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Compute Health Acquisition Corp. *

Compute Health Acquisition Corp. *

Jan 20, 2021 by Kristi Marvin

PROPOSED BUSINESS COMBINATION: Allurion Technologies, Inc.

ENTERPRISE VALUE: $500 million
ANTICIPATED SYMBOL: ALUR

Compute Health Acquisition Corp. proposes to combine with Allurion, a company focused on developing programs to combat obesity.

The Allurion Program is a weight loss platform that combines the Allurion Gastric Balloon, the world’s first and only swallowable, procedure-less gastric balloon for weight loss, the Allurion Virtual Care Suite including the Allurion Mobile App for consumers, Allurion Insights for healthcare providers featuring the Iris AI Platform, and the Allurion Connected Scale and Health Tracker devices. The Allurion Virtual Care Suite is also available to providers separately from the Allurion Program to help customize, monitor, and manage weight loss therapy for patients regardless of their treatment plan: gastric balloon, surgical, medical, or nutritional.

SUBSEQUENT EVENT – 7/24/23 – LINK

  • Warrant Agreement Amendment:
    • The SPAC announced updated terms to the warrant agreement that governs the outstanding warrants of Compute Health.
    • Subject to the approval of the warrant holders of Compute Health, which will be sought at the Warrant Holder Meeting, the Warrant Agreement terms will be amended to:
      • (i) provide that, upon the completion of the Business Combination between Compute Health and Allurion Technologies, Inc., each of the outstanding warrants of Compute Health will become exercisable for 1.420455 shares of Pubco at an exercise price of $8.10 per share;
      • (ii) provide that, upon the completion of the Business Combination, each Compute Health Public Warrant will be exchanged for 0.6125 Pubco Public Warrants;
      • (iii) amend the term of the Compute Health Warrants such that they will expire seven years after the consummation of the Business Combination, or earlier upon redemption or liquidation;
      • (iv) delete section 4.4 of the Warrant Agreement relating to adjustments of the Warrant Price if Compute Health issues additional shares or equity-linked securities for capital raising purposes in connection with the closing of the Business Combination;
      • (v) amend Sections 6.1 and 6.2 of the Warrant Agreement to provide that, subject to the terms of the Warrant Agreement, not less than all of the Compute Health Public Warrants may be redeemed for cash or for shares of common stock after a date that is ninety (90) days after the date on which Compute Health completes the initial Business Combination.

SUBSEQUENT EVENT – 5/2/23 – LINK

Termination Agreements

  • Allurion with the right to prepay, in one or more transactions, all or a portion of the outstanding principal amount, plus accrued interest, under the HVL Bridge Note, including by way of
    • (a) a $2 million payment in cash by Allurion to HVL on May 2, 2023, $1.5 million of which is deemed a prepayment penalty (the “Prepayment”) and
    • (b) immediately prior to the consummation of the transactions contemplated by the Business Combination Agreement, an additional payment of at least $6 million, up to the then-outstanding principal amount, plus accrued interest, under the HVL Bridge Note (the “Additional Payment”) (the repayment contemplated by clauses (a) and (b), the “Repayment”) by way of
      • (i) payment in cash by Allurion and/or
      • (ii) the sale and transfer of all or any portion of the HVL Bridge Note, equivalent in value to the portion of the Additional Payment to be repaid pursuant to this clause (b)(ii), to any person or persons designated in writing by Allurion.
  • Pubco will issue a number of shares of Pubco Common Stock to HVL.
    • The number of shares issued will be equal to:
      • The Pubco Share Target minus
      • The number of shares of Pubco Common Stock already issued to HVL upon the consummation of the transactions contemplated by the Business Combination Agreement (in exchange for the shares of Allurion Common Stock issued upon conversion of the HVL Bridge Note), plus
      • 300,000 shares of Pubco Common Stock (the “Hunter Closing Shares”).
    • The Pubco Share Target is calculated as follows:
      • The outstanding principal and accrued interest under the HVL Bridge Note immediately before the Business Combination Agreement is completed (after paying the Repayment) divided by $5.00.

