Merge gets Merrick lifeline; Vast upsizes deal to C$30 million; Legend issues stock; Raptor sells units

By Kenneth Lim

Boston, May 22 - Merge Healthcare Inc. said it sold $20 million worth of two-year notes and common stock to a single investor, who will also have nomination rights to the company's board.

Meanwhile, Vast Exploration Inc. raised C$30 million from a private placement of units that was upsized in a matter of hours.

Legend International Holdings, Inc. announced a $100 million placement of stock to fund its Australian projects, while Raptor Pharmaceuticals Corp. sold an initial $2.21 million tranche of stock and warrants to eight investors.

Merge lands Merrick injection

Merge Healthcare said it is raising $20 million from Merrick RIS, LLC through a private placement of notes and stock.

The deal involves a $15 million issue of 13% senior secured term notes due 2010 and $5 million worth of common stock.

Merge has to prepay the first two interest payments of the notes at closing. The notes may also be called by Merrick if a change of control occurs. The redemption amount in that instance will be par if shareholders receive at least $1.75 per share in the change of control. If the change of control consideration is less than $1.75 per share, the redemption amount will be 120% of par during the first year and 118% thereafter.

The note may also be voluntarily redeemed at 120% of par at any time.

Merge also sold about 14.3 million common shares to Merrick at $0.35 apiece, and issued another 6.8 million shares as partial consideration for the notes.

Merge common stock (Nasdaq: MRGE) jumped 50% or $0.19 to close at $0.57 on Thursday.

Merge, a Milwaukee, Wis.-based developer of medical and clinical imaging software, said the proceeds will provide it with liquidity as it tries to grow its business.

"We are pleased that Merrick has partnered with the company and provided this financing package," Merge president and chief executive Kenneth Rardin said in a statement.

"The financing should provide us with the necessary liquidity as we continue our attempts to grow our revenues and align expenses with the revenues of the business and regain our position as a growing and profitable provider of healthcare diagnostic imaging software and services. This financing combined with the ongoing cost reduction plans that started with the February restructuring and the refocusing of the business on the North America RIS-PACS and teleradiology markets and the Cedara OEM business allows the company to focus on its core strengths. Additionally, we look forward to the strategic advice and counsel Merrick will provide to the company as we move forward."

As part of the deal, Merrick will be entitled to nominate five people to replace five officers on Merge's existing board of directors. Merge is also required to have positive adjusted EBITDA for the last fiscal quarter of 2008 and cumulatively thereafter during the term of the notes.

In its latest financial results, for the first quarter ended March 31, Merge reported a net loss of $7.8 million, or $0.23 per share, from a year-ago net loss of $9.7 million, or $0.29 per share. In its annual report for 2007, the company's auditors included a "going concern" qualification that expressed "substantial doubt" about the company's ability to continue beyond 2008.

At that time, Merge said "additional cash would likely be necessary in order to fund its operations beyond the latter half of the second quarter of 2008."

Merge also reported on Thursday that it had settled consolidated class action suits against the company. The settlement, which requires the Merrick financing to be completed, will see Merge paying the plaintiffs $3.025 million in cash, while Merrick's directors and officers insurers will pay an additional $12.975 million.

"The agreement in principle to settle the securities class action is another significant step forward for Merge Healthcare, especially when coupled with the previously announced agreement in principle to settle the company's derivative action," Rardin further stated. "We are excited that we can now focus on the go-forward strategy of Merge Healthcare."

Vast boosts deal size

Vast Exploration wasted no time in growing the size of its stock placement Thursday. The company priced the deal for C$25 million early in the day, then upped the amount to C$30 million a few hours later.

The company is selling 50.001 million units of one common share and one half-share warrant at C$0.60 per unit. Each whole warrant will be exercisable at C$0.90 for two years.

Vast Exploration common stock (TSX: VST) rose 18.75% or C$0.12 to close at C$0.76 on Thursday.

Canaccord Capital Corp. and Macquarie Capital Markets Canada Ltd. were the underwriters. They have an over-allotment option for a further C$5 million, or 8.334 million units at C$0.60.

Vast, an oil and gas exploration and production company based in Calgary, Alta., said it will use the proceeds for working capital and to fund its part of a production sharing contract in Kurdistan, Iraq.

Legend raises $100 million

Legend International said it is selling $100 million worth of stock in a private placement.

The Melbourne, Australia-based diamond mining company said it is selling 40 million shares at $2.50 each.

Legend common stock (OTCBB: LGDI) closed at $3.15 on Thursday, higher by 6.06% or $0.18.

Legend said it will use the proceeds to advance its ongoing phosphate projects in the Georgina Basin in the Mount Isa region of Queensland, Australia.

Raptor raises $2.21 million, eyes more

Raptor Pharmaceuticals said it issued the initial $2.21 million tranche in a stock-and-warrant financing deal and could raise a further $7 million.

The company issued 4.42 million units of one common share and one half-share warrant at $0.50 per unit to eight investors, the company said. Each two-year warrant will be exercisable at $0.75 in the first year and at $0.90 after that.

Raptor common stock (OTCBB: RPTP) dropped 9.09% or $0.05 to close at $0.50.

One potential investor has also offered to subscribe for an additional 14 million units for $7 million. Raptor said it will accept the subscription after it receives the consideration for those additional units, which must occur by June 30.

Raptor, a Novato, Calif.-based biotechnology company that develops drugs using human receptor-associated proteins and related proteins, said it will use the proceeds to fund ongoing operations and satisfy its trade payables accrued in the ordinary course of business.

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