Deutsche Beteiligungs AG
Deutsche Beteiligungs AG – Publication of major related-party transactions pursuant to Section 111c (1) in and (4) AktG

Deutsche Beteiligungs AG – Publication of major related-party transactions pursuant to Section 111c (1) in and (4) AktG

Disclosure in accordance with section 111c (1) and (4) of the German Stock Corporation Act (Aktiengesetz – AktG) with the objective of Europe-wide distribution

Deutsche Beteiligungs AG (“DBAG”) intends to initiate a new private equity fund: DBAG Solvares Continuation Fund GmbH & Co. KG (hereinafter “Continuation Fund”).

The Continuation Fund’s purpose will be aimed at continuing an investment in Solvares Group GmbH (hereinafter “Solvares”), which is currently held (indirectly) by (i) DBAG Expansion Capital Fund Konzern GmbH & Co. KG, a non-consolidated intragroup investment entity (as well as a subsidiary) of DBAG, (ii) DBAG Expansion Capital Fund International GmbH & Co. KG, a non-consolidated structured entity from DBAG’s perspective and at the same time a related party of DBAG within the meaning of Section 111a (1) sentence 2 AktG, and (iii) DBG Advisors Expansion GmbH & Co. KG, also a related party of DBAG within the meaning of Section 111a (1) sentence 2 AktG (the entities under (i) through (iii) together hereinafter the “Transferor Funds”).

In this context, on 28 August 2024 (hereinafter the “Signing Date”), certain subsidiaries of DBAG concluded a Framework Agreement (hereinafter the “Framework Agreement”) with certain related parties of DBAG within the meaning of Section 111a (1) sentence 2 AktG and certain third parties independent of DBAG. The Framework Agreement stipulates various specific measures, process steps as well as certain rights and obligations of the parties in connection with the establishment of the Continuation Fund structure (the measures summarized in the Framework Agreement hereinafter referred to as the “CF Transaction”). In this context, in addition to the Framework Agreement, certain other agreements already set out (directly or indirectly) in the Framework Agreement are also to be classified as transactions with related parties within the meaning of Section 111a (1) sentence 2 AktG.

Specifically, the following contracts are to be classified as related party transactions in the context of the transaction:

1. Conclusion of the Framework Agreement in relation to the CF Transaction by (i) the Transferor Funds, (ii) DBG Managing Partner GmbH & Co. KG (managing limited partner and future alternative investment fund manager of the Continuation Fund; hereinafter “DBG Manager”), a fully-consolidated subsidiary of DBAG, (iii) DBG Service Provider Verwaltungs GmbH (general partner of the Continuation Fund; hereinafter “General Partner”), a non-consolidated subsidiary of DBAG, (iv) the Continuation Fund, a subsidiary of DBAG as of the Signing Date and in the future – as of the capitalization of the Continuation Fund by accepting additional limited partners (third-party investors) (hereinafter “CF Closing”) – from DBAG’s perspective not a subsidiary, but a related party of DBAG within the meaning of Section 111a (1) sentence 2 AktG, (v) the DBG Team Solvares CF GmbH & Co. KG as team co-investment vehicle to the Continuation Fund (hereinafter “Team Co-Investment KG”), a related party of DBAG within the meaning of Section 111a (1) sentence 2 AktG, (vi) Cheetah Investment S.à r.l. (hereinafter the “Seller”), a third-party entity independent from DBAG, party to the Framework Agreement as the seller of the 50,01 % stake in Solvares to be transferred in the course of the CF Transaction (the “Solvares Participation”), as well as (vii) the company functioning as the direct purchaser of the Solvares Participation (hereinafter the “Purchaser”), (viii) the external shareholder in Solvares (i.e., the shareholder not participating in Solvares via the Seller), who indirectly holds or will hold a 49.99 % participation in Solvares via a shareholding chain with the Purchaser as the ultimate holding entity (hereinafter “External Shareholder”), and (ix) an additional party in its capacity as future anchor investor of the Continuation Fund (hereinafter the “Anchor Investor”), whereas the parties referred to in (vii) through (ix) are each also third parties independent of DBAG.

The Framework Agreement contains in particular provisions in connection with the future capitalization of the Continuation Fund through capital contributions by the Anchor Investor, a subsidiary of DBAG (see below) and optional reinvestments by existing investors as well as provisions regarding the capitalization of the Purchaser, the transfer of the Solvares Participation and general obligations aimed at supporting the implementation of the CF Transaction.

The Framework Agreement further includes as annexes certain contracts relevant to the implementation of the CF Transaction, such as in particular the share purchase agreement between the Seller and the Purchaser with regard to the Solvares Participation (hereinafter “SPA”), which are concluded directly together with the Framework Agreement. In addition, the Framework Agreement provides for the conclusion of further agreements attached to the Framework Agreement as drafts, including in particular the future limited partnership agreement of the Continuation Fund (hereinafter “CF LPA”) as well as an agreement between the Continuation Fund, the Team Co-Investment KG and the DBG Manager regarding investments of the Team Co-Investment KG alongside the Continuation Fund (hereinafter “Parallel Investment Agreement”).

Certain provisions of the Framework Agreement and the agreements attached thereto as annexes are subject to conditions precedent set out in detail or, as in the case of the CF LPA, allow for deviations under conditions set out in detail until the CF Closing.