Backstop Agreement

  • The Backstop Purchaser will, at a closing to take place at the same time, on the same date and concurrently with but immediately prior to the closing of the merger of Merger Sub I with and into Allurion pursuant to the Business Combination Agreement purchase up to $2 million aggregate principal amount of the HVL Bridge Note from HVL.
  • Allurion will notify HVL and the Backstop Purchasers of, among other things, the Backstop Closing Date, the amount of principal then outstanding under the HVL Bridge Note (the “Balance”) and, subject to the limitations set forth in the Backstop Agreement, the amount of the Balance, which may not exceed each Backstop Purchaser’s Maximum Purchase Amount, that Allurion requires each Backstop Purchaser to purchase from HVL (the “Backstop Purchase Amount”).
  • Allurion will
    • (a) cancel the existing HVL Bridge Note and issue a new convertible unsecured promissory note to HVL for any remaining Balance of the HVL Bridge Note expected to be outstanding after the Backstop Closing, together with all unpaid interest on the HVL Bridge Note accrued since the date of issuance thereof and
    • (b) issue new convertible unsecured promissory notes (the “New Bridge Notes”) to each Backstop Purchaser with an issuance date of the Backstop Closing Date and an original principal amount equal to such Backstop Purchaser’s Backstop Purchase Amount, with such New Bridge Notes to be held in escrow until the Backstop Closing.
  • Pubco will issue Backstop Shares to each Backstop Purchaser in exchange for their commitment to purchase their Backstop Purchase Amount of the HVL Bridge Note.
    • If the Backstop Purchase Amount is equal to the Maximum Purchase Amount, Pubco will issue each Backstop Purchaser an amount of Pubco Common Stock equal to the greater of 700,000 shares and the Conditional Additional Pubco Shares.
    • The Conditional Additional Pubco Shares may be issued to Fortress or RTW and are not to exceed 750,000 shares each.
    • If the Backstop Purchase Amount is less than the Maximum Purchase Amount, Pubco will issue each Backstop Purchaser a number of shares of Pubco Common Stock equal to 700,000 multiplied by a fraction.
      • The fraction has a numerator equal to the Backstop Purchase Amount and a denominator equal to 2,000,000.

Amended and Restated RTW Side Letter

  • On May 2, 2023, the Company, Pubco, Merger Sub II, Allurion, and RTW entered into an Amended and Restated RTW Side Letter.
    • The Amended and Restated RTW Side Letter replaces the Existing RTW Side Letter entirely and states that Conditional Additional Pubco Shares would be calculated net of any Backstop Shares.
    • Additionally, if a third party offers Allurion debt financing on more favorable terms than RTW received under the Backstop Agreement, RTW will be offered the same or better terms.

Fortress Side Letter

  • On May 2, 2023, Fortress and Allurion entered into a Fortress Side Letter in accordance with the Backstop Agreement.
    • The Fortress Side Letter states that any Conditional Additional Pubco Shares issuable to Fortress under the Fortress Credit Agreement would be calculated net of any Backstop Shares.
    • The Fortress Side Letter also ensures that Fortress will receive the same or better terms and conditions as any third party offering debt financing to Allurion.

Contribution Agreements

  • On May 2, 2023, The Shantanu K. Gaur Revocable Trust of 2021 entered into a Contribution Agreement with Pubco, under which the Gaur Trust agreed to contribute a number of shares of Pubco Common Stock (the “Gaur Trust Contributed Shares”) equal to 50,000 shares of Pubco Common Stock plus a number of shares of Pubco Common Stock equal to one-third of the Additional Hunter Shares.
    • This contribution will be effective immediately after the completion of the Business Combination Agreement and the issuance of Pubco Common Stock to the Gaur Trust pursuant to the terms of the Business Combination Agreement.
  • The Sponsor agreed to contribute to the Company a number of shares of Class A Common Stock, as a contribution to capital, equal to 200,000 shares of Class A Common Stock, plus a number of shares equal to one-third of the Additional Hunter Shares divided by 1.420455.
    • The Sponsor’s contribution will be contingent upon the closing of the transactions contemplated by the Business Combination Agreement, and it will be effective immediately following the Sponsor Recapitalization and immediately prior to the merger of the Company with and into Pubco pursuant to the terms of the Business Combination Agreement.

TRANSACTION

  • Upon the closing of the proposed transaction, it is expected that the Company will issue, and assume warrants and other equity incentive arrangements representing or underlying, in the aggregate, 37,812,000 shares of the Company to Allurion equity holders, with the consideration payable to Allurion equity holders based on an assumed $500 million pro forma enterprise value of the combined Company.
  • If holders of Compute Health Class A common stock elect not to redeem their Compute Health Class A shares in connection with the proposed transaction, such holders will receive, at the closing of the proposed transaction, an additional 0.420455 shares of the Company for each non-redeemed share of Compute Health Class A common stock.
  • The proposed transaction includes a fully committed Private Investment in Public Equity (PIPE) led by RTW Investments.
  • The proposed transaction also includes:
    • Additional equity investments from Former Medtronic CEO and Chairman Omar Ishrak, Former GE CEO Jeff Immelt, Leavitt Equity Partners, Naghi Group Vice Chairman Mr. Yasser Naghi, and existing Allurion investors including Novalis LifeSciences and Segulah Medical Acceleration, and Medtronic signed a non-redemption agreement.
    • A senior secured term loan from an affiliate of Fortress Investment Group to refinance existing Allurion debt and further extend runway and is further supported by a $100 million Chardan Equity Facility.

