Alliqua to acquire Soluble Systems
Alliqua BioMedical announced that the Company has signed a definitive agreement to acquire the business of Soluble Systems through a series of transactions. As part of the transactions, Soluble will contribute and transfer substantially all of its assets into a newly formed subsidiary of Alliqua and Alliqua will complete a holding company reorganization resulting in New Alliqua becoming the new public parent of Alliqua. New Alliqua will remain publicly traded and change its name to "Alliqua BioMedical. "Under the terms of the agreement, Soluble will receive consideration with a total value of approximately $35M, plus warrants to purchase 4M shares of New Alliqua common stock at an exercise price of $1.07. The transaction consideration consists of the issuance of approximately 17.6M shares of Alliqua common stock, valued at $0.89 per share, the assumption of $12.4M of senior debt, the cash payment due at closing of $5.4M to retire Soluble's subordinated debt, $1Mof cash payments by Alliqua to Soluble prior to closing, and $500,000 of other consideration. In addition, Soluble will have the right to appoint one new director to the Company's board of directors. The transaction is expected to close in the first quarter of 2017 and is subject to certain closing conditions that are described below."Financially, the benefits from this combination are powerful. The organization's commercial scale will increase dramatically, as the combined selling infrastructure will nearly double the size of Alliqua's existing direct salesforce. We expect that broader U.S. direct sales coverage will drive rapid additional market penetration for all Alliqua products with the potential for cross-selling opportunities over time. Post-closing, the combined company's financial profile should improve with a 2016 annualized revenue base estimated to be between $36 and $38 million, gross margins in excess of 70% and significant operating margin benefits from synergies. Clearly, we believe this financial profile positions us with the requisite scale, a clear path to profitability and improving returns for our stockholders going forward.