In connection with the capitalization of the Continuation Fund, the Framework Agreement provides for DBAG Solvares Continuation Fund Konzern GmbH & Co. KG (hereinafter “Konzern KG”), a non-consolidated intragroup investment entity (subsidiary) of DBAG, to assume a capital commitment to the Continuation Fund by subscribing to a limited partner interest (hereinafter the “DBAG Commitment”). According to DBAG’s current estimate, the present value of the aforementioned capital commitment, which is expected to correspond to approximately 13.39% of the Continuation Fund’s total capital commitments, amounts to EUR 16.4 million as of the Signing Date. The funds required by Konzern KG to cover its capital commitment will be provided to Konzern KG by DBAG as its sole limited partner.

Furthermore, the Framework Agreement provides for a group of persons from DBAG’s sphere as set out in detail to assume a capital commitment towards the Team Co-Investment KG (the “Team Commitment”). In this context, it is further provided that the Team Co-Investment KG shall in turn invest alongside the Continuation Fund in accordance with the Parallel Investment Agreement (pro rata in the ratio of its capital commitments to the capital commitments of the Continuation Fund). DBAG currently estimates the present value of the Team Commitment to be EUR 2.8 million as of the Signing Date. The Team Commitment is intended to be assumed by selected members of the Investment Advisory Team as well as selected members of senior management who are not part of the Investment Advisory Team. The purpose of taking a personal investment risk is to promote the initiative and commitment of the co-investing individuals for the success of the Continuation Fund’s investments.

The target size of the Continuation Fund’s capital commitments (together with Team Commitment) is set at EUR 130 million.

Following the CF Closing, the Continuation Fund and the Team Co-Investment KG will indirectly acquire via Lighthouse Holding S.à r.l. (hereinafter “Lighthouse Holding”), on the Signing Date a subsidiary of DBAG, in the future (as of the CF Closing) neither a subsidiary nor a related party of DBAG within the meaning of Section 111a (1) sentence 2 AktG, a 50.01 % stake in the company (hereinafter “Topco”) which functions as the uppermost segment of the shareholding chain through which the External Shareholder (indirectly) holds its stake in the Purchaser. In connection with the capital increase, Lighthouse Holding will provide Topco with funds in accordance with the terms of the Framework Agreement, the present value of which DBAG currently estimates to be EUR 92.9 million as of the Signing Date.

The funds made available will then be passed on directly or indirectly by Topco to the Purchaser, who will use such amounts to finance the purchase price to be paid under the SPA as well as transactions costs for the acquisition of the Solvares Participation. DBAG considers the terms of the SPA to be at arm’s length.

As a result, the Continuation Fund and the Team KG will (indirectly) hold a 50.01% stake in Solvares via Lighthouse Holding once the CF Transaction has been completed.

2. As set out in section 1, the Framework Agreement provides for the conclusion of the CF LPA, which revises the existing limited partnership agreement of the Continuation Fund in connection with the CF Closing. The parties to the CF LPA will be the General Partner, the DBG Manager, DBG Advisors Solvares CF GmbH & Co. KG (hereinafter the “Carry KG”), a related party of DBAG within the meaning of Section 111a (1) sentence 2 AktG, as well as the other limited partners acceding to the Continuation Fund in the course of the implementation of the CF Transaction on the basis of separate agreements with the DBG Manager, which will be the Konzern KG and third parties independent of DBAG (third-party investors).

The CF LPA provides for a carry system commonly employed by private equity funds. In this context, DBAG, DBG Advisors Pooling GmbH & Co. KG, a related party within the meaning of Section 111a (1) sentence 2 AktG, certain members of the Investment Advisory Team as well as selected members of senior management who are not part of the Investment Advisory Team will indirectly make intangible partner contributions to the Continuation Fund via the Carry KG. Based on the CF LPA, the Carry KG in turn receives a capital-disproportionate share of the Continuation Fund’s profits, if the Continuation Fund has fulfilled certain performance-related criteria (carried interest). The carried interest reduces the profit participation of the investors with a capital participation in the Continuation Fund accordingly and is therefore also borne economically by the Konzern KG in proportion to its participation quota in the Continuation Fund. According to DBAG’s current estimate, the Carry KG’s participation in the Continuation Fund’s profits, discounted on a risk-adjusted basis over the expected term of the Continuation Fund as of the Signing Date, amounts to EUR 26.6 million.

Further, the DBG Manager will provide management services to the Continuation Fund on the basis of the CF LPA and a separately concluded management agreement between the Continuation Fund, the DBG Manager and the General Partner. For its management services, DBG Manager will receive a market-standard management fee, which is expected to amount to EUR 2.6 million discounted on a risk-adjusted basis over the expected term of Continuation Fund.

Furthermore, the CF LPA provides for the DBG Manager to appoint DBG Advising GmbH & Co. KG (hereinafter “Advising KG”), a fully consolidated subsidiary of DBAG, as advisor with the mandate to provide advisory services in connection with investments. For this purpose, it is intended that DBG Manager and Advising KG enter into a separate advisory agreement on the basis of which Advising KG will perform advisory services to DBG Manager, for which Advising KG will receive a renumeration in accordance with customary market rates that is expected to amount in the aggregate and discounted over the expected term of the Continuation Fund to EUR 0.4 million.

Additionally, the CF LPA contains provisions that reflect the requirements of the Framework Agreement regarding the DBAG Commitment and the Team Commitment described in section 1 above. For details, including the applicable present values, reference is made to the information provided in section 1.

The Supervisory Board has approved the conclusion of the Framework Agreement by resolution dated 27 August 2024 in accordance with Section 111b (1) and (3) AktG.