US-based medical equipment manufacturer Sanuwave Health has agreed to merge with SEP Acquisition (SEPA), a special purpose acquisition company (SPAC), to become a publicly listed company.

SEPA is co-sponsored by Sweat Equity Partners, an entrepreneur-led family of investment companies and Mercury Fund, an early-stage venture capital platform.

The proposed transaction will create a combined company that will operate under the Sanuwave brand name and will be listed on the Nasdaq Capital Market.

The combined company will have a total enterprise value of $127.5m, on a pro forma basis.

It will receive around $13m in gross proceeds at closing, including $12m from SEPA shareholders, and $1m from the SPAC sponsor converting a loan into equity.

The boards of Sanuwave and SEPA have unanimously approved the merger.

It is expected to be completed in the fourth quarter of this year, subject to approval by SEPA and Sanuwave stockholders, and other customary closing conditions.

Upon closing, Sanuwave shareholders will have around 69.6% equity interest in the combined company.

SEPA CEO Andrew White said: “We are excited to partner with SANUWAVE on a combination of our companies. We believe this transaction is a 1+1=3 equation where new capabilities are created and opportunities are opened.

“Sweat Equity Partners, together with Mercury Life Sciences, have a broad investor base, with long track records of success in the medical device and healthcare sectors, and we’ve already begun working with Sanuwave to open new distribution opportunities and markets.

“We believe very strongly in this Company and the UltraMIST product and look forward to being a part of Sanuwave’s future success.”

Sanuwave is a commercial-stage medical device company that offers two FDA-approved products in the $45bn US wound care market.

Its lead product, the UltraMIST system, currently contributes to more than 90% of the company’s revenue and has nationwide scheduled 1 reimbursement from CMS.

UltraMIST is a low-frequency, non-contact ultrasound system that delivers energy through a fluid mist, to promote wound healing below the surface without touching the wound.

It works by modulating the cell membranes to help increase blood flow and capillary formation and enhance the removal of damaged tissues by neutrophils.

Faegre Drinker Biddle & Reath served as legal advisor to Sanuwave, while ValueScope served as financial advisor and Baker Donelson, Bearman, Caldwell & Berkowitz as legal advisor to SEPA, on the transaction.

Sanuwave CEO Morgan Frank said: “SEPA is a strong, value-add partner, and this transaction will allow Sanuwave to simplify its capital structure and gain a listing on the Nasdaq Capital Market while funding the company for the exciting growth ahead.

“This is the next step in putting the company on a sound footing that will allow us to focus on rapid, profitable growth and to garner an equity valuation commensurate with our performance.”