Business Context and Reporting Period
This Form 8-K Current Report, dated April 12, 2016 (with events occurring through April 14, 2016), details two material transactions for CareDx, Inc.: the completion of a private equity offering and the acquisition of Allenex AB, a Swedish company.
Key Financial Metrics and Transaction Details
- Equity Offering: The Company sold approximately $14.1 million worth of Units to accredited investors. Each Unit consists of one share of Common Stock, five shares of Series A Mandatorily Convertible Preferred Stock, and three Warrants. The purchase price was $23.94 per Unit (equivalent to $3.99 per share of Common Stock assuming conversion).
- Acquisition Cost: The Company acquired 98.37% of Allenex AB for a total purchase price of approximately $21.1 million (SEK 172.4 million) in cash and 1,375,026 shares of CareDx common stock.
- Deferred Consideration: An additional payment of approximately $6.2 million (SEK 50.6 million) is expected to be paid to Allenex majority shareholders as deferred consideration.
- Commitment Agreement: Certain stockholders committed to investing an additional $8 million in 334,168 Units by June 30, 2016, subject to conditions.
- Use of Proceeds: Net proceeds from the equity offering are intended for working capital, acquisitions, and general corporate purposes.
Material Changes and Transaction Structure
The filing reports the closing of the equity offering on April 14, 2016, which was conditioned upon the closing of the Allenex acquisition and lender consent. The acquisition of Allenex was completed via a tender offer where shareholders could choose between an all-cash alternative (SEK 2.50 per share) or a mixed consideration alternative (SEK 1.731 per share plus CareDx stock). With 98.37% of shares tendered, CareDx intends to initiate compulsory acquisition procedures for the remaining shares and delist Allenex from Nasdaq Stockholm.
Guidance, Risks, and Contingencies
- Stockholder Approval: The Series A Preferred Stock is mandatorily convertible into Common Stock only upon receipt of requisite stockholder approval required by NASDAQ rules. A Voting Agreement was executed with majority stockholders to secure this approval.
- Warrant Restrictions: Warrants issued in the offering are exercisable for seven years at $4.98 per share but cannot be exercised until the requisite stockholder approval is obtained.
- Financial Reporting: The Company will file financial statements of the acquired business and pro forma financial information by amendment within 71 calendar days of this report.
- Regulatory Compliance: The equity sale was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D. The stock issuance for the acquisition relied on Rule 802 exemption.
Investor Verification Checklist
- Verify the receipt of Requisite Stockholder Approval for the conversion of Series A Preferred Stock and exercise of Warrants.
- Confirm the execution of the $8 million Commitment Agreement by June 30, 2016.
- Monitor the filing of pro forma financial information and Allenex AB financial statements within the 71-day window.
- Review the Certificate of Designation (Exhibit 3.1) for specific terms regarding the Series A Preferred Stock.
- Track the status of the compulsory acquisition procedures and delisting of Allenex from Nasdaq Stockholm.