Glaukos Corporation (NYSE:GKOS) entered into a definitive merger agreement to acquire Avedro, Inc. (NasdaqGM:AVDR) from a group of sellers for approximately $490 million on August 7, 2019. Under the terms of the merger agreement, for each share of Avedro common stock, Avedro shareholders will receive an exchange ratio equivalent of 0.365 shares of Glaukos stock. Each outstanding and unexercised option to purchase Avedro common stock will be assumed by Glaukos and converted into an option to purchase a number of shares of Glaukos common stock equal to the product of the number of shares of Avedro common stock subject to such Avedro Stock Option immediately prior to the effective time multiplied by the exchange ratio. Each then-outstanding restricted stock unit (RSU) issued by Avedro will be assumed by Glaukos and converted into the right to receive the number of shares of Glaukos common stock equal to the product of the number of shares of Avedro common stock subject to such Avedro RSU immediately prior to the effective time multiplied by the exchange ratio. Each outstanding warrant of Avedro shall be assumed by Glaukos and shall be converted into a warrant to purchase a number of shares of Glaukos common stock equal to the product of the number of shares of Avedro common stock subject to such outstanding warrant immediately prior to the effective time multiplied by the exchange ratio. Upon closing, Glaukos shareholders are expected to own approximately 85% of the combined company, with Avedro shareholders expected to own the remaining 15%. A termination fee of approximately $22.5 million i.e. 4% will be payable by Avedro to Glaukos upon termination of the transaction.

The completion of the merger is subject to customary conditions and regulatory approvals, including: (a) receipt of the Avedro Stockholder Approval; (b) the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (c) the absence of any temporary restraining order, preliminary or permanent injunction or other order from any court of competent jurisdiction preventing or prohibiting the Merger or any applicable law of a governmental authority of competent jurisdiction prohibiting or rendering illegal the Merger; (d) the approval for listing on the New York Stock Exchange of the Glaukos Common Stock to be issued to Avedro stockholders in the Merger; (e) that the registration statement on Form S-4 for the Glaukos Common Stock to be issued to Avedro stockholders in the Merger has been declared effective by the SEC; (f) subject to certain materiality exceptions, the accuracy of certain representations and warranties of each of Avedro and Glaukos contained in the Merger Agreement and the compliance by each party with the covenants contained in the Merger Agreement; (g) the absence of a material adverse effect with respect to each of Avedro and Glaukos and (h) the receipt by each of Avedro and Glaukos from their respective counsels of a tax opinion that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. The transaction is approved by the Board of Directors of Glaukos and unanimously approved by Avedro's Board. The Board of Directors of Avedro unanimously recommends the shareholders to approve the transaction. Certain shareholders of Avedro, including OrbiMed, HealthQuest and LAV Agile, which collectively own approximately 41% of the outstanding shares of Avedro common stock, have entered into voting agreements to vote in favor of the transaction. As of August 28, 2019, early termination of waiting period notice was granted by Federal Trade Commission. The Glaukos Board delegated responsibility to the Special Committee to evaluate a potential transaction with Avedro. Special Committee unanimously recommended the proposed acquisition. A special meeting of the Avedro stockholders will be held on November 19, 2019. The transaction is expected to be completed in the fourth quarter of 2019. The transaction is expected to be accretive to operating results and cash flow by 2021.

Barbara Borden and Miguel Vega of Cooley LLP acted as legal advisors and Guggenheim Securities is serving as financial advisor and fairness opinion provider to Avedro. Georgeson LLC acted as proxy solicitor for Avedro. Mark D. Peterson and Andor Terner of O'Melveny & Myers LLP acted as legal advisors and Perella Weinberg Partners LP acted as financial advisor to Glaukos. American Stock Transfer & Trust Company, LLC acted as transfer agent and registrar for Glaukos. Avedro has agreed to pay Guggenheim Securities a cash transaction fees of $8.25 million for financial advice and in connection with Guggenhein providing fairness opinion Avedro had previously paid Guggenheim a cash milestone fees of $1 million. Avedro will pay a proxy solicitation fees of $12,000 plus reasonable out-of pocket expenses for this service.