The planned merger between Israeli-US dental implants company Keystone Dental and Israeli company Check-Cap (Nasdaq: CHEK) has been rejected by the Check Cap shareholders. The rejection of the deal comes after a Canadian investment company called Symetryx Corporation bought 5% of Check-Cap, and joined forces with another Canadian investor with 20% of the company to lead opposition to the merger.
Check-Cap developed a ingestible capsule for imaging of the colon, but a clinical trial of the product failed, and the company’s board of directors sought another activity. The company’s share price closed 3.21% lower yesterday, giving a market cap of $14.1 million.
Under the proposed deal, Keystone Dental was supposed to have been merged into Check-Cap and to start being traded at a valuation of $265 million, with Keystone Dental’s existing shareholders holding 85% of the merged company, which would have $22.3 million cash. The valuation is similar to that at which Keystone Dental’s last fund raising round took place in 2021, despite the general decline in the market since then.
The merged company was also due to cease being Israeli, at the request of foreign investors concentered at the risk arising from the Israeli government’s judicial overhaul legislation.
Keystone Dental, which was formed on the basis of a merger between Israeli company Paltop and a US company, currently operates from California with a development center in Caesarea. In 2022, Keystone Dental had revenue of over $60 million. It employs 250 people, 100 of them in Israel. According to a recent company presentation, it will grow by 20% this year and reach operating breakeven in 2024.
While Keystone Dental’s investors see it as a growth company, Symetryx argues that it is an industrial company, and as such was being valued at too high a multiple on its EBITDA, which is expected to reach $2.8 million in 2025.
Raising money from existing investors
Keystone Dental will now remain a privately-held company, and will carry out a fund raising round from its existing investors led by Accelmed, which is headed by Dr. Uri Geiger. Among other Israeli investors in the company are Poalim Capital Markets and The Phoenix Holdings.
In July 2023, Symetryx made a non-binding offer to buy Check-Cap for $4.3 per share, 79% above its current market price.
Published by Globes, Israel business news - en.globes.co.il - on December 19, 2023.
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