Chanticleer Holdings Inc. agreed to merge with Princeton, N.J.-based private biotechnology company Sonnet BioTherapeutics Inc. as part of a larger strategy that includes spinning off the restaurant operations to form a new company.
Sonnet's shareholders will own a 94% stake in the combined company that will operate as Sonnet BioTherapeutics Holdings Inc. and will be listed on Nasdaq under the ticker symbol SONN.
Under the agreement, Sonnet will pay $6 million to Chanticleer, the owner and operator of restaurants including Hooters. The sum will be used for the repayment of Chanticleer's debt related to the spinoff. The new restaurant company will retain the balance for working capital and general corporate purposes.
Additionally, the spinoff company will get a warrant to purchase about 2% of Chanticleer's issued and outstanding shares at the completion of the merger. The warrant can be exercised within five years at a price of 1 cent per share.
Chanticleer Chairman and CEO Mike Pruitt said the new restaurant company will be owned by Chanticleer's shareholders and will have a balance sheet and overhead structure that is better suited for a growing restaurant company. He added that the company is seeking to become a leader in the Better Burger Segment organically and through acquisitions.
Sonnet founder and CEO Pankaj Mohan will lead the combined company after the deal's completion, subject to approvals from shareholders and regulators. The existing Sonnet board will take over the merged entity.
Sonnet develops therapies for cancer patients. Its lead experimental drug SON-080 completed a phase 1 trial in patients suffering from nerve damage due to chemotherapy for cancer. The company plans to further study the drug for efficacy during the first half of 2020, Chanticleer noted in its Oct. 10 press release.
Chanticleer's stock price was up 8.7% to 90 cents as of 12:14 p.m. ET on Oct. 11.
Chardan Capital Markets is the exclusive adviser to Sonnet, and Lowenstein Sandler LLP is the company's legal counsel. Libertas Law Group and K&L Gates LLP are the legal counsel and special tax counsel to Chanticleer, respectively.
