Item
1.01. |
Entry into a Material Definitive Agreement.
|
Merger Agreement
On May 23, 2022, Entasis Therapeutics Holdings Inc., a Delaware corporation (“Entasis” or the “Company”), entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with Innoviva, Inc., a Delaware corporation (“Parent”), and Parent’s wholly owned subsidiary, Innoviva Merger Sub, Inc., a Delaware corporation (“Merger Sub”). Pursuant to the Merger Agreement, and upon
the terms and subject to the conditions thereof, Merger Sub will commence a tender offer (the “Offer”) to acquire all of the issued and outstanding shares of the Company’s common stock, par value $0.001 per share (the “Shares”), other than Shares
held by Parent or Merger Sub, at a price of $2.20 per Share in cash (the “Offer Price”), without interest and subject to any applicable withholding of taxes.
The Offer will be scheduled to expire on the 20th business day following the commencement of the Offer, unless extended in accordance
with the terms of the Merger Agreement and applicable law. The obligation of Parent and Merger Sub to consummate the Offer is subject to certain customary conditions, including that there be validly tendered and not validly withdrawn a number of
Shares that, excluding the Shares beneficially owned by Parent, Merger Sub, and the Company’s Chief Executive Officer, represents at least one Share more than 50% of the Shares not beneficially owned by such persons that are outstanding at the time
of the expiration of the Offer (the “Minimum Condition”). The Minimum Condition may not be waived. Parent and its affiliates currently own approximately 60% of the issued and outstanding Shares. Consummation of the Offer is not subject to a
financing condition.
At the time of the acceptance for payment of all Shares tendered (and not validly withdrawn) pursuant to the Offer (the “Offer
Acceptance Time”), each Share (other than any Shares held by (i) Parent or Merger Sub and (iii) by stockholders who have properly exercised and perfected their demands for appraisal of such Shares in accordance with Section 262 of the General
Corporation Law of the State of Delaware (the “DGCL”) will be cancelled and converted into the right to receive an amount in cash equal to the Offer Price, without interest and subject to any applicable withholding of taxes. As soon as practicable
following the Offer Acceptance Time, subject to the satisfaction or waiver of certain customary conditions, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent pursuant to Section
251(h) of the DGCL (the “Merger”).
Immediately prior to the effective time of the Merger (the “Effective Time”), each Company stock option with a per share exercise
price less than the Offer Price, whether or not vested, will terminate and be cancelled, and the holder thereof will be entitled to receive the Offer Price less any applicable per share exercise price for each share subject to such award, pursuant
to the terms set forth in the Merger Agreement. Each Company stock option with a per share exercise price equal to or greater than the Offer Price will be cancelled as of immediately prior to the Effective Time, with no consideration payable.
Additionally, each Company restricted stock unit (“RSU”) will terminate and be cancelled as of immediately prior to the Effective Time and be converted into the right to receive a number of restricted stock units in respect of shares of Parent
common stock, par value $0.01 per share (“Parent Common Stock”) with terms and conditions that are similar the RSUs for which they were exchanged (each, a “Replacement RSU Award”), except for certain changes to the vesting schedule and conditions
and changes to such terms and conditions as do not adversely impact the rights of the holder thereof if Parent determines in good faith that such changes are necessary for the administration of such awards. The number of shares underlying the
Replacement RSU Awards will equal (x) the number of Shares subject to RSUs immediately prior to the Effective Time, multiplied by (y) the Offer
Price, divided by (z) the per share volume-weighted average price of Parent Common Stock for the 10 business days prior to the closing date
(the “Parent Stock VWAP”). The Merger Agreement further provides that, as of the Effective Time, each outstanding Company warrant (a “Warrant”) that is outstanding as of immediately prior to the Effective Time with a per share exercise price less
than the Offer Price will be cancelled, and Parent will issue a replacement warrant (each, a “Replacement Warrant”) (i) exercisable for (a) a number of shares of Parent Common Stock equal to the aggregate number of Shares underlying such Entasis
Warrant; multiplied by (b) the Offer Price; divided
by (c) the Parent Stock VWAP and (ii) having a per share exercise price equal to (a) the current per share exercise price of such Warrant; multiplied
by (b) the Parent Stock VWAP; divided by (C) the Offer Price.
The Merger Agreement includes customary
representations, warranties and covenants of the Company, Parent and Merger Sub. The Company has agreed to use reasonable best efforts to ensure that its business and operations are conducted in the ordinary course of business consistent with
past practices until the earlier of the Effective Time or the termination of the Merger Agreement. The Company has also agreed not to solicit or initiate, or knowingly facilitate or knowingly encourage the submission of proposals for a strategic
transaction involving the Company. The Company’s board of directors unanimously approved the execution, delivery and performance by the Company of the Merger Agreement and the Merger on the terms and subject to the conditions set forth in
the Merger Agreement and unanimously recommends that the stockholders of the Company (other than Parent and its affiliates) tender their Shares in the Offer.
The Merger Agreement also includes customary termination provisions for both the Company and Parent. The Merger
Agreement provides that the parties are entitled to an injunction or injunctions to prevent breaches of the Merger Agreement, and to specifically enforce the terms and provisions of the Merger Agreement.
Amendment to Investor Rights Agreement
In connection with entry into the Merger Agreement, the Company and Parent entered into Amendment No. 1 to the
Investor Rights Agreement (the “Amendment”), dated April 22, 2020, as amended, between the Company and Parent. The Amendment adjusts and clarifies the circumstances in which Parent would have preemptive rights to acquire Company securities and
narrows the exception under which the Company may issue securities on an expedited basis without first giving Parent the opportunity to participate in the transaction. The Amendment also grants Parent certain rights to negotiate a sale or material
licensing transaction related to the Company’s product candidate sulbactam-durlobactam in the United States, the European Economic Area or the United Kingdom before the Company can enter into such an agreement with respect to such a transaction
with a third party.
General
The foregoing summaries of the principal terms of the Merger Agreement and the Amendment do not purport to be a
complete description of such agreements and the rights and obligations of the respective parties thereunder. The respective summaries are qualified in their entirety to the full copy of the Merger Agreement and Amendment which are filed as Exhibits
2.1 and 10.1, respectively, and incorporated in this Item 1.01 by reference. The foregoing summaries and attached exhibits are intended to provide information regarding the material terms of the transactions described herein and are not intended to
modify or supplement any factual disclosures about the Company in its public reports filed with the Securities and Exchange Commission (the “SEC”). The assertions embodied in the representations and warranties included in the Merger Agreement and
the Amendment were made solely for purposes of such agreements among the respective parties thereto and are subject to important qualifications and limitations agreed to by the parties, including in the case of the Merger Agreement being qualified
by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them that differ from those applicable to investors. Moreover, some of those representations and warranties may not be
accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to the Company’s SEC filings or may have been used for purposes of allocating risk among the
contracting parties rather than establishing matters as facts. Investors should not rely on the representations and warranties or any description of them as characterizations of the actual state of facts of the parties to the Merger Agreement and
the Amendment or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement and the Amendment, and this subsequent
information may or may not be fully reflected in public disclosures by the Company or Parent.