SPAC FUNDING

  • At least $87 million of gross proceeds from:
    • PIPE
      • Company and Pubco entered into subscription agreements with certain investors to purchase 5,386,695 shares of Pubco Common Stock for a purchase price of $7.04 per share, for an aggregate purchase price of $37,922,363.
      • Omar Ishrak, chairman of the board of directors of the Company, has entered into a Subscription Agreement with an aggregate purchase price of $5,000,000.
    • Non-Redemption Agreement
      • Additional equity investments from Former Medtronic CEO and Chairman Omar Ishrak, Former GE CEO Jeff Immelt, Leavitt Equity Partners, Naghi Group Vice Chairman Mr. Yasser Naghi, and existing Allurion investors including Novalis LifeSciences and Segulah Medical Acceleration, and Medtronic signed a non-redemption agreement.
      • Medtronic agreed, for the benefit of the Company, Pubco and Allurion, not to, among other things,
        • (a) redeem 700,000 shares of Class A Common Stock beneficially owned by Medtronic
        • (b) sell, encumber or otherwise transfer the Medtronic Shares. In connection with these commitments from the Investor, the Company, Pubco and Allurion have agreed that, at the CPUH Merger Effective Time, each Medtronic Share will be canceled and converted into the right to receive 1.420455 shares of Pubco Common Stock.
    • Chardan Equity Facility
      • A senior secured term loan from an affiliate of Fortress Investment Group to refinance existing Allurion debt and further extend runway and is further supported by a $100 million Chardan Equity Facility.

RTW SIDE LETTER

  • Allurion and Merger Sub II made an Existing RTW Side Letter with RTW.
    • According to the letter, Pubco will issue an additional 1,000,000 shares of Pubco Common Stock to RTW.
    • 250,000 shares will be issued when the Business Combination Agreement is completed and won’t be subject to any contingencies.
    • 750,000 shares will be issued based on the Net Closing Cash of the Intermediate Merger.
  • The shares to be issued will vary based on the Net Closing Cash, with no shares issued if the Net Closing Cash is equal to or greater than $100 million and 750,000 shares issued if it’s equal to or less than $70 million.

LOCK-UP

  • Company and Sponsor
    • Subject to certain permitted transfers, for a period of either 18 months or 12 months following the Closing Date.

EARNOUT

  • Company
    • Allurion stockholders, holders of Allurion RSU Awards, and vested Allurion Options will have the right to receive over five years
      1. 4,500,000 shares if the VWAP is greater than or equal to $15.00 over any 20/30 trading day period.
      2. 4,500,000 shares if the VWAP is greater than or equal to $20.00 over any 20/30 trading day period.

NOTABLE CONDITIONS TO CLOSING

  • Minimum cash condition of $70 million (net of certain expenses) and is expected to provide a minimum of $87 million of gross cash proceeds.

NOTABLE CONDITIONS TO TERMINATION

  • Outside Date of August 7, 2023.
  • The Parties have also agreed that, from and after the date of the Business Combination Agreement, Allurion must use reasonable best efforts to obtain gross proceeds of at least $15 million of additional financing pursuant to one or more private sales of Allurion Common Stock (or securities convertible into Allurion Common Stock) (the “Incremental Financing”) by no later than April 30, 2023.

ADVISORS

  • Jefferies LLC is acting as exclusive financial advisor and exclusive capital markets advisor to Allurion.
  • Goodwin Procter LLP is acting as legal advisor to Allurion.
  • Kirkland & Ellis LLP is acting as legal advisor to Jefferies.
  • Credit Suisse Securities (USA) LLC is acting as exclusive financial advisor, exclusive capital markets advisor and exclusive placement agent to Compute Health.
  • Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to Compute Health.
  • Davis Polk & Wardwell LLP is acting as legal advisor to Credit Suisse.

EXTENTION – 12/2/22 – LINK

  • The SPAC approved the monthly extension from February 9, 2023 to August 9, 2023 
    • Starting in February, the Sponsor will contribute $0.05/Share into the trust account
    • 77,026,806 (89.306%) shares were redeemed

MANAGEMENT & BOARD

Executive Officers

Jean Nehmé, 33
Co-Chief Executive Officer, Director

Dr. Nehmé co-founded Digital Surgery in 2011 while training in plastic surgery in London and has continued to serve in his role after Digital Surgery was acquired by Medtronic in February 2020 to be integrated into the MITG Robotics division. Dr. Nehmé earned multiple awards for his research in innovation and application of surgical technology and simulation. He has presented at multiple international conferences and won the Founders Forum Singapore Rising Star award and the London Business School Deloitte Digital Health Award in 2015. Dr. Nehmé completed his masters in surgical technology at Imperial College London.

