Alphatec Holdings, Inc. (“ATEC” or the “Company”) (Nasdaq: ATEC), a
medical device company dedicated to revolutionizing the approach to
spine surgery, announced today that it has entered into an
agreement to acquire EOS imaging, SA, for a purchase price of $79.7
million, plus the retirement debt of $37.2 million, in an all-cash
transaction.
“SafeOp has substantiated the value of
clinically actionable information by accelerating product adoption
across our portfolio,” said Pat Miles, Chairman and Chief Executive
Officer. “Our original investment thesis for EOS as a solution to
better inform surgery never changed. With this transaction, we take
another major step toward distinguishing ATEC clinical performance
with improved information from diagnosis through follow-up.”
EOS imaging is globally recognized for its
rapid, low dose, biplanar full-body imaging and 3D modeling
capabilities. EOS technology informs the entire surgical process by
capturing a calibrated, full-body image in a standing
(weight-bearing) position, enabling precise measurement of
anatomical angles and dimensions. The resulting imaging drives a
more accurate understanding of patient alignment during diagnosis,
characterizes bone quality, elevates the likelihood of surgical
goal fulfillment by integrating a fully informed plan into surgery,
and supports a post-operative assessment against the original
surgical plan.
Growth through the monetization of
improved outcomes
Uniting ATEC’s AlphaInformatiX platform with
EOS’ technology will create a platform distinctively equipped to
address the requirements of spine surgery.
-
Reduces cost to serve with precise pre-surgical planning that
significantly improves inventory efficiency;
-
Facilitates patient-specific implants and expands optionality with
distinctive bone quality measurements that can improve treatment
effectiveness;
-
Informs the restoration of alignment with a scientific, objective,
data-driven approach to meet a crucial, unmet need in spine that is
most correlated with long-term successful outcomes;1
-
Expands ATEC’s academic reach through EOS’ wealth of installations
in research institutions and influence shaped by over 500
peer-reviewed scientific articles and endorsement by thought
leaders worldwide;
-
Provides immediate access to EOS’ 380-unit installed base and
expedites ATEC’s future ability to enter and penetrate key
international markets.
“EOS is a game-changing technology that has
unquestionably improved the treatment of children, adolescents and
adults with spinal deformity,” commented Dr. Chris Shaffrey of Duke
Spine Center in North Carolina.
“ATEC Spine and EOS both believe in the power of
information to improve surgical outcomes,” said Mike Lobinsky,
Chief Executive Officer of EOS imaging. “We are pleased to revisit
this transaction and eager to combine the strengths and know-how of
our organizations. I am confident that we will quickly create a
highly differentiated, end-to-end informational offering that will
accelerate growth in the U.S. and pave the way for the future
global growth of our combined entity.”
Transaction Terms
Once closed, the transaction is expected to
immediately expand ATEC’s revenue base through the addition of
EOS’s revenue run rate and the monetization of information through
incremental pull-through and cross-selling opportunities. The
Company expects the acquisition to be accretive to revenue, revenue
growth, adjusted EBITDA and free cash flow in the first full year
of operations following the transaction close.
The Boards of Directors of both ATEC and EOS
have approved the execution of a tender offer agreement
(the "Tender Offer Agreement"), through which ATEC will launch
a cash tender offer for all of the issued and outstanding shares
and convertible notes of EOS imaging for a total purchase price of
$116.9 million (the “Offer”).
Under the terms of the Offer, EOS' shareholders
would receive EUR €2.45 (or approximately USD $2.99) per EOS share,
representing a premium of 41% to the closing price of EOS shares on
December 16, 2020.
Holders of approximately 23% of EOS’ outstanding
common shares have entered into agreements to tender into the Offer
for cash, representing approximately EUR €15.1 million (or
approximately USD $18.4 million) of the total purchase price.
The Offer will also target all outstanding EOS
convertible notes (“EOS OCEANE”, or the “Notes”). The holders of
the Notes would receive either EUR €7.01 (or approximately USD
$8.55) per EOS OCEANE (including interest due through May 31,
2021).
The Company expects to file the Offer with the
French Financial Markets Authority (Autorité des marches
financiers) (“AMF”) in February 2021. The transaction is expected
to close in the second quarter of 2021, subject to customary
closing conditions, including obtaining French regulatory clearance
regarding foreign investments and a favorable opinion of the EOS
board of directors based on the fairness opinion issued by the
independent expert appointed by EOS.
Financing Matters
In connection with the proposed combination,
ATEC has arranged a strategic financing with $178 million in
financing commitments, including a definitive securities purchase
agreement to raise $138 million in a private placement of common
stock at a price of $11.11 per share. The private placement is
being led by Squadron Capital LLC and supported by a group of new
and existing investors in ATEC, including Perceptive Advisors,
Avidity Partners, and First Light Asset Management. The private
placement is expected to close within five business days prior to
the filing of the Offer with the AMF, which is expected to occur in
February 2021, subject to the satisfaction of customary closing
conditions.
