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Capstar Special Purpose Acquisition Corporation

Capstar Special Purpose Acquisition Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: Gelesis, Inc.

ENTERPRISE VALUE: $1.0 billion
ANTICIPATED SYMBOL: GLS

Capstar Special Purpose Acquisition Corporation proposes to combine with Gelesis, Inc., a biotherapeutics company advancing biomimetic superabsorbent hydrogels to treat excess weight and metabolic disorders.

Gelesis is a biotherapeutics company aiming to transform weight management using a proprietary biomimetic superabsorbent hydrogel technology. The Company’s first commercial product, Plenity®, is a U.S. Food and Drug Administration (FDA) cleared aid in weight management in adults with excess weight or obesity, Body Mass Index (BMI) of 25 to 40 kg/m², when used in conjunction with diet and exercise. Plenity has the broadest BMI range of any prescription weight-management aid to date—over 150 million American adults could be eligible for treatment with Plenity, many of whom did not have a prescription alternative before. Plenity’s unique scientific approach and efficacy, safety and tolerability profile allow Gelesis to bring it to market in a completely new way.

Plenity capsules contain a non-systemic biomimetic hydrogel that is not absorbed but instead acts locally in the gastrointestinal (GI) tract. The capsules are taken with water before meals and are designed to help people feel satisfied with smaller meals. Plenity combines the simplicity and convenience of a consumer product with clinical and scientific validation as well as FDA regulatory clearance as a de novo Class II medical device. In clinical studies, ~6 out of 10 adults had clinically meaningful weight loss and those people lost on average, within six months, ten percent of their body weight (about 22 lbs). There was no difference in overall side effects compared to placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements and flatulence.

Plenity is a prescription product with a direct-to-patient approach, giving the consumer the option of going through leading telehealth platform Ro, or through an in-person healthcare provider visit. This makes it easier for consumers to seek free physician evaluation on their own time and their own terms. If prescribed, the product is delivered to the consumer’s home within two days at a transparent cost of $98/month, or $1.75 per meal.

Plenity is now available in limited release, and over 48,000 members have begun their weight management journey. During Plenity’s beta launch in October 2020, with limited promotion and without brand awareness marketing, Plenity surpassed all branded prescription weight management products in new monthly members during the month of testing, with high satisfaction ratings. The Company anticipates the full commercial launch of Plenity later in 2021 and is currently constructing a larger manufacturing facility to meet anticipated demand.

Gelesis’ novel platform technology is inspired by the structural and mechanical properties of raw vegetables. When consumed, the hydrogel forms small solid gel pieces in the stomach consisting of water held by a 3D cellulose structures, similar to raw vegetables. The structures, which have no calories, are homogeneously mixed with the ingested foods, increasing the volume and firmness of that meal while reducing its caloric density. The hydrogel pieces are not absorbed and partially degrade in the large intestine, releasing the water before leaving the body naturally. In clinical trials, this therapeutic approach demonstrated a strong efficacy and safety profile.

SUBSEQUENT EVENT 1/10/22 – 8-K Link

  • In connection with the Special Meeting of stockholders of the Company, being virtually held on January 11, 2022, a total of 27,260,179 shares of the Company’s Class A common stock were presented for redemption, including 1,000,000 Shares held by GCCU VI LLC, a Delaware limited liability company (“G VI”) and 1,000,000 Shares held by TOCU XXIX LLC, a Delaware limited liability company (“T XXIX”), each an affiliate of Pacific Investment Management Company LLC.
    • As a result, there is presently approximately $3.4 million remaining in the trust account following redemptions. 
  • As part of the PIPE Financing, G VI agreed to purchase 1,750,000 Shares and T XXIX agreed to purchase 1,750,000 Shares, in each case, at a cash purchase price of $10.00 per share, comprising $35.0 million of the $90.0 million of expected aggregate proceeds from the PIPE Financing.
  • As previously disclosed, on December 30, 2021, the Company entered into a Backstop Agreement with the purchasers party thereto, pursuant to which the Backstop Purchasers agreed to purchase an aggregate of up to 1,500,000 Shares immediately prior to the Closing at a cash purchase price of $10.00 per share, resulting in aggregate proceeds of up to $15.0 million, which amount, when added to the proceeds from the PIPE Financing, is expected to ensure that the Minimum Cash Condition will be satisfied.
  • The Backstop Purchasers will purchase 1,159,927 Shares immediately prior to Closing for an aggregate purchase price of $11,599,270.
  • At the closing of the sale of the Shares purchased by the Backstop Purchasers, the Company will issue to the Backstop Purchasers an additional 1,983,750 Shares, equal to the number of Capstar Class B Shares forfeited by Capstar Sponsor Group LLC, and certain affiliates of the Sponsor

