Compute Health Acquisition Corp. (CPUH) Tweaks Allurion Deal
Compute Health (NYSE:CPUH) announced in an 8-K this morning that it has made a number of amendments to its business combination with Allurion, shifting its financing arrangements.
The bulk of the new financing changes affect the $16.75 million in convertible bridge notes that Allurion issued in February with Hunter Ventures Limited taking on $13 million of these. These were to carry a 7% per annum interest rate and convert to shares upon close at a valuaton of Allurion at about $217.3 million.
Hunter Ventures is now to receive a number of shares at close equal to its original amount plus 300,000 divided by $5. Allurion may also pre-pay plus interest portions of this note commitment on May 2 in the form of $2 million in cash ($1.5 million of which would be a prepayment penalty fee) and up to $6 million more.
Following on those changes, RTW, which had previously agreed to invest in the deal’s $43.9 million PIPE at $7.04 per share and a Fortress affiliate joined a new backstop agreement. These investors are to purchase up to $2 million of Hunter Ventures’ note within one day of the deal’s completion vote.
Under the new terms, the 37,812,000 new shares that are to be issued to Allurion as share compensation will now to be reduced by the product of 1,400,000 and the aggregate backstop amounts divided by $4 million.
If this calculation renders a percentage at or above 100%, then the amount of shares subtracted from Allurion’s consideration will be the larger or the original calculation or 1,500,000 multiplied by the net closing cash percentage.
The rest of the bridge is then to be transformed into a new convertible unsecured promissory note and held in escrow until the closing of the backstop. In exchange for this commitment Fortress and RTW are to each earn up to 700,000 bonus shares if the full $2 million is covered.
This is actually in some ways a reduced sweetener for both as each was slated to receive 1,000,000 bonus shares at close under certain conditions, but those incentive shares are now to only come in net of these new terms. The many moving parts aside, what is clear is that this is expensive capital for Allurion.
Allurion Board Member Krishna Gupta is paying yet more for them as he agreed to forfeit up to 50,000 restricted stock units plus an amount equal to one third of the additional shares Hunter is to receive at close. The Shantanu K. Gaur Revocable Trust of 2021 agreed to provide another 50,000 shares to this end.
Compute Health’s sponsor will cover the last third of Hunter’s shares as a part of a contribution of 200,000 Class A shares, plus the same amount as Hunter’s third, divided by 1.230455.
These changes come as the parties passed an earlier deadline set in the combination’s terms for Allurion to make best efforts to raise $15 million in private equity funding by April 30. The parties have now waived that requirement.
Compute Health and Allurion announced their $500 million business combination on February 9. Natick, Massachusetts-based Allurion makes a swallowable balloon that inflates in patients’ stomachs to reduce space for incoming food for weight loss purposes while serving as an IoT tracker of certain health metrics.