SafeStitch Medical to merge with TransEnterix, raise $30M

SafeStitch Medical to merge with TransEnterix, raise $30M

SafeStitch Medical (OTC:SFES) and TransEnterix are set to merge next quarter in a deal that includes a private placement worth about $30 million.

Miami-based SafeStitch said the deal will see it move to Research Triangle, N.C., but keep its name, stock symbol and place on the OTC exchange. TransEnterix CEO Todd Pope will helm the new SafeStitch, with chairman (and medtech veteran) Paul LaViolette at the head of the new firm’s board. SafeStitch chairwoman Jane Hsiao will take a seat on the new entity’s board, with OPKO Health chairman Phillip Frost joining the board, according to a press release.

The release did not mention SafeStitch founder, president & CEO Jeffrey Spragens or detail any other management changes. A SafeStitch representative was not available for comment this afternoon.

The deal will see each share of TransEnterix stock converted into 1.1723 shares of the new SafeStitch, according to a regulatory filing. Shares held by non-accredited investors will be converted into cash, priced at the average SFES share price for the 60-trading day period before the merger closes. Shares were trading at 90¢ apiece as of about 2 p.m. today, down 2.2%.

The deal also calls for investors including Hsiao and Frost’s Frost Gamma Investments Trust to acquire 7.5 million preferred shares at $4 each, or about $30 million, in a private placement, according to the filing. Each share would convert to 10 shares of common stock, according to the filing.

After the deal closes, expected during the 3rd quarter, shareholders of SafeStitch Medical and TransEnterix will own approximately 35% and 65% of the combined company, respectively, SafeStitch said.

SafeStitch, founded in 2005 by Dr. Charles Filipi and Spragens, makes the Amid hernia fixation device. TransEnterix makes laparoscopic devices including the Spider and Starr instruments. It was founded in 2006 and raised $21 million in "institutional financing" in 2008, according to its website. Another $55 million round followed in 2009 and TransEnterix raised a further $15 million in venture capital backing in 2011.

"We believe this merger will significantly enhance our ability to bring our innovative robotic surgery platform to market. Drs. Frost and Hsiao have a proven track record of driving healthcare innovation while creating significant value for shareholders. We expect the company will be at the forefront of advancements in minimally invasive surgery," Pope said in prepared remarks.

"We are excited about the breadth of the management team of TransEnterix. There are compelling advantages to innovative flexible technologies and robotics for less invasive surgical interventions, such as our proprietary trans-oral device. This merger will provide greater resources to help bring the pipeline products of the combined company to market and offer our shareholders an excellent opportunity to realize significant value of their investment," Hsiao added.

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