UK’s BenevolentAI agrees Europe’s largest Spac deal

BenevolentAI, a London-based drug discovery group, has agreed the largest merger with a European special purpose acquisition company, allowing it to raise €390m and go public with a €1.5bn valuation.

BenevolentAI will list in Amsterdam by combining with Odyssey, a Spac launched by brothers Michael and Yoel Zaoui, investment bankers who are best known for their deal advisory boutique in London.

Before transaction costs, BenevolentAI will receive the €300m raised by Odyssey when it listed in July as well as €135m in the form of a private investment in public equity (Pipe) from existing backers such as Singapore’s Temasek.

New investors include AstraZeneca, with which the company has previously collaborated, and health investing specialists Ally Bridge. The Spac shareholders and Pipe investors will take a 23.5 per cent and 9.1 per cent stake in the company respectively.

Founded in 2013 by serial entrepreneur Ken Mulvany, BenevolentAI’s stated mission is to deploy artificial intelligence on vast data sets to identify molecules that can be quickly made into drugs, compressing the costly and lengthy process of drug discovery.

BenevolentAI has helped identify Eli Lilly’s arthritis drug baricitinib, also known as Olumiant, as a Covid-19 treatment. The drug, an immunosuppressant, has emergency use authorisation from the US Food and Drug Administration, and is under review by the European Medicines Agency.

The company has a partnership with AstraZeneca to study kidney disease and idiopathic pulmonary fibrosis. One of the kidney disease targets it identified through its technology has become part of AstraZeneca’s investigational portfolio.

However, BenevolentAI has struggled to live up to early hype and the deal with Odyssey falls short of the valuation it reached three years ago.

That downward trajectory came into focus in 2019 since it was one of the large illiquid positions held by Neil Woodford, the star fund manager whose investment company collapsed due to terrible picks.

Woodford initially invested £40m in BenevolentAI, then called Stratified Medical, in 2014 at a valuation of £190m. But a subsequent capital raise in 2018 valued the business at £1.5bn. 

Yet a year later, a £68m investment in BenevolentAI by Singaporean sovereign wealth fund Temasek halved the company’s valuation.

BenevolentAI was one of several businesses Woodford persuaded to list on the Guernsey stock exchange in 2018 to reduce his exposure to unlisted companies. But when the company cancelled its listing a year later, it caused Woodford’s fund to breach limits on illiquid holdings.

The Odyssey deal shows the wide-divergence between Europe’s nascent Spac market and the US, where Singaporean start-up Grab went public at nearly a $40bn valuation last week.

As part of the tie-up, former Sanofi boss Olivier Brandicourt and Jean Raby, a former executive at Natixis who oversaw the French bank’s asset management unit during the H2O crisis, will join BenevolentAI’s board.

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