EdtechX Holdings Acquisition Corp II (NASDAQ:EDTXU) and zSpace Inc said they have entered into a definitive merger agreement that would result in zSpace becoming publicly traded.
Following the anticipated closing of the proposed business combination, the combined company is expected to be named zSpace Technologies Inc and listed on the Nasdaq Stock Market under the new ticker symbol ZSPX.
zSpace is a leading provider of commercial augmented reality (AR) and virtual reality (VR) technology in the global education market. The company offers differentiated hardware along with immersive experiential learning software modules for K-12 science, technology, engineering, game design and mathematics (STEM) applications, as well as workforce-oriented career and technical education applications. Its easy-to-use technology delivers immersive and interactive learning experiences.
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zSpace is currently deployed in 94% of the top 100 school districts in the US - including the top ten largest districts - and is used in workforce applications in 73% of these districts. With a userbase of over 2,400 US school customers and over one million students annually, zSpace is positioned to serve a growing community of learners around the globe.
“zSpace is committed to innovating and delivering immersive learning experiences to address the rapidly evolving needs of today’s students,” said Paul Kellenberger, the CEO of zSpace in a statement.
“Merging with EdtechX II represents an important next step in our growth trajectory as we seek to deepen our presence in the U.S., enhance our product portfolio, and expand the geographic footprint of our transformative technology. Our work closely aligns with EdtechX II’s commitment to supporting increased digitization and access within the modern educational landscape, and we welcome their partnership as we pursue a successful public listing," he added.
The combined company will have an estimated post-transaction enterprise value of $195 million, assuming no redemptions by EdtechX II public stockholders.
Benjamin Vedrenne-Cloquet and Charles McIntyre, co-founders and respectively CEO and chairman of EdtechX II, commented: “With our focus on backing industry-leading educational technology platforms that increase access to high-quality and scalable digital learning resources, we are proud to support zSpace’s mission and help facilitate this next phase of the company’s growth. As digital learning becomes mainstream in education and the workplace globally, experiential and immersive solutions become premium, delivering greater efficacy in learning outcomes and deeper engagement among learners.
"We believe the growing adoption of zSpace’s immersive solutions in the global K-12 education and workforce training market segments will drive robust recurring revenue growth and profitability. We look forward to working alongside the zSpace leadership team to enable learners around the world to access next-generation experiential instruction.”
As a result of the transaction, the holders of EdtechX II securities will receive 13.1 million shares of common stock of the combined entity. Additionally, proceeds from the transaction, before the payment of certain transaction expenses, will comprise up to $117 million of cash held in EdtechX II’s trust account before redemptions and $25 million in exchange for the retirement of an equal amount of existing company debt from a fully committed private placement (PIPE).
As part of the aggregate consideration payable to EdtechX II security holders under the merger agreement, holders of certain of the company securities will also have the right to receive their pro rata portion of (a) up to an aggregate of 3,694,581 shares of common stock in three equal tranches if certain conditions are met prior to the fifth anniversary of the closing date of the proposed business combination and (b) new warrants exercisable for up to an aggregate of 1,000,000 shares of common stock.
Two of the company’s key existing security holders, bSpace Investments Limited and Kuwait Investment Authority, will enter into separate subscription agreements to purchase an aggregate of $25 million of shares of common stock of EdtechX II at $10.15 per share, in exchange for the retirement of an equal amount of indebtedness owed by the company to bSpace and Kuwait Investment Authority, and the PIPE will occur concurrently with the proposed business combination.
The transaction will require satisfaction of a minimum cash condition - which is equal to $24 million in net proceeds after the repayment of primary debt and transaction costs - and the satisfaction of other customary closing conditions.
The net proceeds from the transaction will be used as working capital to support the company’s organic growth and acquisition expansion plans, as well as the elimination of certain existing primary debt.
EdtechX II and zSpace’s respective boards of directors have unanimously approved the transaction, which is expected to close in the fourth quarter of 2022, subject to the extension of EdtechX II’s liquidation date to December 15, 2022, regulatory and stockholder approvals. zSpace’s management, employees, and shareholders will roll 100% of their existing zSpace equity holdings into the combined company and are expected to own approximately 42% on a non-fully diluted basis immediately following the closing of the proposed business combination, assuming no redemptions by EdtechX II’s public stockholders in connection with the extension vote and the business combination vote.
EdtechX II’s sponsor team and zSpace’s current shareholders have also agreed to a lock-up provision of up to 18 months following the closing of the proposed business combination, subject to earlier releases at the 6-month and 12-month anniversaries of the closing date of the proposed business combination.
Pankaj Gupta and Mohammed Alhassan, co-founders and co-CEOs of Gulf Islamic Investments (GII), commented: "As a key existing securityholder in zSpace, we are committed to continue supporting zSpace through its debut on Nasdaq and its next stage of growth. We believe the Company is well-positioned to further enhance its platform and geographic reach within the global education market.”
EdtechX Holdings Acquisition Corp II is a SPAC, blank check company organized for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or other similar business combination with one or more businesses or entities.
Contact the author at jon.hopkins@proactiveinvestors.com