SUBSEQUENT EVENT 12/30/21 – 8-K Link

  • On December 30, 2021, the Company, Merger Sub and Gelesis entered into a Second Amendment to the Original Business Combination Agreement, which, among other things, removed the provisions relating to the issuance of 1,983,750 additional Capstar Class A Shares to Gelesis stockholders, equal to the number of Capstar Class B Shares forfeited by Capstar Sponsor Group LLC, (the “Sponsor”), and certain affiliates of the Sponsor in accordance with the Amendment to Sponsor Letter Agreement entered into by Capstar, the Sponsor, certain affiliates of the Sponsor and Gelesis on November 8, 2021.
  • In connection, with the execution of the Second Amendment to Business Combination Agreement, on December 30, 2021, the Company entered into a Backstop Agreement (the “Backstop Agreement”) with PureTech Health LLC and SSD2, LLC, pursuant to which the Purchasers agreed to purchase an aggregate of up to 1,500,000 Capstar Class A Shares immediately prior to the Closing at a cash purchase price of $10.00 per share (the “Backstop Purchase Shares”), resulting in aggregate proceeds of up to $15.0 million, which amount, when added to the proceeds from the PIPE Financing, is expected to ensure that the Minimum Cash Condition will be satisfied.
  • The Purchasers will only be obligated to purchase Backstop Purchase Shares if, at the Effective Time, the amount of funds remaining in the Trust Account after giving effect to the Capstar Stockholder Redemptions (the “Available Funds”) is less than $15.0 million, in which case the Purchasers will purchase such number of Backstop Purchase Shares which results in gross proceeds to the Company equal to the amount by which $15.0 million exceeds the Available Funds, subject to the other terms and conditions of the Backstop Agreement.
  • In addition, subject to the terms and conditions of the Backstop Agreement and the terms and conditions of the Sponsor Letter Agreement, at the closing of the sale of the Backstop Purchase Shares, the Company will issue to the Purchasers 1,983,750 Capstar Class A Shares.

SUBSEQUENT EVENT 11/8/21 – 8-K Link

  • On November 8, 2021, CPSR, Merger Sub and Gelesis entered into an Amendment to the Original Business Combination Agreement (the “Business Combination Agreement Amendment,” and together with the “Business Combination Agreement”), which, among other things:
    • (i) Adjusts the equity valuation of Gelesis from $900,000,000 to $675,000,000.
    • (ii) Increases the number of Earn Out Shares available to be issued to Company Stockholders from 15,000,000 to 23,483,250.
    • (iii) Provides for the issuance of 1,983,750 additional Capstar Class A Shares to Company Stockholders, equal to the number of Capstar Class B Shares forfeited by the Sponsor and certain affiliates of the Sponsor in accordance with the Sponsor Letter Agreement Amendment.
    • (iv) Extends the Termination Date from January 18, 2022 to January 31, 2022.

TRANSACTION

  • The transaction values the combined company at an implied enterprise value of approximately $1.0 billion and equity value of approximately $1.3 billion, based on a $10.00 per share price of Capstar common stock and assuming no redemptions by Capstar’s public shareholders.
  • The transaction will provide up to $376 million in gross proceeds to the combined company from a combination of a $100 million common stock PIPE financing at $10.00 per share along with $276 million of cash held in Capstar’s trust account (assuming no redemptions by Capstar’s public shareholders).
  • The PIPE financing is anchored by a mix of new and existing top tier investors and partners, including PIMCO private funds, Pritzker Vlock Family Office, China Medical Systems Holdings Limited (CMS), and co-founder PureTech Health.
    • Kennedy Lewis Investment Management will invest $10 million in the PIPE conditioned upon the closing of their $100 million senior secured credit facility to the Company, which is subject to the completion of due diligence, final documentation, and customary closing conditions.
  • Proceeds from the business combination, PIPE, and credit facility will be primarily used to support the full commercial launch of Plenity for weight management later this year and expanded manufacturing to meet consumer demand.
  • Gelesis’ existing shareholders will convert 100% of their ownership stakes into the new company.

