Mountain Crest III (MCAE) Re-Strikes ETAO Deal

Mountain Crest III (MCAE) Re-Strikes ETAO Deal

Mountain Crest III (NASDAQ:MCAE) announced this afternoon that it has amended its merger agreement in connection to its proposed business combination with healthcare group ETAO.

As part of the amended merger agreement, Mountain Crest III has reduced ETAO’s valuation from $2.5 billion to just $1 billion due to unfavorable market conditions, ETAO’s financial statements, and its failure to close a private placement of its securities in the amount of $51 million that was scheduled to close on or before February 15, 2022. MCAE also noted that the amendment was made due to the uncertainty of the $250 million commitment in a private investment in its securities that is scheduled to close simultaneously with the deal.

Mountain Crest III originally brought $54.1 million into the deal supplemented by a $250 million PIPE at $10 per share with commitments from the China SME Investment Group. At the time, ETAO expected to also take in a $51 million investment prior to the deal’s close.

MCAE will now issue 100k ordinary shares at $10 per share as agreed by the parties to the shareholders of ETAO in exchange for 100% of the issued and outstanding shares.

Additionally, the amendment allows for the Sponsor to determine whether its designee will be an independent or dependent director on the board. If the Sponsor’s designee is dependent, then ETAO and the designee will enter into an agreement establishing the responsibilities and the compensation for the director prior to the closing of the merger.

The parties also extended the outside date for the closing of the deal from May 31, 2022 to October 5, 2022.

The last modification the parties made to the merger agreement pertained to ETAO’s failure to provide its audited financial statements for the years ended December 31, 2021 and 2020 as well as its reviewed condensed and consolidated financial statements for the six month periods ended June 30, 2022 and 2021. If the company is unable to obtain approval or consent from any Governmental Authority, including the Cyberspace Administration of China or the China Securities Regulatory Commission, by the outside date then that will constitute as a material failure by ETAO and the Shareholders’ Representative to perform its obligation.

MCAE originally announced the $2.5 billion deal with ETAO on January 28, 2022. Beijing-based ETAO is a diversified digital healthcare group managing 12 hospitals, about 30 chain clinics and an insurance brokerage.