Surrozen, Inc. current report, 15 April 2021

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Filing Overview

Consonance-HFW Acquisition Corp. (CHFW) filed a current report on April 15, 2021, announcing a definitive Business Combination Agreement with Surrozen, Inc. The filing is a transaction disclosure rather than a periodic financial report; it does not present a reporting-period income statement, balance sheet, or cash-flow results for Surrozen.

Business Combination and Financial Terms

  • CHFW will domesticate as a Delaware corporation and change its name to Surrozen, Inc.
  • Perseverance Merger Sub Inc. will merge with Surrozen, with Surrozen surviving as a wholly owned subsidiary of the post-transaction company.
  • Surrozen’s outstanding shares, restricted stock awards, and options will be exchanged for comparable securities based on an implied Surrozen equity value of $200.0 million.
  • The transaction was expected to close in the third quarter of 2021, subject to shareholder approvals and other closing conditions.
  • CHFW entered into PIPE subscription agreements for 12,020,000 units at $10.00 per unit, generating aggregate gross proceeds of $120.2 million. Each unit consists of one common share and one-third of a warrant.
  • Each whole PIPE warrant is exercisable for one share at $11.50 per share, subject to customary adjustments.
  • The transaction requires trust-account proceeds plus PIPE proceeds of at least $100.0 million, after shareholder redemptions and specified transaction liabilities and expenses.
  • CHFW must have at least $5.000001 million of net tangible assets after closing.

Material Changes Versus Prior Period

The filing does not provide comparable-period revenue, profit, cash flow, margins, debt, cash, or liquidity metrics. The material change disclosed is CHFW’s entry into the proposed business combination with Surrozen and the related $120.2 million PIPE financing.

  • CHFW sponsor and certain holders of Class B ordinary shares agreed to support the transaction, waive anti-dilution protections, and vote in favor of the proposals.
  • The sponsor agreed to contribute 759,000 Class B ordinary shares to CHFW for no consideration at closing.
  • Surrozen stockholders holding more than 67% of Surrozen’s outstanding preferred stock and voting power agreed to support the transaction and oppose competing proposals.
  • CHFW agreed that the post-closing board would have nine directors, including eight identified by Surrozen and one identified by CHFW.

Conditions, Outlook, and Risks

  • Closing depends on CHFW and Surrozen shareholder approvals, completion of the domestication, Nasdaq approval, satisfaction of the minimum cash and net tangible asset conditions, and the absence of a continuing material adverse effect.
  • The agreement could be terminated in customary circumstances, including failure to close by October 12, 2021, subject to a potential 60-day extension, material breach, an injunction, or failure to obtain shareholder approval.
  • The PIPE financing is contingent on substantially concurrent completion of the business combination.
  • CHFW intended to file a Form S-4 registration statement containing a prospectus and proxy statement. The filing states that investors should rely on the definitive proxy statement/prospectus for detailed transaction, pro forma financial, and risk information when available.
  • Identified risks include shareholder redemptions, failure to obtain approvals or Nasdaq listing, termination of the agreement, litigation, integration and execution risks, inability to realize anticipated benefits, growth and employee-retention challenges, transaction costs, and accounting or reporting issues involving SPAC warrants.
  • The filing contains forward-looking statements that are subject to substantial uncertainty and should not be treated as guarantees of completion or future performance.

Important Facts to Verify

  • Whether the Form S-4, definitive proxy statement/prospectus, and subsequent filings were filed and declared effective.
  • Whether the business combination closed, the final share count and ownership percentages, and the final post-closing corporate name and ticker.
  • The amount of shareholder redemptions and resulting cash available at closing compared with the $100.0 million minimum.
  • Whether the $120.2 million PIPE financing was fully funded and the extent of resulting dilution, including PIPE and legacy warrants.
  • Surrozen’s historical and projected revenue, operating losses, cash burn, liquidity, debt, clinical-development costs, and other financial information, which are not provided clearly in this 8-K.
  • The final terms of the merger agreement, sponsor arrangements, lock-ups, registration rights, and any amendments or termination events.