cpsr trans overview

PIPE

  • $100 million common stock PIPE financing at $10.00 per share
  • The PIPE financing is anchored by a mix of new and existing investors and partners, including PIMCO private funds, Pritzker Vlock Family Office, China Medical Systems Holdings Limited (CMS), and co-founder PureTech Health.
    • Kennedy Lewis Investment Management will invest $10 million in the PIPE conditioned upon the closing of their $100 million senior secured credit facility to the Company, which is subject to the completion of due diligence, final documentation, and customary closing conditions.

EARNOUT

  • Subsequent Event – Increases the number of Earn-Out Shares available to be issued to Company Stockholders from 15,000,000 to 23,483,250.
  • Subsequent Event – At the Effective Time, and subject to the terms of this Agreement, Capstar shall issue 23,483,250 restricted Capstar Shares (the “Earn-Out Shares”) to Company Stockholders, holders of Company Options (whether Vested Company Options or Unvested Company Options) and holders of Company Warrants pro rata with the portion of the Aggregate Transaction Share Consideration plus the Rollover Unvested Option Amount allocated to each Company Stockholder, holder of Company Options and holder of Company Warrants
  • 15.0 million shares issued to Gelesis’ existing shareholders in 5.0 million share increments at $12.50, $15.00, and $17.50 per share

BACKSTOP AGREEMENT

  • Subsequent Event – In connection, with the execution of the Second Amendment to Business Combination Agreement, on December 30, 2021, the Company entered into a Backstop Agreement (the “Backstop Agreement”) with PureTech Health LLC and SSD2, LLC, pursuant to which the Purchasers agreed to purchase an aggregate of up to 1,500,000 Capstar Class A Shares immediately prior to the Closing at a cash purchase price of $10.00 per share (the “Backstop Purchase Shares”), resulting in aggregate proceeds of up to $15.0 million, which amount, when added to the proceeds from the PIPE Financing, is expected to ensure that the Minimum Cash Condition will be satisfied.
  • The Purchasers will only be obligated to purchase Backstop Purchase Shares if, at the Effective Time, the amount of funds remaining in the Trust Account after giving effect to the Capstar Stockholder Redemptions (the “Available Funds”) is less than $15.0 million, in which case the Purchasers will purchase such number of Backstop Purchase Shares which results in gross proceeds to the Company equal to the amount by which $15.0 million exceeds the Available Funds, subject to the other terms and conditions of the Backstop Agreement.

SPONSOR LETTER AGREEMENT

  • Subsequent Event – The Sponsor Letter Agreement, as amended November 8, 2021, to provide for the forfeiture of 1,983,750 Capstar Class B Shares immediately prior to the Effective Time, shall be in full force and effect and shall have not been further amended nor subjected to the waiver of any party thereto without the prior written consent of the Company.
  •  The Sponsor will subject certain of the shares of CPSR Class B Common Stock and warrants to purchase CPSR Class A Common Stock currently held by it to certain vesting conditions and potential forfeiture as follows:
    • (A) The shares subject to the vesting conditions and potential forfeiture will vest (in part, and no longer be subject to forfeiture) in equal thirds if the trading price of CPSR Shares is greater than or equal to $12.50, $15.00 and $17.50, respectively, for any 20 trading days within any 30-trading day period on or prior to the date that is five years following the closing date (the “Sponsor Vesting Period”) and will also vest in connection with any Capstar Sale if the applicable thresholds are met in such Capstar Sale during the Sponsor Vesting Period
    • (B) The warrants subject to the vesting conditions and potential forfeiture (the number of which warrants will be prorated to reflect the proportionate amount of CPSR stockholder redemptions) will vest (and no longer be subject to forfeiture) at such time during the Sponsor Vesting Period as
      • (i) If the trading price of CPSR Shares is greater than or equal to $20.00 for any 20 trading days within any 30-trading day period or
      • (ii) There is a Capstar Sale in which the sale price for the acquisition of the CPSR Shares is greater than or equal to $20.00, in each case, during the Sponsor Vesting Period and, in each case, on the terms and subject to the conditions set forth in the Sponsor Letter Agreement.

