Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On June 28,
2018, Keryx Biopharmaceuticals, Inc., a Delaware corporation (Keryx), entered into an agreement and plan of merger (the Merger Agreement) with Akebia Therapeutics, Inc. (Akebia), a Delaware corporation, and Alpha
Therapeutics Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Akebia (Merger Sub), pursuant to which Keryx and Akebia will combine their respective businesses through the merger of Merger Sub with and into Keryx,
with Keryx continuing after such merger as the surviving corporation and a wholly-owned subsidiary of Akebia (the Merger). The Merger Agreement has been approved by the Boards of Directors of each of Keryx and Akebia.
At the effective time of the Merger, (i) each share of common stock, par value $0.001 per share, of Keryx (a Keryx Share) issued and
outstanding immediately prior to the effective time of the Merger (other than the shares that are held by Akebia, Merger Sub, any subsidiary of Akebia or Keryx, or held by Keryx as treasury shares) will be converted into and become 0.37433 fully
paid and
non-assessable
shares of common stock of Akebia, $0.00001 par value per share (an Akebia Share), such that the
pre-Merger
stockholders of Keryx and
Akebia will each own approximately 50% of the voting power of the combined company upon the closing of the Merger (the Combined Company), based on the companies fully diluted market capitalizations as of signing and before taking
into account the Additional Shares described below.
The Merger Agreement provides that, at the effective time of the Merger, each outstanding Keryx
restricted share issued under a Keryx equity plan (Keryx Restricted Shares), other than those Keryx Restricted Shares that accelerate or lapse as a result of the Merger, will be cancelled and converted into restricted stock unit awards
of Akebia, the number of which will be adjusted in accordance with the terms of the Merger Agreement. Each of those Keryx Restricted Shares whose restrictions (including vesting) accelerate or lapse as a result of the Merger, will be cancelled and
converted into the right to receive 0.37433 Akebia Shares. In addition, each outstanding and unexercised option to acquire Keryx Shares granted under a Keryx equity plan will be cancelled and converted into an option to acquire Akebia Shares, with
the number of shares and exercise price adjusted for the exchange ratio in accordance with the terms of the Merger Agreement.
The Combined Company will
have a Board of Directors consisting initially of nine directors, comprised of: (i) four directors designated by the current Board of Directors of Akebia, each of whom will be a director of Akebia immediately prior to the date of the Merger
Agreement (and who will be reasonably acceptable to Keryx) (the Akebia Directors); (ii) four directors designated by the current Board of Directors of Keryx, each of whom will be a director of Keryx immediately prior to the date of the
Merger Agreement (and who will be reasonably acceptable to Akebia) (the Keryx Directors); and (iii) one additional director to be designated by the Board of Directors of Keryx (the Additional Director), who will serve as
the chairperson and be reasonably acceptable to Akebia. Alternatively, the Keryx Directors may choose to select the chairperson from amongst the Keryx Directors, who will be reasonably acceptable to Akebia, and in such an event such Keryx Director
will serve as chairperson and the Akebia Directors and the Keryx Directors will select the Additional Director, who will be a person not on either the Board of Directors of Akebia or the Board of Directors of Keryx as of the date of the Merger
Agreement. Promptly following the date of the Merger Agreement and before the filing of the joint proxy statement to be filed in connection with the Merger, Akebia and Keryx will work in good faith to equitably allocate the Akebia Directors and
Keryx Directors among the three classes of directors.
Akebia and Keryx each made certain representations and warranties, and agreed to certain covenants,
in the Merger Agreement, including covenants by Akebia and Keryx to conduct their businesses in the ordinary course during the period between the execution of the Merger Agreement and consummation of the Merger, to refrain from taking certain
actions specified in the Merger Agreement and to use reasonable best efforts to cause the conditions of the Merger to be satisfied.
In addition, neither
Akebia nor Keryx is permitted to solicit, initiate or knowingly encourage or induce, or take any other action designed to facilitate, any competing transaction proposals from third parties or to engage in discussions or negotiations with third
parties regarding any competing transaction proposals, subject to certain exceptions. Each partys board of directors may change its recommendation to its stockholders in response to a superior proposal or an intervening event if the board of
directors determines in good faith that the failure to take such action would constitute a breach of the directors fiduciary duties under applicable law.
The consummation of the Merger is subject to customary closing conditions, including: (i) approval of the
issuance of Akebia Shares in connection with the Merger by the affirmative vote of the majority of Akebia Shares cast at the Akebia shareholders meeting in favor of the issuance of Akebia Shares in connection with the Merger; (ii) the
adoption of the Merger Agreement by the affirmative vote of the holders of a majority of all outstanding shares of Keryx common stock entitled to vote thereon; (iii) the absence of any adverse law or order promulgated, entered, enforced,
enacted or issued by any governmental entity that prohibits, restrains or makes illegal the consummation of the Merger; (iv) the Akebia Shares to be issued in the Merger being approved for listing on the Nasdaq Capital Market; (v) the
expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other material government approvals; (vi) subject to certain materiality exceptions, the accuracy of certain representations and
warranties of each of Akebia and Keryx contained in the Merger Agreement and the compliance by each party with the covenants contained in the Merger Agreement; and (vii) the absence of a material adverse effect with respect to each of Akebia
and Keryx. Akebias obligation to consummate the Merger is also subject to the conversion of $164.75 million of Keryxs Zero Coupon Convertible Senior Notes due 2021 (the Convertible Notes) pursuant to the terms of the
Notes Conversion Agreement by and among Keryx, Baupost Group Securities, L.L.C. (Baupost) and, with respect to certain sections only, Akebia described below in greater detail. The parties expect the Merger will be completed in the second
half of 2018.
