing to OpenLimit through subscription to an equity-linked instruments issued by OpenLimit.

WISeKey is a Swiss cybersecurity company whose Class B Shares are listed on the, SIX Swiss Exchange. OpenLimit is a Swiss cybersecurity company listed on the Main Market of Deutsche Boerse.

Indicative Terms of the Transaction

In the context of the contemplated merger WISeKey and OpenLimit have signed an MoU to finalize merger conversations over the next 5-6 weeks based on an agreed exchange ratio range (the “Exchange Ratio Range”) of 7 OpenLimit shares for 1 WISeKey Class B share to 12 OpenLimit shares for 1 WISeKey Class B share – i.e. “7:1” to “12:1”.

Based on WISeKey’s closing price of CHF6.69 (€6.17) per Class B share on 22 July 2016, the Exchange Offer Ratio Range values OpenLimit between €0.50 to €0.90 Cents per OpenLimit Share.

The parties have agreed to progress all required work leading to the singing of a definitive Merger Agreement for a statutory merger transaction under Swiss law until the end of August 2016 (“Signing”), subject to a mutually agreed extension. At Signing, the definitive Exchange Ratio will be determined based on the relative share prices of WISeKey and OpenLimit during the relevant period prior to Signing and based on a fairness opinion obtained by each company.

Concurrently with execution of the MoU, WISeKey has agreed to provide interim financing to OpenLimit of up to €4.99m, in the form of an equity-linked financing facility, structured in two tranches. Tranche I, a convertible loan with a principal amount of up to €2.5m will be made available in four sub-tranches, the payment of which will occur subject to the progress of the pending merger discussions. Tranche II, convertible loan with a principal amount of up to €2.49m will be made available subject to the entry into of the definitive merger agreement.

The merger will create the leading, listed European cybersecurity player ideally positioned to capture the numerous growth opportunities.

The merger transaction will result in an increased free float and stronger liquidity for the combined entity. The definitive transaction is subject to execution of definitive agreements, the satisfaction of various conditions, including approval by the shareholders of both WISeKey International Holding Ltd and OpenLimit Holding AG.

Addressing fast growing IoT market

The ability to authenticate and remotely manage millions of networked, automated devices and equipment is becoming pervasive − from the factory floor, to a car manufacturer, to the hospital operating room, to the residential home − everything, from refrigerators, watches, wearables to wine bottles, is connecting and communicating via the Internet.

The Internet of Things security market is expected to grow from $6.89 billion in 2015 to nearly $29 billion by 2020 according to a report published by Markets and Markets, thus growing at an annual rate of 35% over the next five years. These massively deployed connected objects are facing regular attacks hence generating a large need for trusted end-to-end cybersecurity solutions. We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be an integrated and comprehensive trusted platform, involving all technology elements from digital identification, Root of Trust Semiconductors, algorithms, blockchains and Artificial Intelligence to the service of 4IR ecosystem.

Chairman & CEO of WISeKey, Carlos Moreira commented on the envisaged merger: “With this business combination, we continue our mission to position of WISeKey Cybersecurity Platform as the first ever consolidated integrated vertical process providing a total “chip to root solution” to our existing clients and users and will also give us access to OpenLimit customers, in particular in Germany and other large and more mature markets in Europe. WISeKey will be reinforced with 65 staff located in Berlin and will fully participate on Industry 4.0 German vision for the future of manufacturing, one where smart factories will use the WISeKey IoT Platform to digitize their processes and reap huge benefits in the form of improved quality, lower costs, increased efficiency and enter the 4th Industrial Revolution”.

Chairman, René C. Jäggi of OpenLimit commented: “The combined product and service portfolios of WISeKey and OpenLimit will enable the group to provide more comprehensive, state-of-the-art solutions to the IoT-market. OpenLimit brings additional expertise in the development of certified IT-security solutions for embedded devices to the group and has many existing customers in the German market, as well as other international markets. We will therefore focus our efforts on successfully concluding the merger. With today’s MoU, both groups have taken the first step towards this important milestone”.

ACXIT Capital Partners act as financial advisor and arranger to WISeKey and Homburger and Freshfields act as legal counsels to WISeKey in this transaction. Vischer Rechtsanwälte and Linklaters are acting as legal counsels to OpenLimit