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Mountain Crest Acquisition Corp. III *

Mountain Crest Acquisition Corp. III *

Apr 27, 2021 by sam.beattie

PROPOSED BUSINESS COMBINATION:  ETAO International Group

ENTERPRISE VALUE: $1.0 billion
ANTICIPATED SYMBOL: ETAO

Mountain Crest Acquisition Corp. III proposes to combine with ETAO International Group, a digital healthcare group providing telemedicine, hospital care, primary care, pharmacy and health insurance covering all life stages of patients, is to go public, raising up to $304 million, assuming no redemptions by Mountain Crest III shareholders, to advance its best-in-class internet medical services, supported by artificial intelligence and big data technologies, to improve health care delivery and quality in specialized clinics and hospital settings.

  • ETAO has developed a healthcare ecosystem leveraging a technology platform that allows it to extend the reach of traditional healthcare services beyond the hospital wall to reach patients in modern clinical facilities in distant communities and even in their homes.
  • However, China’s healthcare system is at the developing stage with still many issues to be overcome.
  • Through ETAO’s online and offline ecosystem, supported by a network of bilingual, highly trained international specialists, the company is able to deliver medical services and quality care for Chinese patients via telemedicine and other services powered by technology.

EXTENSION – 11/17/22 – LINK

  • The Company extended the time it has to complete its initial business combination from November 20, 2022, to February 20, 2023 by depositing $250,000 to the trust account on November 17, 2022.

SUBSEQUENT EVENT – 10/19/22 – LINK

  • The SPAC extended the Outside Date for the closing of the Business Combination from October 5, 2022 to February 20, 2023.

SUBSEQUENT EVENT – 7/29/22 – LINK

  • On July 25, 2022, MCAE and the Subscriber terminated the PIPE Subscription Agreement by mutual consent by executing a Mutual Termination Agreement, dated as of July 25, 2022.
  • Pursuant to the Mutual Termination Agreement, the PIPE Subscription Agreement is void and of no further force and effect, and all rights and obligations of the parties thereunder have terminated.

SUBSEQUENT EVENT – 6/13/22 – LINK

  • On June 7, 2022, MCAE, the Company and the Shareholders’ Representative entered into an Amendment to Agreement and Plan of Merger (the “Amendment”) that expressly amended and modified the Merger Agreement as follows:
    • The agreed value of the Company is reduced from $2,500,000,000 to $1,000,000,000. Thus, in consideration of the Acquisition Merger, Purchaser will issue 100,000,000 ordinary shares at a per-share price of US$10.00 per share in exchange for 100% of the issued and outstanding ordinary shares of the Company.
    • The Outside Date for the closing of the Business Combination is extended from May 31, 2022 to October 5, 2022. If the parties do not terminate the Merger Agreement within five business days of the Outside Date, then the Company shall be responsible to pay all costs and expenses incurred in connection with MCAE’s obtaining any and all extensions to the deadline in which MCAE is required to complete the Business Combination, which is currently November 20, 2022.

TRANSACTION

  • Subsequent Event – 6/13/22 – The agreed value of the Company is reduced from $2,500,000,000 to $1,000,000,000. Thus, in consideration of the Acquisition Merger, Purchaser will issue 100,000,000 ordinary shares at a per-share price of US$10.00 per share in exchange for 100% of the issued and outstanding ordinary shares of the Company.
  • Transaction values ETAO International Group (“ETAO”) at a pro forma fully diluted enterprise value of approximately $2.5 billion with existing ETAO shareholders rolling over 100% of their equity into equity of the combined company.
  • Transaction expected to provide up to $304 million of cash proceeds, including a fully committed $250 million PIPE at $10 per share and up to $54 million of cash held in the trust account of Mountain Crest Acquisition Corp. III (“Mountain Crest III“) assuming no redemptions by Mountain Crest III shareholders.
  • ETAO also received commitments through a separate private placement of $51 million.

MCAE Transaction Overview

PIPE

  • Subsequent Event – On July 25, 2022, MCAE and the Subscriber terminated the PIPE Subscription Agreement by mutual consent by executing a Mutual Termination Agreement.
  • $250 million PIPE at $10 per share from thought-leading investor China SME Investment Group that is scheduled to close simultaneously with the business combination transaction.
  • Separately, ETAO has also received commitments through a separate private placement of $51 million expected to close prior to February 15, 2022.
  • Revere Securities, LLC acted as the placement agent in connection with the PIPE for a fee equal to 1% of the aggregate purchase price paid for the PIPE Shares sold in the PIPE.

STOCK PURCHASE AGREEMENT

  • Mountain Crest Holdings III LLC (the “Sponsor”) and ETAO International Group, Inc. (“EIG”) entered into a stock purchase agreement, dated December 16, 2021 (the “EIG Stock Purchase Agreement”), pursuant to which EIG purchased 200,000 shares of MCAE common stock (the “EIG Shares”) from the Sponsor for a purchase price of $2,500,000.

LOCK-UP

  • All holders of Company ordinary shares have agreed to execute lock-up agreements (the “Lock-up Agreements”) at the Closing.
  • Pursuant to the Lock-Up Agreements such holders have agreed, subject to certain customary exceptions, not to:
    • (i) sell, offer to sell, contract or agree to sell any shares of Parent Common Stock or Purchaser Ordinary Shares held by them (the “Lock-up Shares”), provided, however, that such Lock-up Shares shall not include shares of Parent Common Stock or Purchaser Ordinary Shares acquired by such Holder in open market transactions during the Lock-up Period until the date that is six months after the date of the Closing (the “Lock-Up Period”).

NOTABLE CONDITIONS TO CLOSING

  • Aggregate cash proceeds available to the Parent Parties from a private placement or other financing being not less than $200,000,000.

