Business Context and Reporting Period
Company: Alphatec Holdings, Inc. (ATEC)
Filing Type: Form 8-K (Current Report)
Date: February 28, 2020
Event: Entry into a Material Definitive Agreement to acquire EOS Imaging S.A., a French leader in orthopedic medical imaging and software solutions.
Key Financial Metrics and Transaction Terms
- Total Purchase Price: Up to $121.5 million.
- Offer Consideration:
- Cash Offer: €2.80 (approx. $3.08) per EOS Share and €7.01 (approx. $7.71) per OCEANE (convertible bond).
- Exchange Offer: 0.50 shares of ATEC Common Stock per EOS Share.
- Financing Commitment: $130 million in secured debt financing from Perceptive Credit Holdings III, LP.
- Refinancing Portion: Up to $60 million to retire existing credit facilities.
- Tender Offer Portion: Up to $70 million (expandable to $100 million) to fund the cash portion of the offer.
- Supplemental Portion: Up to $15 million for general corporate needs if the Tender Offer Portion is not fully utilized.
- Break-up Fees:
- EOS to Alphatec: €2.5 million (up to €3.5 million in certain circumstances) if EOS board fails to recommend the offer or changes recommendation.
- Alphatec to EOS: €2.5 million reverse break-up fee under specific termination events.
- Warrant Issuance: Alphatec agreed to issue warrants to Perceptive representing equity in ATEC Common Stock:
- 18.5% of the Refinancing Portion principal.
- 9% of the Tender Offer Portion principal.
- 9% of the Supplemental Portion principal.
Material Changes and Conditions
This filing represents a material change in Alphatec's capital structure and strategic direction through the proposed acquisition of EOS. The transaction is subject to several critical conditions:
- Regulatory Approval: Clearance by the French Autorité des marchés financiers (AMF), expected in late April 2020.
- Shareholder Support: Acquisition of at least two-thirds of EOS share capital and voting rights on a fully diluted basis.
- Board Recommendation: EOS board must issue a reasoned opinion recommending the offer.
- Commitments: Certain EOS shareholders controlling ~23% of shares have committed to tender into the Exchange Offer and hold ATEC stock for a minimum of three months post-closing.
- Squeeze-Out: If Alphatec acquires 90% or more of EOS, it may implement a mandatory squeeze-out of remaining shareholders.
Outlook, Risks, and Management Commentary
Outlook: Alphatec expects to file the offer with the AMF in late April 2020. The offer will be open for 25 Euronext Paris trading days. Closing is expected shortly after the acceptance period.
Risks and Contingencies:
- Financing Risk: The debt commitment is subject to customary conditions, including no material adverse effect on EOS.
- Regulatory Risk: Failure to obtain AMF clearance or French Foreign Investment Condition satisfaction.
- Competing Offers: The agreement terminates if a competing tender offer is announced.
- Integration Risk: Uncertainty regarding successful integration of businesses and realization of synergies.
- Termination: Alphatec may terminate if closing conditions are not met by May 31, 2020, or by paying the reverse break-up fee.
Investor Verification Checklist
- Verify the final approval status of the offer by the French AMF (expected late April 2020).
- Confirm the percentage of EOS shares tendered to ensure the two-thirds threshold is met.
- Monitor the execution of the definitive debt documentation with Perceptive Credit Holdings III, LP.
- Review the final terms of the warrants issued to Perceptive, specifically the exercise prices based on 5-day VWAP and the $4.60 floor.
- Assess the impact of the 23% shareholder tender commitments on the likelihood of the Exchange Offer success.
- Check for any competing offers or material adverse changes to EOS's business prior to closing.