ATEC also entered into a debt exchange agreement
and an amendment to its existing credit agreement with Squadron,
which provide for a reduction to $45 million of the existing
$75 million of outstanding term debt by a conversion of $30 million
of debt into shares of ATEC common stock at a price of $11.11 per
share, and an increase of $15 million in the amount of available
revolving financing to $40 million. Under the terms of the amended
credit agreement, the maturity date on the entire term loan was
extended to June 2026, and the minimum and maximum interest
rates were reduced by 1% per annum from the levels in the existing
credit agreement. The other material terms of the amended credit
agreement remain the same as the existing term loan.
Additional details regarding the Tender Offer
Agreement and financing commitments can be found in ATEC’s Current
Report on Form 8-K to be filed with the SEC.
Advisors
Cowen is acting as financial and capital markets
advisor to ATEC and Latham & Watkins LLP is serving as legal
counsel for the acquisition transaction and private placement.
Piper Sandler is acting as financial advisor to EOS imaging and
Gide Loyrette Nouel is serving as legal counsel. Stifel is acting
as financial advisor to Squadron and Reed Smith LLP is serving as
legal counsel.
Webcast
The Company will host a webcast on December 17,
2020, at 6:00A.M. PT to discuss this transaction. The webcast
can be accessed
at https://edge.media-server.com/mmc/p/mij52bgk. An audio
version of the webcast will also be available domestically at (877)
556-5251 and internationally at (720) 545-0036. The conference ID
number is 6397277.
An archived edition of the webcast and the
presentation materials will be available in the Investor Relations
section of ATEC’s corporate website at www.atecspine.com. In
addition, an audio replay of the webcast will be available until
December 24, 2020. The replay dial-in numbers are (877) 556-5251
for domestic callers and (720) 545-0036 for international callers.
Please use the replay conference ID number 6397277.
About EOS imaging
Based in Paris, EOS imaging developed and
commercialized imaging systems (EOS and EOSedge systems) that
provide a full-body evaluation of the patient in a standing
position, resulting in a comprehensive understanding of how the
patient is compensating in the hips, knees and ankles to maintain
an upright posture. The measurements factor into a holistic
approach to the development of customized surgical plans, which can
then be integrated seamlessly into the operating room.
Utilizing advanced predictive analytics, EOS
technology is uniquely capable of correlating preoperative and
postoperative imaging to assure, from the operating room, the
achievement of alignment, the most prognostic factor of long-term
successful surgical outcomes. Compared to the conventional
spine-imaging modalities, X-Ray and CT, the EOS systems
significantly reduce radiation doses and exam times, producing
unstitched, full-body, biplanar, high-quality images at lower
cost.
Key Features of the EOS imaging
Portfolio
- Standing full-body assessment. Head
to toe biplanar exams in the weight-bearing position for accurate
assessment of factors causing pain and disability to better guide
treatment and surgical decisions. Surgical planning from a standing
position enables alignment parameters that more closely match
functional posture.
- High image quality. EOSedge is the
first X-ray system with high-resolution photon-counting detector
that delivers outstanding-quality images, reinforcing diagnostic
capabilities while addressing a broad range of imaging and
orthopedic surgery challenges.
- Reduced radiation exposure. Driven
by the ALADA2 principle, the EOS or EOSedge exam delivers a minimal
dose of radiation to reduce the long term impact of repeated
imaging. With the introduction of the proprietary EOSedge Flex
Dose™ feature, the dose automatically adjusts along the
patient body to further optimize the radiation as well as
delivering homogeneous image quality by avoiding over/under
exposure in the thinner/larger parts of the body.
- Precise 3D measurements.
Patient-specific measurements, dimensions and angles to make
informed clinical decisions at all stages of care.
- EOSapps and EOSlink for surgical
planning and OR integration. Pre-operative planning software to
anticipate surgical results and select components for spine
surgery; pairs with surgical technologies for precise execution
with EOSlink.
EOS’ installed base of over 380 imaging systems
encompasses 20 of the top 25 U.S. hospitals3. EOS has imaging
systems installed in more than 40 countries generating more than 1
million patient exams annually. Listed on the Euronext Paris
Exchange, the company has corporate locations in the U.S., France,
Canada, Germany and Singapore, and engages more than 175 employees.
For additional information, please visit www.EOS-imaging.com.
About Squadron Capital LLC and Squadron Medical
Finance Solutions, LLC
Squadron Capital seeks to acquire and
invest in operating companies located both in the US and
abroad. Squadron’s mission is long-term investment
(multi-generational) and assistance to the portfolio companies’
leadership teams in the execution of their business plans. Squadron
Medical Finance Solutions, a subsidiary of Squadron Capital,
assists orthopedic OEMs in achieving their business objectives
by offering financing of surgical instruments and implant sets, or
by providing debt financing to support the broader capital
requirements of growing companies. Squadron Capital is a strategic
investor in a broad range of companies in the orthopedic space,
both public and private.
About Alphatec Holdings,
Inc.
Alphatec Holdings, Inc. (ATEC), through its
wholly-owned subsidiaries, Alphatec Spine, Inc. and SafeOp
Surgical, Inc., is a medical device company dedicated to
revolutionizing the approach to spine surgery through clinical
distinction. ATEC architects and commercializes approach-based
technology that integrates seamlessly with the SafeOp Neural
InformatiX System to provide real-time, objective nerve information
that can enhance the safety and reproducibility of spine surgery.
