Business Context and Reporting Period
This Form 8-K, filed on August 7, 2019, by Glaukos Corporation (GKOS), reports the entry into a definitive merger agreement with Avedro, Inc. The filing also discloses the resignation of a Glaukos director to avoid a conflict of interest regarding the transaction.
Key Financial Metrics and Transaction Terms
This filing does not contain standard financial performance metrics such as revenue, profit, cash flow, or debt levels for the reporting period. The primary financial data relates to the proposed merger structure:
- Exchange Ratio: Avedro shareholders will receive 0.365 shares of Glaukos common stock for each share of Avedro common stock held.
- Termination Fee: Avedro may be required to pay Glaukos a termination fee of approximately $22.5 million under specified circumstances.
- Tax Treatment: The transaction is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
- Support: Voting agreements have been signed by stockholders representing approximately 41% of Avedro's outstanding shares to vote in favor of the merger.
Material Changes and Corporate Actions
The filing details the following material changes:
- Merger Agreement: Glaukos, Avedro, and a wholly-owned subsidiary of Glaukos (Merger Sub) entered into an Agreement and Plan of Merger. Merger Sub will merge with and into Avedro, with Avedro surviving as a subsidiary of Glaukos.
- Director Resignation: Gilbert H. Kliman, M.D., resigned from the Glaukos Board of Directors on August 6, 2019, to avoid a conflict of interest as he was also a member of the Avedro Board. He did not participate in the approval of the Merger Agreement.
- Equity Conversion: Outstanding Avedro stock options, restricted stock units (RSUs), and warrants will be assumed by Glaukos and converted into Glaukos equity instruments based on the exchange ratio.
Guidance, Outlook, Risks, and Contingencies
The consummation of the merger is subject to several conditions and risks:
- Conditions to Closing: Approval by Avedro stockholders, expiration of the HSR Act waiting period, absence of injunctions, effectiveness of the Form S-4 registration statement, NYSE listing approval, and receipt of tax opinions.
- Termination Rights: The agreement may be terminated if not consummated by May 7, 2020, if stockholder approval is not obtained, or if a superior alternative transaction is proposed by Avedro.
- Risks: Management highlights risks including failure to obtain regulatory or stockholder approval, integration challenges, retention of key personnel, and potential legal proceedings.
- Outlook: No specific financial guidance or revenue outlook is provided in this filing. Investors are directed to the upcoming Form S-4 for detailed information.
Important Facts for Investor Verification
- Verify the final exchange ratio of 0.365 Glaukos shares per Avedro share and its impact on dilution.
- Monitor the status of the Form S-4 registration statement and the scheduled Avedro stockholder vote.
- Review the $22.5 million termination fee provisions and the conditions under which Avedro must pay it.
- Confirm the resignation of Dr. Gilbert H. Kliman and the composition of the Glaukos Board post-transaction.
- Assess the timeline for closing, noting the May 7, 2020, termination date if the merger is not consummated.