Asensus Surgical (Nasdaq: ASXC) said it will file for bankruptcy protection if shareholders do not approve the Karl Storz merger.
The surgical robotics developer urged stockholders in its second-quarter earnings to vote in favor of the merger proposal as the extended deadline date of August 20 approaches. Asensus has received proxies for approximately 55% of its outstanding shares, with 80% of those voting in favor of the merger proposal. Approval from a majority of all shares of common stock is required.
If shareholders do not approve the merger, Asensus said it will incur “significant near-term financial obligations.” It will have to pay Karl Storz $20 million of securitized notes with interest and prepayment premium and other associated transaction expenses. Asensus said the financial implications exceed its assets on its current balance sheet.
“We do not believe we are in a position to raise the capital needed to fund these expenses and also to continue funding operations,” CEO Anthony Fernando said on the Q2 earnings call. “If the merger is not approved, we expect to seek bankruptcy protection. It’s important to note that Karl Storz has a security interest in all of our assets. This means that Karl Storz holds a legal claim over our company’s assets as collateral for the debt that we owe them.”
Karl Storz’s security interest would give it priority over other creditors and stockholders in claims against Asensus’ assets in a bankruptcy scenario. CEO Fernando stressed that stockholders could receive less than the merger consideration if bankruptcy is filed.
“As a result, in the event of a bankruptcy, we believe our common stockholders will receive less than the merger consideration and may not receive distributions at all in a bankruptcy setting. We have heard from stockholders that they would like us to get a higher price than 35¢ per share,” Fernando said. “I want to emphasize that we have exhausted all reasonable options available to us to get a higher price and our Directors believe 35¢ per share is the best price reasonably obtainable for stockholders. Before accepting the Karl Storz deal, we explored various alternatives, including partnerships and potential acquisitions.”
Acquisition talks throughout the year
Asensus Surgical announced plans to be acquired by Karl Storz on June 7. The deal was initially valued at 35¢ per share in cash.
Karl Storz Endoscopy-America, a wholly-owned direct subsidiary of Germany-based Karl Storz, agreed to acquire all outstanding shares of Asensus. Karl Storz formally entered talks to buy the surgical robotics technology developer in April. The companies previously collaborated on surgical robotics marketing and development more than a year ago.
The purchase price of 35¢ per share represents a 67% premium on the closing price of the company’s stock on April 2, when they initially announced the intent to complete this deal. It marks a 52% premium on the stock’s closing price on the final trading day before the announcement.
“As described more fully in the proxy statement we solicited interest from other potential partners and acquirers, but none of these discussions led to a proposal other than the proposal from Karl Storz. Since the announcement of this transaction on April 3, 2024, no other company has expressed interest in offering a higher price than Karl Storz,” Fernando said. “I cannot overstate the importance of every single stockholders’ participation in this vote, whether you support the merger or not, your vote matters.”
Asensus sales beat Wall Street estimates, earnings miss
Asensus also announced second-quarter results that beat Wall Street revenue estimates but missed on earnings.
The company reported $2.2 million in sales, doubling its Q2 2023 revenues. Asensus had profit losses of $25.7 million in Q2 with a diluted earnings per share loss of 9¢.
Adjusted to exclude one-time items, earnings per share were -7¢, 2¢ behind The Street, where analysts were looking for sales of $1.23 million.
Shares in ASXC were down 2.19% to 31¢ apiece in premarket trading.
