Item 1.01.
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Entry into a Material Definitive Agreement.
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On November 26, 2018, Arsanis, Inc., a Delaware corporation (Arsanis or the Company), Artemis AC Corp., a Delaware
corporation and a wholly owned subsidiary of Arsanis (Merger Sub), and X4 Pharmaceuticals, Inc., a Delaware corporation (X4), entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to
which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into X4, with X4 continuing as a wholly owned subsidiary of Arsanis and the surviving
corporation of the merger (the Merger). The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code). At the effective time
of the Merger, each outstanding share of X4 common stock and X4 preferred stock will be converted into the right to receive shares of Arsanis common stock as set forth in the Merger Agreement.
Subject to the terms and conditions of, and the calculation of the exchange ratios for the X4 common stock and X4 preferred stock pursuant to, the Merger
Agreement, it is currently anticipated that upon the closing of the Merger, current Arsanis stockholders will own approximately 30% of the combined company and current X4 stockholders will own approximately 70% of the combined company on a pro forma
basis, based on each companys respective equity ownership as of November 26, 2018 and Arsanis expected net cash as of the closing of the Merger.
The provisions for calculating the exchange ratios for the X4 common stock and X4 preferred stock are set forth in the Merger Agreement, and assume a
pre-transaction
valuation of $115 million for X4s business and $50 million for Arsanis business. In the case of Arsanis, the
pre-transaction
valuation is
subject to downward or upward adjustment to the extent Arsanis net cash as of the business day prior to the closing is above or below $20 million. In addition, Arsanis will assume the (i) outstanding warrants of X4, (ii) outstanding
stock option awards of X4, and (iii) insofar as they relate to such stock option awards of X4, each stock option plan or other stock or equity-related plans of X4, each of which will be adjusted to reflect the exchange ratios for the Merger.
The exchange ratios are also based on the relative capitalizations of Arsanis and X4, which, in the case of X4, includes all then outstanding X4 options and warrants (whether or not exercisable) and, in the case of Arsanis, includes options for
approximately 800,000 shares currently outstanding or proposed to be granted in connection with the Merger.
Each of Arsanis and X4 has agreed to
customary representations, warranties and covenants in the Merger Agreement including, among others, covenants relating to (1) using reasonable best efforts to obtain the requisite approvals of its stockholders, which, in the case of Arsanis,
includes the Public Company Voting Proposal and the Other Public Company Voting Proposals (each as described below), as applicable,
(2) non-solicitation
of alternative acquisition proposals,
(3) conduct of their respective businesses during the period between the date of signing the Merger Agreement and the effective time of the Merger, (4) Arsanis using reasonable best efforts to maintain the existing listing of the
Companys common stock on the Nasdaq Stock Market, Inc. (Nasdaq) and to cause shares of the Companys common stock being issued in connection with the Merger to be approved for listing on Nasdaq prior to the effective time of
the Merger, and (4) Arsanis filing with the Securities and Exchange Commission (the SEC) and causing to become effective a registration statement to register the shares of Arsanis common stock to be issued pursuant to the Merger
Agreement (the Registration Statement).
Consummation of the Merger is subject to certain closing conditions, including, among other things,
the (1) approval by the stockholders of Arsanis of the issuance of the shares of Arsanis common stock pursuant to the Merger Agreement (the Public Company Voting Proposal), (2) approval by the stockholders of X4 to adopt the Merger
Agreement, (3) continued listing of the Companys common stock on Nasdaq and (4) effectiveness of the Registration Statement. Each partys obligation to consummate the Merger is also subject to other specified customary
conditions, including the