DEFA14A: Kiniksa Pharmaceuticals Proposes Redomiciliation from Bermuda to the United Kingdom

Kiniksa Pharmaceuticals intends to change its place of incorporation from Bermuda to the United Kingdom, pending shareholder and court approval.

Summary

• Kiniksa Pharmaceuticals announced its intention to redomicile its principal holding company from Bermuda to the United Kingdom.
• The redomiciliation is subject to shareholder approval of a scheme of arrangement and approval by the Supreme Court of Bermuda.
• If approved, a new public holding company, New Kiniksa, will be formed in the UK, and Kiniksa shareholders will receive new shares on a one-for-one basis.
• Kiniksa believes Bermuda is no longer the most desirable jurisdiction due to global tax initiatives and regulatory proposals.
• The company anticipates completing the redomiciliation in the second half of 2024.
• New Kiniksa's Class A ordinary shares are expected to continue trading on the Nasdaq Global Select Market under the ticker symbol KNSA.
• The company intends to petition the Supreme Court of Bermuda to order a meeting of shareholders to approve the scheme.
• A Practice Statement Letter has been distributed to shareholders in advance of a directions hearing before the Supreme Court of Bermuda, scheduled for April 19, 2024.
• The company does not expect the Redomiciliation will have any material impact on its financial results.

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The move is presented as a strategic decision to improve the company's long-term prospects, but it is subject to approvals and carries inherent risks.

Positives

• The UK offers a stable legal and regulatory environment.
• The redomiciliation aims to improve the company's position regarding OECD tax proposals.
• The UK has a more expansive tax treaty with the U.S., which Kiniksa believes is in the best interests of shareholders, employees, and other stakeholders.
• The UK possesses robust legal, accounting and financial industries.
• The UK, like Bermuda, is a common law jurisdiction, which Kiniksa considers to be less prescriptive than many civil law jurisdictions.
• Changing the place of incorporation of the groups principal holding company to the UK will provide a continuity of legal rights for our shareholders on substantially the same grounds as they enjoy in Bermuda.

Negatives

• The redomiciliation is subject to shareholder and court approvals, which introduces uncertainty.
• Global tax initiatives of the Organization for Economic Co-Operation and Development (OECD) and recent tax law changes in Bermuda have the potential to materially adversely affect our company.
• Legislative and regulatory proposals in jurisdictions in which Kiniksa operates could be detrimental to companies that are domiciled in Bermuda.

Risks

• The company's ability to obtain shareholder approval for the redomiciliation is not guaranteed.
• The company's ability to satisfy all conditions for the redomiciliation on the expected timeframe is uncertain.
• The company may not realize the expected benefits from the redomiciliation.
• Unanticipated difficulties or costs may arise in connection with the redomiciliation.
• The Scheme will terminate and all actions taken under the Scheme will be reversed or voided, as if they had never occurred, and the position will revert to that existing immediately prior to the Effective Time if the transactions contemplated by the Scheme have not occurred on or before 5:00pm Bermuda time on the date nine (9) months after the Effective Time.

Future Outlook

Kiniksa expects to complete the redomiciliation in the second half of 2024, subject to shareholder and court approvals. New Kiniksa's Class A ordinary shares are expected to continue to trade on the Nasdaq Global Select Market under the ticker symbol KNSA.

Management Comments

• Kiniksa believes that moving the place of incorporation of its principal holding company to the United Kingdom by way of the Redomiciliation is the best available option.
• Kiniksa has decided that Bermuda is no longer the most desirable jurisdiction for our principal holding companys place of incorporation for several reasons.
• Kiniksa determined instead that moving the principal holding company of the group from Bermuda to a country with a more expansive tax treaty with the U.S. would be in the best interests of shareholders, employees and other stakeholders, and Kiniksa believes that moving the place of incorporation and tax residence of the groups principal holding company to the UK in this manner is the best available option.

Industry Context

Redomiciliation is a strategic move often undertaken by companies to optimize their tax structure, regulatory environment, and access to capital markets. Other pharmaceutical companies have considered or executed similar moves to jurisdictions perceived as more favorable.

Comparison to Industry Standards

• Many companies incorporated in Bermuda have considered redomiciling to jurisdictions with more favorable tax treaties with the US.
• The UK is a common choice for redomiciliation due to its stable legal system and tax benefits.
• Other companies such as Jazz Pharmaceuticals have redomiciled to Ireland for similar reasons.

Stakeholder Impact

• Shareholders will be impacted by the share exchange and the potential long-term benefits of the redomiciliation.
• Employees may benefit from the company's improved position regarding tax and regulatory matters.
• Other stakeholders could benefit from the company's improved financial stability and long-term prospects.

Next Steps

• Obtain shareholder approval for the scheme of arrangement.
• Obtain approval from the Supreme Court of Bermuda.
• Form a new public holding company in the United Kingdom (New Kiniksa).
• Issue new shares of New Kiniksa to existing Kiniksa shareholders on a one-for-one basis.
• File the Sanction Order with the Registrar of Companies in Bermuda.
• Distribute copies of the Scheme, the Proxy Statement of KNSA Bermuda in connection with the Scheme representing an explanatory statement issued pursuant to Section 100 of the Companies Act and including a notice of the Scheme Meeting; and voting forms (which will include proxy cards) for voting at the Scheme Meeting.

Key Dates

Keywords

redomiciliation, Kiniksa Pharmaceuticals, Bermuda, United Kingdom, scheme of arrangement, shareholder approval, tax treaty, corporate structure