NOTABLE CONDITIONS TO TERMINATION

  • Subsequent Event – 10/19/22 – The SPAC extended the Outside Date for the closing of the Business Combination from October 5, 2022 to February 20, 2023.
  • Subsequent Event – 6/13/22 – The Outside Date for the closing of the Business Combination is extended from May 31, 2022 to October 5, 2022. If the parties do not terminate the Merger Agreement within five business days of the Outside Date, then the Company shall be responsible to pay all costs and expenses incurred in connection with MCAE’s obtaining any and all extensions to the deadline in which MCAE is required to complete the Business Combination, which is currently November 20, 2022.
  • If the Closing has not occurred on or before May 31, 2022 (the “Outside Date“).

ADVISORS

  • Revere Securities LLC is acting as capital markets advisor to Mountain Crest III.
  • Sichenzia Ross Ference LLP is acting as legal counsel to ETAO in the transaction.
  • Loeb & Loeb LLP is acting as legal counsel to Mountain Crest III.

MANAGEMENT & BOARD

Executive Officers

Suying Liu, 33
Chairman and Chief Executive Officer and Chief Financial Officer

Dr. Liu has been a director of PLBY Group, Inc. (Nasdaq: PLBY) since it closed its business combination with Mountain Crest Acquisition Corp (Nasdaq: MCAC) in February 2021. Dr. Liu was the Chairman and Chief Executive Officer of Mountain Crest Acquisition Corp from November 2019 until it closed its business combination with PLBY Group, Inc. He has been the Chairman and Chief Executive Officer of Mountain Crest Acquisition Corp. II (Nasdaq: MCAD) since July 2020. He served as the Head of Corporate Strategy of Hudson Capital Inc. (Nasdaq: HUSN) between May 2020 and September 2020, where he led the company’s strategic development for both general operations and specific growth areas. Between November 2018 and April 2020, Dr. Liu served as the Chief Strategist of Mansion Capital LLC, a privately-held real estate investment firm with brokerage and property management operations serving clients from both North America and Asia for their investments in the U.S. real estate market. Prior to joining Mansion Capital, Dr. Liu was an investment strategist at J.P. Morgan Chase & Co. from July 2015 to October 2018, providing investment strategies to major Wall Street institutions spanning private equity, hedge funds and insurance companies, with a primary focus in commercial mortgages. Dr. Liu began his career in academia, teaching a variety of degree programs from bachelor’s to executive education at Washington University Olin Business School between January 2013 and May 2015 while completing his doctoral studies, for which he received a PhD in finance in May 2015. Dr. Liu obtained a master’s in finance in December 2012 and his BA in economics and mathematics summa cum laude in May 2010 from Washington University in St. Louis.

Board of Directors

Nelson Haight, 56
Director

Mr. Haight currently serves as Senior Vice President, Chief Financial Officer and Treasurer for Key Energy Services, Inc., which he joined in June 2020. From September 2019 to June 2020, Mr. Haight was the interim Chief Financial Officer for Element Markets, LLC, an environmental commodities firm. From November 2018 to June 2019, Mr. Haight was the interim Chief Financial Officer for Epic Companies, LLC, a family office backed oilfield service company. Epic Companies filed for bankruptcy in August 2019. Between July 2017 and September 2018, Mr. Haight was the Chief Financial Officer of Castleton Resources, LLC, a privately held exploration and production company. From December 2011 to July 2017, Mr. Haight served in various capacities from Vice President to Chief Financial Officer at Midstates Petroleum Company, Inc., an exploration and production company founded in 1993 and focused on the application of modern drilling and completion techniques to oil/liquids-prone resources in previously discovered yet underdeveloped hydrocarbon trends. In 2015, Mr. Haight led the team that raised $625 million in new capital for Midstates Petroleum. Midstates Petroleum filed for Chapter 11 bankruptcy in April 2016, and Mr. Haight was instrumental in its successful reorganization and emergence from bankruptcy in October 2016. Mr. Haight received an MPA and BBA from the University of Texas at Austin in May 1988 and is a Certified Public Accountant and member of the American Institute of Certified Public Accountants.

Todd Milbourn, 52
Director

Dr. Milbourn is the Vice Dean and Hubert C. and Dorothy R. Moog Professor of Finance at Washington University Olin Business School, where he has researched and built academic programs in the areas of corporate finance, executive compensation and credit ratings since June 2000. With expertise on valuation, corporate finance, corporate governance, executive compensation and corporate risk-taking, Dr. Milbourn has been retained as an expert by private firms as well as the U.S. Department of Justice in cases related to fair rates of return, breach of contract damages and executive compensation programs, among others. Dr. Milbourn is also the Director and Chair of the Audit Committee of the Xanthus Fund at Oppenheimer. Dr. Milbourn obtained his PhD in finance from Indiana University Kelly School of Business in December 1995 and BA in economics and mathematics from Augustana College in May 1991.

Wenhua Zhang, 51
Director

Mr. Zhang has been a Partner at Azia Capital Fund LP, a private investment firm, since October 2014. Mr. Zhang began his career in the financial industry as the Vice President of Equity Research in the technology, media and telecom sector with T. Rowe Price from August 2001 to May 2008, and later joined Bain Capital as Director of the Brookside Fund, a long short equity investments fund, between July 2008 and December 2010. From February 2011 to August 2012, Mr. Zhang was Senior Vice President and Portfolio Manager at Harvard Management Company, a wholly owned subsidiary of Harvard University charged with managing the university’s endowment assets, and then as Partner and Portfolio Manager at Newport Asia LLC between October 2012 and October 2014, investing in Asia’s high-growth companies on behalf of clients from institutions, endowments, and family offices. Mr. Zhang received an MBA with dual majors in finance and technology innovation from the Wharton School at the University of Pennsylvania in May 2001.

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