A private equity firm has filed suit against QT Imaging Inc., hoping to force the Novato, California-based ultrasound developer to complete a merger deal announced last year.
GigCapital Global specializes in taking other companies from private ownership to public trading. Leaders there formed a “special purpose acquisition corporation”—a blank check, shell company listed on a stock exchange for the purpose of acquiring an entity—in late 2022. “GigCapital5 Inc.” and QT Imaging had planned to merge by mid-2023, estimating the equity value of the combined company at $151 million.
However, the M&A deal has now stalled, with GigCapital filing suit in a Delaware state court on Sept. 7 to try and force the deal forward, according to a U.S. Securities and Exchange Commission filing. GigCapital accuses QT Imaging of engaging in discussions with a third party that are “contrary to the exclusivity provision” of their agreement.
“Because of the delays caused by QT Imaging’s actions, the company will not have sufficient time to complete the QTI business combination prior to September 28, 2023,” the SEC filing stated. “The [GigCapital5] board believes that it is in the best interests of our stockholders to provide the company more time to consummate the QTI business combination and, to the extent necessary, pursue the QTI lawsuit as described herein.”
QT Imaging did not immediately respond to a Radiology Business request for comment on Monday. Internist John Klock, MD, founded the company in 2011 and currently serves as its CEO and chief medical officer. The medical device-maker offers whole-body and breast ultrasound technology including the QTSscan, cleared for sale by the U.S. Food and Drug Administration as an adjunct to mammography. The National Institute of Health also has awarded QT Imaging more than $15.5 million in research funding.
GigCapital5 and QT Imaging publicly announced their M&A deal on Dec. 12 with plans to go public on the New York Stock Exchange under the ticker symbol “QTI.” The combined company was slated to receive about $41 million in gross proceeds from GigCapital5’s trust account along with $26 million more in financing, “to be raised prior to the closing of the business combination,” according to the original announcement.
After commencing the lawsuit, QT Imaging purportedly asked to terminate the business agreement on Sept. 9. GigCapital5 asserts that severance of the agreement cannot occur, due to QT Imaging allegedly violating terms of their original pact. The private equity firm said it intends to proceed to trial on Nov. 20, seeking to compel QT Imaging to “act in accordance with its obligations” and “proceed to consummate the transactions contemplated” by the business agreement.
GigCapital5 also has scheduled a shareholder meeting for Sept. 28 to vote on extending the closing deadline for the merger to Dec. 8.