Business Context and Reporting Period
This Form 8-K, filed on December 22, 2020, reports a material definitive agreement entered into on December 21, 2020. NantKwest, Inc. (the "Registrant") and ImmunityBio, Inc. have executed an Agreement and Plan of Merger. Under the terms, a wholly-owned subsidiary of NantKwest will merge with and into ImmunityBio, with ImmunityBio surviving as a wholly-owned subsidiary of NantKwest. Dr. Patrick Soon-Shiong serves as Chairman and CEO of ImmunityBio and controls more than 80% of its fully-diluted equity.
Key Financial Metrics and Transaction Terms
The filing details the exchange mechanics and termination fees but does not provide historical revenue, profit, cash flow, or debt metrics for either company.
- Exchange Ratio: Each outstanding ImmunityBio share will convert into 0.8190 shares of NantKwest common stock.
- Equity Conversion: Outstanding ImmunityBio options, restricted stock units (RSUs), and warrants will convert into NantKwest equivalents with adjusted exercise prices or share counts.
- Termination Fees:
- If ImmunityBio terminates to accept a superior proposal: Approximately $87.6 million payable to NantKwest.
- If NantKwest terminates to accept a superior proposal: Approximately $34.1 million payable to ImmunityBio.
- Voting Support: Voting agreements have been secured with stockholders owning approximately 64.4% of NantKwest and 88.9% of ImmunityBio to support the transaction.
Material Changes and Conditions
The transaction represents a significant change in corporate structure and ownership. The merger is subject to several closing conditions, including:
- Approval by stockholders of both ImmunityBio and NantKwest.
- SEC declaration of effectiveness for the Form S-4 registration statement.
- Approval for listing the new shares on the Nasdaq Global Select Market.
- Absence of legal orders prohibiting the merger.
- Expiration date: The agreement may be terminated if the merger is not consummated by September 20, 2021.
Outlook, Risks, and Management Commentary
Management intends for the merger to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code. The filing includes extensive forward-looking statements regarding the uncertainty of the transaction's completion and timing.
Key Risks Identified:
- Failure to satisfy closing conditions or obtain necessary regulatory approvals.
- Disruptions to business operations, employee retention, and supplier relationships.
- Uncertainty regarding the financial performance and synergies of the combined entity.
- Impact of the COVID-19 pandemic on clinical trial milestones and operations.
- Potential legal proceedings related to the merger agreement.
Investor Verification Checklist
- Verify the final approval status of the merger by stockholders of both NantKwest and ImmunityBio.
- Confirm the effectiveness of the Form S-4 registration statement filed with the SEC.
- Review the full text of the Merger Agreement (Exhibit 2.1) for specific representations, warranties, and covenants.
- Monitor for any legal challenges or regulatory orders that could restrain the transaction.
- Assess the potential dilution impact on NantKwest shareholders based on the 0.8190 exchange ratio.