8-K: Enzon Pharmaceuticals to Merge with Viskase Companies in All-Stock Transaction, Forming Viskase Holdings, Inc.

Enzon Pharmaceuticals, Inc. and Viskase Companies, Inc. have entered into a definitive merger agreement, creating Viskase Holdings, Inc. in an all-stock transaction where Viskase stockholders will own approximately 84.1% of the combined entity.

Summary

• Enzon Pharmaceuticals, Inc. (Enzon) and Viskase Companies, Inc. (Viskase) have entered into an Agreement and Plan of Merger, under which Viskase will merge with a wholly-owned subsidiary of Enzon.
• The combined company is anticipated to operate under the name Viskase Holdings, Inc. and will trade on the OTCQX tier of the OTC market.
• Each share of Viskase common stock will be converted into a right to receive a number of shares of Enzon common stock based on an exchange ratio.
• Enzon's Series C Non-Convertible Redeemable Preferred Stock held by affiliates of Icahn Enterprises Holdings L.P. (IEH) will be exchanged for Enzon Common Stock at a discount to its liquidation value.
• An exchange offer will be commenced for Series C Preferred Stock held by non-affiliates of IEH, allowing them to exchange for Enzon Common Stock at its liquidation value.
• Upon closing, pre-merger Enzon Common Stock holders are expected to own approximately 2.06% of the combined company, Series C Preferred Stock holders approximately 13.84%, and Viskase stockholders approximately 84.1%.
• The merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.
• Enzon will file a Form S-4 registration statement, including a consent solicitation statement, to seek stockholder approval for the merger, the name change, and a reverse stock split.
• A reverse stock split of Enzon Common Stock will be effected at a ratio between 1 to 2 and 1 to 100.
• Enzon will redeem and terminate its Section 382 Rights Agreement prior to closing.
• Viskase will terminate its Private Placement Agreement with Icahn Enterprise Holdings L.P. prior to or concurrently with the Effective Time.
• The closing is subject to customary conditions, including stockholder approvals, regulatory clearances (e.g., HSR Act), and Enzon having a minimum cash amount of $43,045,000 plus the aggregate liquidation preference of non-IEH Series C Preferred Stock (excluding exchanged shares), minus the IEH Exchange Adjustment (up to $1,000,000).

Sentiment

Score: 7

Explanation: The merger is a significant strategic move for Enzon, transforming it into an operating company with Viskase's established global business. The unanimous board approvals and IEH's support are positive indicators. However, the substantial dilution for existing Enzon common shareholders and the inherent risks of integration and market conditions temper the overall sentiment. The tax-free reorganization intent is a positive.

Positives

• The merger provides a strategic transformation for Enzon, shifting from a public acquisition vehicle to an operating company with Viskase's established global business.
• The transaction has been unanimously recommended by Special Committees of independent directors and unanimously approved by the Boards of Directors of both Enzon and Viskase.
• The merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes, which can be beneficial for shareholders.
• Icahn Enterprises Holdings L.P. (IEH), a significant shareholder, has entered into a support agreement, indicating strong insider backing for the transaction.
• The combined company will operate under the Viskase name and leadership, suggesting continuity and leveraging Viskase's operational expertise.
• The combined company is expected to trade on the OTCQX tier, potentially offering better visibility and liquidity than the OTC Pink Limited tier where Viskase currently trades.

Negatives

• Existing Enzon Common Stock holders will experience significant dilution, with their ownership stake expected to decrease to approximately 2.06% of the combined company.
• The planned reverse stock split, while potentially necessary for listing or share price, can sometimes be perceived negatively by investors.
• The merger agreement includes termination fees of $1.0 million payable by either party under specific circumstances, indicating potential financial penalties if the deal fails.

Risks

• The conditions to the closing of the proposed transaction may not be satisfied, including failure to obtain necessary stockholder approvals or required regulatory clearances.
• Uncertainties exist regarding the timing of the consummation of the proposed transaction and the ability of each company to complete it.
• Viskase's ability to timely deliver the financial statements required by the Merger Agreement is a condition.
• Anticipated benefits of the proposed transaction, such as revenues, expenses, earnings, growth, and tax treatment, may not be realized.
• Potential litigation related to the proposed transaction could be instituted against Enzon, Viskase, or their respective officers or directors.
• Possible disruptions from the proposed transaction could harm Enzon's or Viskase's respective businesses.
• Viskase's ability to retain, attract, and hire key personnel may be impacted.
• Potential adverse reactions or changes to relationships with customers, employees, suppliers, or other parties may result from the announcement or completion of the proposed transaction.
• Business uncertainty, including changes to existing business relationships, during the pendency of the proposed transaction could affect financial performance.
• Certain restrictions during the pendency of the proposed transaction may impact Enzon's or Viskase's ability to pursue certain business opportunities or strategic transactions.
• The final exchange ratio and relative ownership levels at closing are subject to certain adjustments.
• Estimates regarding future revenue, expenses, and capital requirements following the closing may differ from actual results.
• Legislative, regulatory, and economic developments could adversely affect the combined company.
• Unpredictability and severity of catastrophic events, including acts of terrorism, trade wars, or outbreak of war or hostilities, as well as management's response to such factors, pose risks.
• Other risks and uncertainties are set forth in the Registration Statement under the heading 'Risk Factors' and in Enzon's periodic public filings with the SEC, and Viskase's annual and quarterly reports.

