Avid Bioservices’ $12.50 per Share Merger Agreement: Key Takeaways and Stockholder Guide (CDMO)

Avid Bioservices, Inc. has entered into a definitive merger agreement with investment firms GHO Capital Partners and Ampersand Capital Partners. Under this deal, Avid shareholders will receive $12.50 per share in cash, which represents a significant premium over recent stock prices. But what does this transaction mean for stakeholders, and why is it being pursued? Let’s break down the details of the merger, shareholder considerations, and what the future might hold for Avid Bioservices.

*Update - Merger approved. CDMO shareholders to receive $12.50 cash for each share. Shares delisted after the close of extended hours trading on February 4th 2025

The Basics of the Merger Deal

On November 6, 2024, Avid Bioservices signed an agreement to merge with entities managed by GHO Capital and Ampersand Capital. Here’s what’s on the table for shareholders:

$12.50 per share in cash: This price represents a 50.1% premium over Avid’s six-month volume-weighted average stock price leading up to the announcement.
No partial stock option: The consideration is entirely cash-based, giving shareholders immediate liquidity.
Closing date and conditions: The merger is expected to close following shareholder approval and other regulatory clearances.

Avid’s decision to merge was driven by several factors, including the opportunity for accelerated growth under private ownership and access to additional resources provided by the acquiring firms.

Premium Highlights for Shareholders

For Avid shareholders, the offer price of $12.50 represents a compelling opportunity compared to historical stock prices:

13.8% premium to Avid’s closing price of $10.98 on November 6, 2024 (the last trading day before the announcement).
21.9% premium to the 20-day average stock price prior to the deal.
50.1% premium to the six-month average stock price.

This significant premium reflects the buyers’ confidence in Avid’s potential for growth and profitability within the biologics and contract development manufacturing (CDMO) sectors.

Strategic Rationale: Why Merge Now?

Avid’s Board of Directors unanimously approved the merger, emphasizing that it aligns with the company’s long-term strategic vision. Here’s why:

Enhanced Investment and Resources: As a private company backed by GHO and Ampersand, Avid could gain access to greater financial and strategic resources to expand its CDMO capabilities.
Faster Growth Opportunities: Avid can benefit from faster decision-making, fewer regulatory constraints, and an expanded ability to pursue new partnerships under private ownership.
Market Positioning: The merger positions Avid to be a stronger competitor in the biologics manufacturing market, especially as demand for CDMO services grows.

According to the proxy statement, the Board determined that the merger is in the best interests of shareholders based on its ability to deliver immediate value while ensuring the company’s long-term growth.

Shareholder Vote and Meeting Details

A special meeting of Avid’s shareholders is scheduled to take place virtually, where they will vote on three key proposals:

Merger Agreement Proposal: Approval of the merger and related transactions.
Compensation Proposal: Approval of potential payments to Avid executives related to the merger.
Adjournment Proposal: Approval to adjourn the meeting if necessary to solicit additional votes.

Why Your Vote Matters

For the merger to proceed, Avid needs a majority of shareholders to approve the Merger Agreement Proposal. Without this approval, the transaction will not be completed. The Board of Directors unanimously recommends voting “FOR” all three proposals.

How to Vote:

Shareholders can vote by proxy via mail, telephone, or online.
If you hold shares through a broker or financial institution, make sure to follow their instructions carefully.

Potential Risks and Benefits

While the merger offers an immediate premium and cash payout, shareholders should also consider potential risks:

Benefits

Immediate Value: The $12.50 per share offer locks in a substantial premium compared to Avid’s recent trading prices.
Future Growth Potential: Avid’s enhanced financial backing under private ownership could lead to long-term business expansion and increased competitiveness.

Risks

No Further Upside: Once the merger is completed, shareholders will not benefit from any future appreciation in Avid’s value.
Regulatory Hurdles: The merger is subject to regulatory approvals, and any delays could potentially impact the timeline.
Industry Risks: Despite strong fundamentals, the CDMO industry could face challenges such as regulatory shifts, cost pressures, or changing market demand.

Timeline of the Merger Process

November 6, 2024: Avid signs the merger agreement.
December 2024: Proxy materials distributed to shareholders.
January 2025: Special shareholder meeting for voting.
February 2025: Expected closing of the merger, contingent on approvals. - CONFIRMED APPROVED. CDMO to be delisted from trading overnight February 4th 2025

What Happens After the Merger?

If the merger is approved and finalized:

Avid Bioservices will become a wholly owned subsidiary of the acquiring firms.
The company will be delisted from the stock market, and shares will no longer trade publicly.
Shareholders will receive $12.50 per share in cash, typically within a few business days after the deal closes.

For Avid’s operations, the transition to private ownership could mean expanded investments in technology, infrastructure, and personnel to support long-term growth in the biologics and CDMO sectors.

Conclusion

Avid Bioservices’ merger with GHO Capital and Ampersand Capital Partners is an important milestone that provides shareholders with immediate financial returns and positions the company for long-term success. While the offer price presents a significant premium, shareholders should carefully consider both the benefits and potential risks before casting their votes.

With the Board’s full support, this deal is positioned as a win-win for both the company and its shareholders. Don’t forget to review the proxy materials in detail and ensure your vote is submitted on time!

FAQs

Why is Avid merging with private equity firms?

The merger provides Avid with access to significant financial resources, positioning it for faster growth in the competitive CDMO market.

What happens if the merger is not approved by shareholders?

If shareholders do not approve the Merger Agreement Proposal, the merger will not proceed, and Avid will continue as a publicly traded company.

When will shareholders receive their cash payment?

After the merger closes, shareholders can expect to receive their $12.50 per share in cash within a few business days.

How do I vote if I hold shares through a broker?

Follow the instructions provided by your broker or financial institution. They may allow you to vote online, by phone, or via mail.

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