Disclosure in accordance with section 111c (1) and (4) of the German Stock Corporation Act (Aktiengesetz – AktG) with the objective of Europe-wide distribution
As an extension of its current business activities, DBAG will enter into a partnership with ELF Capital Advisory GmbH (“ELF Capital”) based in Frankfurt am Main. DBAG will thus acquire a majority stake in ELF Capital as well as in ELF European Lending Management I S.à r.l., ELF European Lending Management II S.à r.l. and ELF Capital Solutions Management S.à r.l. (the “Transaction”). By means of put and call options, the transaction provides for a gradual increase of DBAG’s stake in these companies to 100 per cent over the next five years.
ELF Capital offers private debt solutions for small and medium-sized enterprises. The expansion of DBAG’s business activities to include private debt and the related debt fund exposure require DBAG to give up its status as a special investment company as well as insert an amendment to DBAG’s corporate object, including the corresponding amendments to the Memorandum and Articles of Association. In the course of the transaction, DBAG concludes various agreements with related parties (as defined in section 111a (1) sentence 2 of the AktG). Closing of the transaction is, inter alia, subject to the condition precedent that DBAG’s General Meeting approves the required amendments to the Memorandum and Articles of Association.
Specifically, the following contracts are to be classified as related party transactions in the context of the transaction:
- Amendment of the Memorandum of Association of DBG New HoldCo GmbH & Co. KG (in the future: DBG ELF Advisor Holding GmbH & Co. KG and hereinafter “Advisor Holding KG”), a fully-consolidated subsidiary of DBAG, with DBAG as the managing limited partner and further shareholders; DBG New HoldCo Verwaltungs GmbH (in the future: DBG ELF Advisor Holding Verwaltungs GmbH), also a fully-consolidated subsidiary of DBAG, with Tom Alzin and Jannick Hunecke as further limited partners.
After the transaction is completed, Advisor Holding KG will hold 51 per cent of the shares in ELF Capital and will participate in the profits of ELF Capital (in proportion to the size of its shareholding) which ELF Capital generates from advising the ELF Funds. DBAG is the managing limited partner and the sole profit-participating shareholder of Advisor Holding KG. The expected inflows from Advisor Holding KG to DBAG (after taxes), discounted in a risk-adequate manner as at 15 September 2023, depend on the future business development of ELF Advisor and, according to DBAG’s current assessment, amount to a total of 69.5 million euros. The members of DBAG’s Board of Management participating as additional limited partners in Advisor Holding KG do not participate in the profits of Advisor Holding KG.
- Agreement on the contribution of shares in ELF Capital by DBAG to Advisor Holding KG
DBAG will contribute the shares in ELF Capital to be acquired on the basis of the purchase agreement with Wetterstein Capital GmbH to Advisor Holding KG by agreement with the latter. According to DBAG’s current assessment, derived from the purchase agreement, the present value of the contribution in kind amounts to 12.2 million euros as at 15 September 2023.
- Conclusion of a shareholder agreement between DBAG, Messrs Christian Fritsch and Florian Wimpff, Wetterstein Capital GmbH, ELF Capital, ELF European Lending Management I S.à r.l., ELF European Lending Management II S.à r.l., ELF Capital Solutions Management S.à r.l., Advisor Holding KG, DBG Fund HoldCo GmbH & Co. KG (a non-consolidated subsidiary of DBAG) and Tom Alzin and Jannick Hunecke, members of DBAG’s Board of Management
The shareholder agreement contains provisions on DBAG’s investment in ELF Capital Group and on ELF Capital Group’s corporate governance as well as on the mutual rights and obligations of the contracting parties. It also contains provisions on the distribution of future profits, although some of these provisions are still to be set out in agreements to be concluded separately, which will have to be submitted separately to the Supervisory Board for resolution as related party transactions, if necessary.
DBAG undertakes, vis-à-vis the contracting parties, subject to the conditions set out in detail and on condition that the transaction is completed, to invest directly or, at DBAG’s option, indirectly via a vehicle as limited partner in various ELF Funds. According to DBAG’s current assessment (taking into account the expected investment dates), the present value of the respective commitments is to be valued at a total of 97.1 million euros as at 15 September 2023.
In addition, DBAG is the seller of put options which entitle Wetterstein Capital GmbH and Florian Wimpff, subject to certain conditions, to sell to DBAG the remaining 49 per cent of the shares in ELF Capital, ELF European Lending Management I S.à r.l., ELF European Lending Management II S.à r.l. and ELF Capital Solutions Management S.à r.l. in two tranches staggered over time, and to transfer them to DBAG or one of its subsidiaries. The purchase price for these shares depends on the future business development of ELF Advisor. According to DBAG’s current assessment, the present value as at 15 September 2023 amounts to a maximum of 40.2 million euros in total.
Moreover, a carry system commonly employed for debt fund structures will be set up as part of the transaction. In this context, DBAG and members of its Advisory Team (indirectly via ELF European Lending II Carry Vehicle SCSp and ELF Capital Solutions I Carry Vehicle SCSp) will provide an intangible shareholder contribution to ELF European Lending Fund II SCSp SICAV-RAIF (“ELF II”) and ELF Capital Solutions Fund I SCSp SICAV-RAIF (“ELF CS”). On the basis of the Memorandums of Association of ELF II and ELF CS, ELF European Lending II Carry Vehicle SCSp and ELF Capital Solutions I Carry Vehicle SCSp receive a share in the result of ELF II or ELF CS for the intangible shareholder contribution, if the respective fund has fulfilled certain performance-related criteria overall (carried interest). The investment of DBAG and the members of its Advisory Team in the results of ELF II and ELF CS, discounted in a risk-adequate manner over the expected term of ELF II and ELF CS as at 15 September 2023, is expected to amount to 7.3 million euros. In addition, selected Advisory Team members personally co-invest their own money in ELF II and ELF CS. The purpose of taking a personal investment risk is to promote the initiative and commitment of the co-investing individuals for the success of ELF II’s and ELF CS’s investments. The present value of this co-investment as at 15 September 2023 amounts to 0.6 million euros.
The Supervisory Board has approved these transactions in accordance with section 111b (1) and (3) of the AktG.