Future Outlook

The combined company is expected to operate under the name Viskase Holdings, Inc. and will trade on the OTCQX tier of the OTC market. The merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. The realization of anticipated benefits, including revenues, expenses, earnings, and growth, is subject to various factors and uncertainties, including the ability to satisfy closing conditions and obtain regulatory clearances.

Management Comments

• The Chief Executive Officer of the combined company, Viskase Holdings, Inc., will be Timothy P. Feast, who is currently the Chief Executive Officer of Viskase.
• The Board of Directors of the combined company will be selected by the Board of Directors of Viskase and include Jordan Bleznick, a current member of the Enzon Board of Directors.

Industry Context

Enzon Pharmaceuticals, Inc. is positioned as a public company acquisition vehicle, indicating its strategy to acquire operating businesses. Viskase Companies, Inc. is a global producer of non-edible cellulosic, fibrous, and plastic casings for processed meat products, operating nine manufacturing facilities across North America, Europe, South America, and Asia, and selling products in nearly one hundred countries. This merger represents a significant strategic shift for Enzon, effectively transforming it from a shell company into an active operating entity within the food packaging and processing industry by acquiring Viskase's established business and global footprint.

Management Changes

Corporate Governance

Legal Proceedings

• Potential litigation relating to the proposed transaction that could be instituted against Enzon, Viskase, or their respective officers or directors.
• Stockholder litigation or claims against Viskase and/or its directors or officers relating to the Merger or other contemplated transactions (Viskase Transaction Litigation).
• Stockholder litigation or claims against Enzon and/or its directors or officers relating to the Merger or other contemplated transactions (Enzon Transaction Litigation).
• Stockholder litigation or claims against any IEH Party or their respective officers, directors, or managers relating to the Merger or other contemplated transactions (IEH Transaction Litigation).

Related Party Transactions

• Icahn Enterprises Holdings L.P. (IEH) and certain of its affiliates, who are significant shareholders of Enzon, have entered into a support agreement with Enzon and Viskase.
• Under the support agreement, IEH affiliates will exchange their Enzon Series C Preferred Stock for Enzon Common Stock at a discount to its liquidation value immediately prior to the Closing.
• Viskase will terminate its Private Placement Agreement, dated October 9, 2020, with Icahn Enterprise Holdings L.P. prior to or concurrently with the Effective Time.

Stakeholder Impact

• **Shareholders (Enzon)**: Will experience significant dilution, with their ownership stake in the combined company expected to be approximately 2.06%. They will also be subject to a reverse stock split. However, they gain exposure to Viskase's established operating business and global presence.
• **Shareholders (Viskase)**: Will become the majority owners of the newly public combined entity (approximately 84.1%), gaining access to a public trading platform through Enzon.
• **Series C Preferred Stock Holders (Enzon)**: Will have their preferred stock exchanged for common stock, with IEH affiliates receiving a discount and non-affiliates receiving liquidation value, providing a pathway to liquidity.
• **Employees (Viskase)**: The appointment of Viskase's current CEO, Timothy P. Feast, as the CEO of the combined company suggests continuity and stability for Viskase's operational team.
• **Employees (Enzon)**: Potential for changes in Enzon's executive and operational personnel as the company transitions to a new business focus.
• **Customers and Suppliers**: There is a potential risk of adverse reactions or changes to relationships with customers, employees, suppliers, or other parties resulting from the announcement or completion of the proposed transaction.
• **Creditors**: The agreement includes provisions to ensure that the merger does not trigger events of default or acceleration under Viskase's existing credit facilities, aiming to protect creditor interests.

Next Steps

• Enzon will prepare and file a registration statement on Form S-4 with the SEC, which will include a consent solicitation statement.
• Enzon will seek written consent from its stockholders for the Merger Agreement, the amendment to its certificate of incorporation to change the name to Viskase Holdings, Inc., and to effect a reverse stock split.
• Viskase will obtain the written consent of its stockholders to the Merger Agreement and the transactions contemplated thereby within twenty-four (24) hours of execution of the Merger Agreement.
• Enzon will commence an exchange offer for Series C Preferred Stock held by non-affiliates of IEH no less than twenty-five (25) Business Days prior to the anticipated Closing Date.
• The parties will use commercially reasonable efforts to obtain all necessary governmental and regulatory approvals, including under the HSR Act.
• Enzon will redeem and terminate its Section 382 Rights Agreement prior to the Closing.
• Viskase will take all actions necessary to remove the Viskase Common Stock from quotation on OTC, effective as of the Effective Time.
• Enzon will use commercially reasonable efforts to cause the shares of Enzon Common Stock to be issued in the Merger to be listed on OTC, subject to official notice of issuance, prior to the Effective Time.
• The Closing of the Merger will occur on the third (3rd) Business Day after the satisfaction or waiver of the conditions set forth in the Merger Agreement.

Key Dates

Recommendation

Keywords

Merger, Acquisition, SEC Filing, 8-K, Enzon Pharmaceuticals, Viskase Companies, All-stock transaction, Reverse Stock Split, Corporate Governance, Icahn Enterprises, OTCQX, Tax-free reorganization, Financial Reporting, Risk Management, Strategic Analysis, Casings, Processed Meat Products, Public Company Acquisition Vehicle