NOTABLE CONDITIONS TO CLOSING

  • The total cash of CPSR at the Effective Time, after giving effect to the PIPE Financing and including the funds remaining in the CPSR Trust Account after giving effect to CPSR stockholder redemptions, not being less than $105 million.

NOTABLE CONDITIONS TO TERMINATION

  • Subsequent Event – Extends the Termination Date from January 18, 2022, to January 31, 2022.
  • By either CPSR or Gelesis, if the transactions contemplated by the Business Combination Agreement are not consummated on or prior to the Termination Date ( January 18, 2022)

ADVISORS

  • Citi is serving as exclusive financial advisor to Gelesis
  • Goodwin Procter LLP is serving as legal counsel to Gelesis.
  • UBS Investment Bank is serving as exclusive financial and lead capital markets advisor to Capstar
  • Kramer Levin Naftalis & Frankel LLP is serving as Capstar’s legal counsel.
  • UBS Investment Bank and Citi are serving as private placement agents to Capstar with respect to the PIPE financing.
  • Winston & Strawn LLP served as counsel to the placement agents.
  • BTIG, LLC is also serving as a capital markets advisor to Capstar.

MANAGEMENT & BOARD

Executive Officers

R. Steven Hicks. 70
Chairman, CEO & CFO

In June 2000, Mr. Hicks founded Capstar Partners, a private investment firm focusing on small and middle market buyouts, real estate development, and public investing in the media and broadcasting, healthcare services and e-commerce industries. Mr. Hicks has served as Chairman of Capstar Partners since its founding. Prior to founding Capstar Partners, Mr. Hicks was the Vice Chairman of AMFM Inc. (NYSE: AFM), the nation’s largest owner and operator of radio stations, with over 450 radio stations in markets across the United States. In 1996, Mr. Hicks founded Capstar Broadcasting Corporation, which became the nation’s largest radio station holding company by 1998 with 350 radio stations. Mr. Hicks led Capstar Broadcasting Corporation to a successful initial public offering on the New York Stock Exchange in 1998. In August 1999, Capstar Broadcasting Corporation merged with Dallas-based Chancellor Media Corporation in a stock swap valued at $4.1 billion, forming AMFM, where Mr. Hicks remained as the Vice Chairman. In 1993, Mr. Hicks co-founded SFX Broadcasting, building it into one of the largest radio groups in the United States. Mr. Hicks serves on the University of Texas System Board of Regents after being appointed for a six-year term in each of 2009 and 2016. In addition, Mr. Hicks has served on the Board of the University of Texas Investment Management Company since 2009. Mr. Hicks received his Bachelor of Arts from the University of Texas at Austin in 1972.

 

Board of Directors

Rodrigo de la Torre, 39
Lead Director

Mr. de la Torre has over 15 years of business development, finance and strategy experience in top tier multinational organizations, predominantly in the consumer and retail sectors. He has been the Head of Finance and Strategy for Taco Bell Global since April 2019 and previously served as Global Director of Finance and Head of M&A at Pizza Hut International from March 2016 to April 2019. During his time at Yum! Brands, Mr. de la Torre has executed landmark master franchise agreements and partnerships such as the 2018 strategic alliance with Telepizza across Latin America & Iberia. Prior to joining Yum! Brands, Mr. de la Torre was a Vice President in the Consumer & Retail Investment Banking Group of Credit Suisse in New York, where he worked from 2010 to March 2016. During his time at Credit Suisse, Mr. de la Torre advised corporations and financial sponsors in a range of high-profile consumer sector transactions. Mr. de la Torre additionally held M&A and strategy roles at Fonterra Co-operative, a leading dairy products manufacturer, from 2004 to 2007 and was an analyst at ANZ Bank from 2003 to 2004. Mr. de la Torre received a Master of Business Administration from the Tuck School of Business at Dartmouth in 2010 and a Bachelor of Commerce with Honors in Economics and Finance from Victoria University of Wellington in New Zealand in 2003.