Joshua Fink, 42
Co-Chief Executive Officer, Director

Mr. Fink is the Managing Partner of Ophir Holdings, a private investment company, which invests across a broad spectrum of industries including technology, healthcare and natural resources. Mr. Fink is Vice Chairman of the Electrum Group LLC, a firm that primarily invests in the mining sector, with a focus on precious metals. Mr. Fink serves as a Senior Advisor at SoftBank Investment Advisors. He is an advisor to 8VC, a leading Silicon Valley venture capital firm founded by Joe Lonsdale. Mr. Fink is the Managing Partner of Luma Bio-IT SPV, an investment vehicle focused on emerging to mid-sized companies in the Bio-IT and pharma-IT spaces. He is also a Founding Partner at Ascendant Capital Partners, a vertically integrated real estate investment and operating vehicle with an investment focus on urban hospitality, data infrastructure and technology-enabled multifamily assets. Mr. Fink holds a BA from the University of Pennsylvania.

Board of Directors

Omar Ishrak, 65
Chairman, Director 

Dr. Ishrak serves as Chairman of the Board of Directors at Intel. Dr. Ishrak was CEO of Medtronic from June 2011 to April 2020 and served as Executive Chairman and Chairman of the Board of Directors until he stepped down in December 2020. In January 2020, Dr. Ishrak was named independent Chairman of the Board of Directors of Intel. Dr. Ishrak has served as a member of the Intel board since March 2017. Prior to joining Medtronic, Dr. Ishrak was President and CEO of GE Healthcare Systems. He held several other roles at General Electric Company (“GE”) during his 16-year tenure. Earlier in his career, Dr. Ishrak amassed 13 years of technology development and business management experience, holding leadership positions at Diasonics/Vingmed, and various product development and engineering positions at Philips Ultrasound. He was inducted to the American Institute for Medical and Biological Engineering (AIMBE) College of Fellows in 2016 and was elected to the National Academy of Engineering in 2020. Dr. Ishrak serves on the Board of Directors of the Cleveland Clinic, a nonprofit academic medical center. He is also a member of the Board of Trustees of the Asia Society, the leading educational organization dedicated to promoting mutual understanding and strengthening partnerships among peoples, leaders and institutions of Asia and the United States in a global context. In addition, he is a member of the Minnesota Public Radio Board of Trustees. He earned a Bachelor of Science degree and Ph.D. in Electrical Engineering from the University of London, King’s College. He is also a Fellow of King’s College.

Hani Barhoush, 45
Director 

Mr. Barhoush currently serves as the CEO of Disruptive Investments at Mubadala Investment Company and is responsible for overseeing a number of business units including Ventures and Growth, Credit Investments, as well as investment programs in France, China, and Russia and CIS. He also oversees Mubadala Capital, Mubadala’s wholly-owned subsidiary focused on 3rd party asset management. He is also a member of Mubadala’s Investment Committee. Mr. Barhoush joined Mubadala in 2004. Prior to joining Mubadala, Mr. Barhoush was a member of Merrill Lynch’s New York-based investment banking team, where he focused on mergers and acquisitions. Mr. Barhoush holds a B.S.F.S. from Georgetown University’s Edmund A. Walsh School of Foreign Service, an M.P.P. of from Harvard University’s John F. Kennedy School of Government and a J.D. from Harvard Law School.

Gwendolyn A. Watanabe, 49
Director 

Ms. Watanabe is the Vice President and General Manager for the Smith and Nephew US Robotics organization. Prior to January 18th, 2021, Gwen served as the Corporate Vice President of Global Corporate Development, Strategy and Strategic Relationships at Teleflex Incorporated. Ms. Watanabe joined Teleflex in July 2012 as a result of Teleflex’s acquisition of Hotspur Technologies, Inc. She served as President and Chief Executive Officer of Hotspur beginning in 2009. Prior to this, she also served as a founding team member at Nellix Endovascular, Bacchus Vascular and AneuRx, all three of which were medical device start-up companies that were acquired. In addition, Gwen has been general partner of three venture funds and other private equity entities. Ms. Watanabe serves on the board of Misonix (Nasdaq: MSON) and formerly served on the Board of Directors of Hotspur Technologies (acquired by Teleflex), NovaSom (still privately held) and Practice Fusion (acquired by Allscripts). She holds an M.S. in Mechanical Engineering from Stanford University in the Design Division with an emphasis on Biomechanical Design, as well as an MBA from Harvard Business School with a focus on Finance and Marketing. She also holds a B.S. in Mechanical Engineering from the Massachusetts Institute of Technology where she simultaneously completed her pre-med requirements.

ByKristi Marvin