The Merger Agreement contains certain termination rights for both Keryx and Akebia, including for the failure to consummate the Merger by
December 28, 2018, the enactment, promulgation or issuance of any injunction, order or ruling which has become final and
non-appealable
and makes the consummation of the Merger illegal or otherwise
prohibits consummation of the Merger, failure of either Keryxs stockholders or Akebias stockholders to approve the Merger and related transactions, or breaches of representations, warranties or covenants by a party that result in the
failure of certain conditions to closing being satisfied. In addition, each of Keryx and Akebia have the right to terminate the Merger Agreement in order to enter into a Superior Proposal (as defined in the Merger Agreement). Upon
termination of the Merger Agreement under certain specified circumstances Akebia or Keryx may be required to pay the other party a termination fee of $22 million.
The foregoing description of the Merger Agreement and the transactions contemplated thereby is not complete and is subject to and qualified in its entirety by
reference to the Merger Agreement, a copy of which is filed herewith as Exhibit 2.1 and is incorporated herein by reference.
The Merger Agreement has
been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other financial information about Keryx, Akebia, or their respective subsidiaries and affiliates. The representations,
warranties and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the
parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those applicable to investors. Akebias stockholders and Keryxs stockholders and other investors are not third-party beneficiaries under the Merger Agreement and should
not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of Keryx, Akebia, or any of their respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by Keryx and Akebia.
Notes Conversion Transactions
In connection with
the Merger, Keryx entered into a Notes Conversion Agreement (the Conversion Agreement) with Baupost, the holder of the Convertible Notes and, with respect to certain sections only, Akebia. Pursuant to the terms of the Conversion
Agreement, Baupost has agreed to convert the Convertible Notes into 35,582,335 Keryx Shares (the Conversion Shares) in accordance with the terms of the governing Indenture, dated May 9, 2018, by and between Keryx and The Bank of New
York Mellon Trust Company, N.A., immediately prior to
the effective time of the Merger, conditioned upon the issuance to Baupost of an additional 4,000,000 shares of Keryx Common Stock (the Additional Shares). Baupost also agreed to
enter into (i) the Akebia Voting Agreement described below and (ii) a Registration Rights Agreement with Akebia dated and effective as of the closing as of the Merger (the Registration Rights Agreement) pursuant to the terms of
the Conversion Agreement.
The foregoing description of the Conversion Agreement and the transactions contemplated thereby, including the form of
Registration Rights Agreement attached to the Conversion Agreement, does not purport to be complete and is qualified in its entirety by reference to the full text of the Conversion Agreement, which is filed herewith as Exhibit 10.1 and is
incorporated herein by reference.
The representations, warranties and covenants contained in the Conversion Agreement (including the form of Registration
Rights Agreement attached to the Conversion Agreement) were made only for the purposes of the Conversion Agreement and as of specific dates, were solely for the benefit of the parties to the Conversion Agreement, and may be subject to limitations
agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Conversion Agreement and the Registration Rights Agreement. The representations and
warranties may have been made for the purposes of allocating contractual risk between the parties to the Conversion Agreement and the Registration Rights Agreement instead of establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries of the Conversion Agreement or the Registration Rights Agreement and should not rely on such
representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Keryx or any of our subsidiaries or affiliates. Moreover, information concerning the subject matter of such
representations, warranties and covenants may change after the date of the respective agreements, and this subsequent information may or may not be fully reflected in public disclosures by Keryx.
Voting Agreements
Simultaneously with the
execution of the Merger Agreement, Keryx entered into a Voting Agreement with Muneer Satter, the Chairman of Akebias Board of Directors (the Keryx Voting Agreement) pursuant to which Mr. Satter has agreed, among other things,
to vote the Akebia Shares that he beneficially owns in favor of the adoption of the Merger Agreement and against approval of any proposal made in opposition to, in competition with, or inconsistent with, the Merger Agreement or the Merger or any
other transactions contemplated by the Merger Agreement. Simultaneously with the execution of the Merger Agreement, Akebia entered into a Voting Agreement with Baupost (the Akebia Voting Agreement, and, together with the Keryx Voting
Agreement, the Voting Agreements) pursuant to which Baupost has agreed, among other things, to vote the Keryx Shares that it beneficially owns in favor of the adoption of the Merger Agreement and against approval of any proposal made in
opposition to, in competition with, or inconsistent with, the Merger Agreement or the Merger or any other transactions contemplated by the Merger Agreement.
Baupost is currently the beneficial owner of approximately 21.4% of the currently outstanding common stock of Keryx (prior to any conversion of the
Convertible Notes or the issuance of the Additional Shares) and Mr. Satter currently beneficially owns approximately 5% of the currently outstanding common stock of Akebia. The foregoing description of the Voting Agreements does not purport to
be complete and is qualified in its entirety by reference to the Keryx Voting Agreement and the Akebia Voting Agreement, which are filed as Exhibits 99.1 and 99.2 to this Current Report on Form
8-K
and are
incorporated herein by reference.