Jamie Weinstein, 44 [Resigned 12/14/21]
Director

Since September 2019, Mr. Weinstein has served as a managing director, portfolio manager and head of corporate special situations at PIMCO, focusing on PIMCO’s opportunistic and alternative strategies within corporate credit. Prior to joining PIMCO in 2019, Mr. Weinstein worked for KKR as a portfolio manager for the firm’s special situations funds and portfolios, which he managed since their inception in 2009. Mr. Weinstein was also a member of KKR’s special situations, real estate, and India NBFC investment committees and the KKR credit portfolio management committee. Previously, Mr. Weinstein was a portfolio manager with responsibility across KKR’s credit strategies. Prior to joining KKR, Mr. Weinstein was with Tishman Speyer Properties as director of acquisitions for Northern California and at Boston Consulting Group as a consultant. He has 18 years of investment experience and received a Master of Business Administration from Stanford University in 2002 and a Bachelor of Science in Civil Engineering and Operations Research from Princeton University in 1998.

Kathryn Cavanaugh, 46
Director

Since January 2019, Ms. Cavanaugh has served as the Managing Partner of Capstar Ventures GP, LLC, an early stage venture capital firm that invests in the next generation of innovative consumer companies. From April 2016 to December 2018, Ms. Cavanaugh was a Partner at Grace Beauty Capital where she advised and invested in early stage companies in the consumer and retail sectors, including Rothy’s, Inc., Parachute Home, Inc., Primary Kids, Inc., Supergoop!, LLC, MM.LaFleur, Inc., ThirdLove (MeCommerce, Inc.), Vengo, Inc., and Pixlee, Inc. From April 2015 to March 2016, Ms. Cavanaugh served as Director of Franchise Growth Strategy, Sales and Operations, and from March 2013 to February 2014 as a Board Director, for The Bar Method, Inc. From October 2011 to February 2014, Ms. Cavanaugh served as Vice President of Talent for Mainsail Partners, a growth equity firm. From September 2005 to June 2010, Ms. Cavanaugh worked at De Novo Ventures, an early stage venture capital firm, where she evaluated, executed and supported more than $350 million of equity investments in early to late stage healthcare companies. Ms. Cavanaugh received a Master of Business Administration from Harvard Business School in 2005 and Bachelor of Science degrees in Chemical Engineering and Biochemistry from the University of Notre Dame in 1997.

John Ghiselli, 56
Director

In June 2019, Mr. Ghiselli founded Waterloo Capital Private Equity, LLC, an investment firm that invests in small cap companies through private equity and mezzanine debt, where he serves as a partner. Since January 2006, Mr. Ghiselli has served as the President of Waterloo Real Estate Investments Inc., a commercial real estate mortgage and investment company. In January 2013, Mr. Ghiselli co-founded Red Hook Capital Partners, LLC, a real estate investment and development firm focused on the charter school sector, where he was a principal until January 2018. Previously, Mr. Ghiselli was an Executive Vice President at Lincoln Property Company in charge of its commercial investment and development business in Southern California. Mr. Ghiselli received a Master of Business Administration from the University of Texas at Austin in 1988 and a Bachelor of Business Administration from the University of Texas at Austin in 1986.

James Whittenburg, 48
Director

Since October 2015, Mr. Whittenburg has served as Executive Chairman of Longhorn Health Solutions, Inc., a home medical supplies distributor in the Medicaid market. From October 2016 to September 2018, Mr. Whittenburg served as President and Chief Executive Officer of SunTree Snack Foods, LLC. Since November 2017, Mr. Whittenburg has served as a director and Vice President of each of Trek Exploration, Inc. and North Hills Corporation of Amarillo Texas. From March 2004 to January 2012, Mr. Whittenberg held a variety of executive management roles with HealthTronics, Inc. (formerly NASDAQ: HTRN), a healthcare services and medical device company, including serving as a director and Chief Executive Officer from May 2007 to January 2012. In July 2010, Mr. Whittenburg led the sale of HealthTronics to Endo Pharmaceuticals (NASDAQ: ENDP) and thereafter served as HealthTronics’ Group President from July 2010 through January 2012. Previously, Mr. Whittenburg was counsel at the international law firm Akin Gump Strauss Hauer & Feld LLP from August 1997 until February 2004. Mr. Whittenburg also served as an independent board member and audit committee member of Harden Healthcare, LLC from September 2009 to October 2013. Mr. Whittenburg received a Juris Doctor from The University of Texas at Austin School of Law in 1997, a Master of Business Administration from the University of Texas at Austin in 1997 and a Bachelor of Business Administration in Accounting from the University of Texas at Austin in 1993 and was previously a Certified Public Accountant.

ByRoman Developer