Business Context and Reporting Period
This Form 8-K, filed on December 16, 2020, by Alphatec Holdings, Inc. (ATEC), reports the entry into a Material Definitive Agreement to acquire EOS imaging S.A. ("EOS"), a French leader in orthopedic medical imaging and software. The filing also details a concurrent private placement of equity and a debt exchange to fund the transaction.
Key Financial Metrics and Transaction Terms
- Acquisition Offer: Alphatec will make a cash tender offer for all outstanding EOS shares and convertible bonds (OCEANEs).
- Offer Price: €2.45 (approx. $2.99) per EOS Share and €7.01 (approx. $8.55) per OCEANE.
- Total Purchase Price: Up to approximately $116.9 million.
- Private Placement: Sale of 12,421,242 shares of ATEC Common Stock at $11.11 per share.
- Aggregate Gross Proceeds: Approximately $138 million.
- Use of Proceeds: Fund the EOS Offer and general corporate purposes.
- Debt Exchange: Exchange of $30 million of outstanding debt obligations for 2,700,270 shares of ATEC Common Stock (valued at $11.11 per share).
- Credit Facility Amendment:
- Total Available Principal: Increased to $40 million.
- Maturity: Extended to June 30, 2026.
- Interest Rate: 1-month LIBOR + 8% (subject to a 9% floor and 12% ceiling).
- Repayment: Interest-only until December 2023, followed by $1 million monthly principal payments.
- Break-up Fees: €2.5 million payable by EOS to Alphatec under certain conditions; €2.5 million reverse break-up fee payable by Alphatec to EOS under certain conditions.
Material Changes and Strategic Actions
Alphatec is re-initiating an acquisition of EOS after terminating a prior agreement in April 2020 due to the COVID-19 pandemic. Key changes include:
- Shareholder Support: Certain EOS shareholders controlling approximately 23% of outstanding shares have entered into Tender Commitments to support the offer.
- Capital Structure: The company is significantly altering its capital structure by issuing new equity to fund the acquisition and converting $30 million of existing debt into equity.
- Regulatory Timeline: The Offer is expected to be filed with the French Autorité des marchés financiers (AMF) in February 2021, with an initial acceptance period of 25 Euronext Paris trading days.
Guidance, Risks, and Contingencies
Conditions to Closing: The obligation to file and complete the Offer is subject to several conditions, including a fairness opinion, a recommendation by the EOS board, no competing offers, satisfaction of the French Foreign Investment Condition, and the tendering of at least two-thirds of EOS share capital and voting rights.
Repurchase Obligation: If the Tender Offer Agreement is terminated or the Offer Closing does not occur by July 31, 2021, Alphatec must repurchase the Private Placement Shares at the purchase price plus 9% annual interest.
Risks and Uncertainties:
- Regulatory approval by the AMF is not guaranteed.
- Failure to meet the two-thirds tender threshold would prevent the acquisition.
- Competing tender offers could emerge.
- Integration risks and potential failure to realize synergies.
- Impact of the ongoing COVID-19 pandemic on business operations.
Investor Verification Checklist
- Verify the filing date and approval status of the Offer with the French AMF (expected February 2021).
- Confirm the closing of the $138 million Private Placement and the issuance of new shares.
- Monitor the percentage of EOS shares tendered to ensure the two-thirds threshold is met.
- Review the final terms of the Credit Agreement Amendment regarding interest rates and repayment schedules.
- Assess the risk of the July 31, 2021, repurchase obligation if the transaction fails to close.