Asensus Surgical to File Bankruptcy if Karl Storz Merger Collapses

Throughout 2024, Asensus Surgical has danced with the idea of being acquired by Karl Storz Endoscopy-America, a wholly-owned direct subsidiary of Karl Storz. After formally entering into talks with the surgical robotics developer in April, it was officially announced on June 7 that it plans to be acquired by the German company.

However, in order to close the deal, a majority of Asensus stockholders have to vote in favor of the merger proposal, with an extended deadline of August 20 approaching. Currently, the company has received proxies for approximately 55% of its outstanding shares, with 80% voting in favor of the proposal.

If the deal isn’t approved, Asensus said it will have no choice but to file for bankruptcy protection as significant near-term financial obligations exceed the assets on its current balance sheet.

“The sum of these obligations exceed the available capital on our balance sheet,” said Anthony Fernando, president and CEO of Asensus, in the Q2 earning call, according to Seeking Alpha. “We do not believe we are in a position to raise the capital needed to fund these expenses and also to continue funding operations. Therefore, if the merger is not approved, we expect to seek bankruptcy protection.”

These financial obligations include the repayment of $20 million of securitized notes with interest and prepayment premium and other associated transactions to Karl Storz. Of note, the company said that Karl Storz has a security interest in all of its assets, meaning “Karl Storz holds a legal claim over our company’s assets as collateral for the debt that we owe them,” Fernando said.

In a bankruptcy scenario, this would mean that Karl Storz would have priority over other creditors and stockholders in claims against Ascensus, also resulting in the potential for stockholders to receive less than the merger consideration.

Currently, Asensus has negotiated price per share to 35¢, which it said is “the best price reasonably obtainable for stockholders,” according to Fernando. The price of 35¢ per share is a 67% premium on the closing price of the company’s stock on April 2, when the intent to merger was announced. Additionally, it marks a 52% premium on the stock’s closing price on the final trading day before the announcement.

Before accepting the Karl Storz deal, Asensus said it explored other alternatives, including partnerships and acquisitions, however these discussions only lead to the proposal from Karl Storz and no other company expressed interest in offering a higher price then the company.