Asensus Surgical Inc. is at a financial crossroads as it urges shareholders to approve a merger with Karl Storz SE. The company, which specializes in surgical robotics, is grappling with significant financial obligations and has issued a stark warning to its stockholders: approve the merger, or face bankruptcy. This merger is seen as a crucial step for Asensus to remain solvent and operational, amidst its ongoing financial struggles.
In 2006, Asensus, originally founded as TransEnterix Inc., has evolved to become a key player in surgical robotics. However, the company has faced persistent financial challenges. Previous reports indicated Asensus and Karl Storz entered acquisition talks earlier this year, with a proposed purchase price of 35¢ per share. The deal was positioned as a strategic move to stabilize Asensus and leverage Karl Storz’s market presence. Despite efforts to secure alternative offers, no other proposals emerged.
Impending Financial Crisis
Asensus emphasized that without merger approval, it will confront “significant near-term financial obligations,” including a $20 million payment to Karl Storz, along with interest and associated transaction expenses. CEO Anthony Fernando expressed doubts about the company’s ability to raise sufficient capital to meet these expenses and sustain operations.
“We do not believe we are in a position to raise the capital needed to fund these expenses and also to continue funding operations,” said Fernando.
Karl Storz holds a security interest in all of Asensus’ assets, which would place it ahead of other creditors and stockholders in a bankruptcy scenario. This means stockholders might receive less than the merger consideration or potentially nothing at all.
Shareholder Vote Crucial
Asensus has received proxies for approximately 55% of its outstanding shares, with 80% favoring the merger. However, a majority of all shares of common stock is required for approval. Fernando urged shareholders to vote, stressing the importance of every single vote.
“I cannot overstate the importance of every single stockholders’ participation in this vote,” he said. “Whether you support the merger or not, your vote matters.”
The proposed merger offers a 67% premium on Asensus’ stock closing price on April 2, 2024. Fernando indicated that despite exploring various alternatives, including partnerships and potential acquisitions, the 35¢ per share offer from Karl Storz remains the best option.
Financial Performance
In its recent second-quarter results, Asensus reported $2.2 million in sales, doubling its Q2 2023 revenues but still facing profit losses of $25.7 million. While its sales outpaced Wall Street estimates, earnings fell short. Adjusted earnings per share were -7¢, missing analyst expectations by 2¢. Shares in ASXC were down in premarket trading.
Asensus Surgical’s future hinges on the upcoming shareholder vote for the merger with Karl Storz SE. The financial challenges faced by Asensus highlight the precarious nature of its current operations. The company must navigate its way through this critical juncture, with the merger representing a potential lifeline. The outcome of the vote will determine whether Asensus can continue its operations or if bankruptcy is inevitable, impacting stakeholders across the board.