Additional information can be found at www.atecspine.com.
Forward Looking Statements
This press release contains "forward-looking
statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 that
involve risks and uncertainty. Such
statements are
based on management's current expectations and
are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those
described in the forward-looking statements. The
Company cautions investors that there can be no
assurance that actual results or business conditions
will not differ materially from those projected or
suggested in such forward-looking statements.
Forward-looking statements include statements about the timing
of the anticipated acquisition, plans to commence the Offer, when
and whether the anticipated acquisition ultimately will close, the
expected consideration to be paid in connection with the Offer, the
potential benefits and synergies of the anticipated acquisition,
including the expected impact on future financial and operating
results, post-acquisition plans and intentions, and expectations on
the completion, timing and size of the private placement and the
debt exchange, and the anticipated use of proceeds therefrom. The
forward-looking statements contained herein are based on the
current expectations and assumptions of the Company and not on
historical facts. The important factors that could cause
actual operating results to differ significantly from
those expressed or implied by such forward-looking
statements include, but are not limited to:
uncertainties as to the timing of the Offer and the closing of the
acquisition; uncertainties as to the percentage of EOS
securityholders tendering their shares in the Offer; the
possibility that competing offers will be made and accepted; risks
related to French regulatory review of the Offer; the Company’s and
EOS’ ability to satisfy the conditions to the closing of the Offer
on the anticipated timeline or at all; the satisfaction of
conditions to closing the Offer and completing the acquisition,
including applicable regulatory clearances; the occurrence of any
event, change or other circumstance that could give rise to the
termination of the Tender Offer Agreement; the effect of the
announcement of the Offer and related transactions on the ability
of the parties to retain and hire key personnel, maintain
relationships with their customers and suppliers, and maintain
their operating results and business generally; the inability to
reach the required threshold in the Offer which would result in EOS
shares continuing to be traded on Euronext and related regulatory
requirements in connection therewith; the inability of the Company
to secure the financing contemplated to be obtained on the expected
terms or timing, or at all, whether as a result of failure to meet
certain conditions or otherwise; risks related to potential
litigation in connection with the Offer or the closing that may
result in significant costs of defense, risks and uncertainties
associated with market conditions and the satisfaction of customary
closing conditions related to the financing; indemnification and
liability; the risk that the businesses will not be integrated
successfully; unexpected variations in market growth and demand for
the combined company’s products and technologies; the risk that
benefits and synergies from the acquisition may not be fully
realized or may take longer to realize than expected; and the
impact of the COVID-19 pandemic on the Company’s and EOS’ business
and the economy. The words “believe,” “will,” “should,”
“expect,” “intend,” “estimate,” “look forward,”
and “anticipate,” variations of such words and similar
expressions identify forward-looking statements, but
their absence does not mean that a
statement is not a forward-looking statement.
A further list and description of these and other
factors, risks and uncertainties can be
found in the Company's most recent annual report,
and any subsequent quarterly and current reports,
filed with
the Securities and Exchange Commission. ATEC
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result
of new information, future events, or otherwise, unless
required by law.
Certain Legal Matters
This press release is not intended to, and does
not, constitute, represent or form part of any offer, invitation or
solicitation of an offer to purchase, otherwise acquire, subscribe
for, sell or otherwise dispose of, any securities whether pursuant
to this press release or otherwise.
The distribution of this presentation in
jurisdictions outside the United States or France may be restricted
by law or regulation and therefore any person who comes into
possession of this presentation should inform themselves about, and
comply with, such restrictions. Any failure to comply with such
restrictions may constitute a violation of the securities laws or
regulations of any such relevant jurisdiction.
EOS is incorporated in France and listed on
Euronext and any offer for its securities will be subject to French
disclosure and procedural requirements, which differ from those
that are applicable to offers conducted solely in the United
States, including with respect to withdrawal rights, offer
timetable, settlement procedures and timing of payments. The
transactions described in this presentation will be structured to
comply with French and U.S. securities laws and regulations
applicable to transactions of this type.
Investor/Media Contact:
Tina JacobsenInvestor Relations (760)
494-6790InvestorRelations@atecspine.com
Company Contact:
Jeff BlackChief Financial OfficerAlphatec Holdings, Inc.
InvestorRelations@atecspine.com
1 Yeh, Kuang-Ting MD, PhD; Lee, Ru-Ping RN, PhD;
Chen, Ing-Ho MD; Yu, Tzai-Chiu MD; Liu, Kuan-Lin MD, PhD; Peng,
Cheng-Huan MD, Wang, Jen-Hung MD; Wu, Wen-Tien MD, PhD. October
2018. Correlation of Functional Outcomes and Sagittal Alignment
After Long Instrumented Fusion for Degenerative
Thoracolumbar Spinal Disease. Spine: Volume 43, Issue 19.2 As low
as diagnostically acceptable3 US News & World Report Best
Orthopedic Hospitals list (2019-2020)
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