SEP Acquisition Corp. (SEPA) to Combine with SANUWAVE in $127M Deal
by Nicholas Alan Clayton on 2023-08-24 at 9:03am

SEP (NASDAQ:SEPA) has entered into a definitive agreement to combine with wound care firm SANUWAVE (OTC:SNWV) at an enterprise value of $127.5 million, or 7.6x its 2022 revenue.

Eden Prairie, Minnesota-based SANUWAVE has commercialized its FDA-approved UltraMist medical device, which accelerates healing and reduces inflammation by delivering a pain-free mist of medicines to the effected area.

The combined company is expected to trade on the Nasdaq under the symbol “SNWV” once the deal is completed in the fourth quarter of 2023.

Transaction Overview

SEP has about $13.3 million in its current trust after seeing 92.7% of shares redeemed in a December extension vote. SANUWAVE expects to receive about $13 million in gross proceeds from the deal including $12 million from a combination of the trust and PIPE investors including Sweat Equity Partners and Mercury Life Sciences.

SEP’s sponsor will also convert a $1 million loan to equity on the same terms as the PIPE, and it has also signed non-redemption agreements with shareholders covering 681,512 shares.

Of these amounts overall, $8.5 million has already been committed and SEP must maintain at least $12 million in cash available in order for the deal to close.

SEP’s sponsor is to see each of its 4,510,375 promote shares converted into 0.277 ordinary shares at close. All of SEP’s warrants – both public and private – are to be exchanged according to the same ratio, or $0.50 per warrant.

SANUWAVE must secure the approval of 80% of its convertible note holders and warrant holders for these conversions as a condition of closing.

The company has agreed to a 180-day lock-up, while SEP’s sponsor will be locked for one year, but may be released early if the company stock trades at or above $12 for 20 of 30 trading days at least 150 days out from close.

SANUWAVE investors are expected to own about 69.6% of the combined entity at close with warrant holders taking a 4% stake.

The parties have not yet released an investor presentation, but SEP’s profile page will be updated once more information is made available.

Quick Takes: SANUWAVE has already passed many of the important milestones necessary to build a thriving medical device business – its two main products are FDA approved and its lead product, UltraMIST, has secured reimbursement rights from Medicare and Medicaid.

UltraMIST is a low frequency, non-contact ultrasound that reduces pro-inflammatory cytokines and kills bacteria in wounds while stimulating healing blood flow. The device weighs just 7 lbs and treatments can be performed in three to 20 minutes with six minutes being the average.

So, it has a nimble device for the $45 billion US wound care market. Now all it needs is cash.

It generated $16.7 million in revenue in 2022, but notched a -$10.3 million net loss from this activity, according to its public financials. Over the first six months of 2023, it maintained a similar pace with $8.4 million in revenue, but with expanding net losses reaching -$20.3 million over this time.

SANUWAVE explains this somewhat in the parties’ press release blaming production capacity constraints for the shortfalls. But, it says this is ramping up, and it believes it may be able to secure EBITDA profitability in the fourth quarter of 2023. Meanwhile, it expects to be able to produce two to three times more UltraMIST systems in 2024 than in 2023.

It would need triple both production and sales to make it to profitability if things continue apace, however. Even if it had generated double the revenue in the first half of the year, it would have been for a -$4 million net loss.

Another propellant could come from engaging larger customers, and working on selling more consumables for each device sold. Its production capacity could see it increase production of consumables by four times in the next 12 to 18 months and UltraMist applicator sales already represented 59% of the company’s revenue in the first half of 2023.

SANUWAVE may believe that it can hit those production gains without much additional support. But, the market has been skeptical of that notion lately. The company began 2022 with a market cap of about $81.8 million. But, successive unprofitable quarters have driven that down to $17.4 million as of the OTC market’s last close.

It remains to be seen if dropping $12 million to $14 million into its bucket will make a substantial difference to its overall profitability dynamics. If the money for boosting production has already been spent and it largely needs to buy time to see it come to fruition, this deal could be just what it needs.

The deal was announced after hours on Wednesday, so the market has not yet had a chance to weigh in, but SANUWAVE’s shares dropped -8.1% in yesterday’s trading session before the news, closing at $0.017.


  • Company:
    • Faegre Drinker Biddle & Reath LLP served as legal advisor
  • SPAC:
    • ValueScope Inc. and Baker Donelson, Bearman, Caldwell & Berkowitz, PC served as financial and legal advisors, respectively
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