According to the S-1, both Gene Burleson and Joel Kanter, the principals of Echo Healthcare Acquisition, have had prior experiences with blank check companies and reverse mergers.
In 2000, the two men were part of a group that formed a blank check company named Sovereign Medical Acquisition Co. They raised $9 million from private investors – the company never went public – and acquired Healthmont, an operator of community hospitals. On October 3, 2003, the company, now renamed Healthmont, merged with Sunlink Health Systems, Inc. (stock symbol: SSY). The shareholders of Healthmont received 1,130,565 shares of Sunlink Health Systems, a public company. Based on a stock price of $3.15, the shares were worth approximately $3.6 million when the transaction closed. On Friday, SSY closed at $5.52.
On March 21, 1995, Kanter was part of a group that created a blank check company named Healthcare Acquisition Corp. The insiders purchased 375,000 shares for $25,000. Healthcare Acquisition completed an initial public offering in April 1996, selling 1,725,000 units at $5.25 per unit. The company raised gross proceeds of approximately $9,050,000. Each unit consisted of one share of common stock and two warrants with a strike price of $5.00 per share. Over $8.7 million of the proceeds, equal to $5.06 per non-insider share, was placed into a trust account. While the original prospectus is not available on the SEC web site, it appears that the Healthcare Acquisition offering was structured in a manner similar to the blank check offerings of recent years. It also appears that the company may not utilized an investment bank for its IPO.
In March 1997, Healthcare Acquisition acquired Encore Medical Corp., an orthopedic products company, in a transaction that was accounted for as a reverse merger. The name of the company was changed, as was the stock symbol. On Friday, Encore (stock symbol: ENMC) closed at $7.61.
Kanter owned 37,500 shares of Healthcare Acquisition, equal to a 10% interest in the founder’s equity position. |
