BurTech Acquisition Corp. (NASDAQ:BRKH) has entered into a definitive agreement to combine with AI-enabled edge computing firm Blaize at an enterprise value of $894 million.

El Dorado Hills, California-based Blaize makes smart-vision hardware for the automotive, retail and software industries.

The combined company is expected to trade on the Nasdaq once the deal is completed in the second quarter of 2024.

Transaction Overview

BurTech has about $46.5 million in its current trust having seen 84.8% of shares redeemed in earlier shareholder votes. Its sponsor, Burkhan Capital has supplemented this with a $25 million investment of convertible notes and warrants.

The company and sponsor may receive up to 16,300,000 additional shares through an earnout should certain conditions be met post-close.

The parties have not yet filed their merger documents or an investor presentation, but BurTech’s profile page will be updated once additional information is made available.

Quick Takes: BurTech can’t be accused of marrying the first deal it danced with.

In fact, the SPAC has gone LOI-official with two other targets since its IPO in December 2021. Both of those relationships quietly ended, and BurTech announced this definitive one late in the afternoon just before Christmas weekend when much of the market was already away.

That’s usually a move reserved for teams that are hoping for less, not more attention on their transaction, but BurTech could have also simply wanted to get a move on rather than wait for the new year.

On December 15, it secured an extra year on its clock with an extension, but this came at the cost of 2,285,040 shares redeemed adding to 22,119,297 that went out the door in a March extension.

BurTech’s sponsor sacrificed 1,000,000 promote shares to a non-redemption agreement for that March vote, and the terms of its most recent extension require it to contribute the lesser of $150,000 or $0.03 per share for each additional month the SPAC is to stay in existence.

Barring something unforeseen, the per-share price is to be the “lesser”, but not by much, requiring the sponsor to add about $130,369 to trust until it gets this deal closed.

Coincidentally, BYTE tied up a very similar transaction with AirShip AI (NASDAQ:AISP) the day before BurTech’s deal was announced. Airship also makes edge computing devices, but it has found its most lucrative initial deployments in law enforcement specifically.

Blaize, meanwhile, has looked to the SPAC-favorite automotive sector for initial work, with its Graph Streaming Processor (GSP) vying to the brain for the various lidar, drive train control and autonomous driving functions.

It has signed a variety of partnerships with other hardware producers to integrate itself into builds that could wind their way into serial production in vehicle models. But, it has yet to announce a concrete contract with an automotive manufacturer that would bring in major business from that vertical.

It has generated revenue since at least 2019, however, through a variety of other applications and in May it gained a concrete boost in launching a UAE-based joint venture with Mark AB Capital that was projected at the time to generate at least $50 million in orders to service the Emirates’ various smart city initiatives.

Those applications are very much the hunting ground of Global SPAC’s 2022 edge computing de-SPAC Gorilla Technology (NASDAQ:GRRR). Like Blaize, Gorilla shared few financial details in its initial materials, but the $709 million enterprise value envisioned in its deal wound up being an effective 31.6x multiple to its same-year (2022) revenues.

Airship was priced more conservatively at 20.8x its 2022 revenue, but the lack of immediate profitability for both of these firms appears to have been unappetizing to the market. Gorilla has fallen to $0.54 while Airship has fallen below $4 in the morning of its second trading day as a public company.

Market tastes could well turnaround on this sector as the high rates and inflation environment wanes, however.

Larger-scale competitors in this field like Mobileye (NASDAQ:MBLY), Cognex (NASDAQ:CGNX) and Axon (NASDAQ:AXON) have each managed to generate profits over the past year, but even they trade below some of the bullish valuations that de-SPACs have received on announcement.

This cohort trades at a range of 7.7x to 18.6x revenue and 36x to 115x EBITDA. Other players in the space that are still burning cash like Ambarella (NASDAQ:AMBA) and C3.ai (NYSE:AI) trade shallower at 8.9x and 9.4x revenue, respectively.

With its own pro forma enterprise value set at $894 million, Blaize would need to be generating about $68.7 million in revenue annually to be in line with the 13x average revenue multiple for its profitable peers or $97.7 million to line up to its cash-burning comparables like Ambarella and C3.

ADVISORS

• Company Advisors:
  
  • Cohen & Company Capital Markets is acting as exclusive financial advisor, lead capital markets advisor and private placement agent to Blaize.
  • Latham & Watkins LLP is acting as legal counsel to Blaize.
  • Blueshirt Capital Advisors is also serving as an investor relations advisor to Blaize.
• SPAC Advisors:
  
  • Norton Rose Fulbright US LLP is acting as U. S. legal counsel to BurTech.
  • Han Kun Law Offices are serving as Chinese legal counsel.