Rafael Holdings and Cyclo Therapeutics Merger: What Investors Should Know (RFL, CYTH)

In a strategic and highly calculated move, Rafael Holdings, Inc. (NYSE: RFL) has entered into a definitive agreement to acquire Cyclo Therapeutics, Inc. (Nasdaq: CYTH), signaling a major realignment in the biotech sector. The proposed merger is designed not just to consolidate assets, but to catalyze future growth, accelerate research initiatives, and expand Rafael’s influence in the therapeutic development landscape.

*UPDATE - The merger is scheduled to be closed overnight on March 25th. The combined entity to trade as Rafael Holdings (RFL) beginning March 26, 2025. CYTH shareholders receive 0.3567 shares of RFL for every 1 share of CYTH owned.

The deal reflects a broader trend in the life sciences industry where capital-rich holding companies are targeting clinical-stage biotech firms with promising but underfunded pipelines. But with this particular deal, there’s more than just financial engineering at play. The merger structure, valuation mechanics, and implications for investors — both institutional and retail — reveal a deeper strategy that requires careful unpacking.

This article will explore every key aspect of the Rafael-Cyclo merger, from structure and exchange ratios to shareholder implications and regulatory hurdles. If you’re holding shares in either company, or tracking this deal as an industry analyst or potential investor, this is the comprehensive breakdown you’ve been looking for.

Deal Structure: Two-Step Merger Process

The merger isn’t a traditional one-step absorption. Instead, Rafael has opted for a reverse triangular merger that unfolds in two stages:

First Merger: Cyclo Therapeutics will merge with and into Tandem Therapeutics, Inc., a wholly owned Nevada-based subsidiary of Rafael. This makes Cyclo a direct subsidiary of Rafael Holdings.
Second Merger: Immediately afterward, Cyclo merges again — this time into another Rafael subsidiary, Tandem Therapeutics, LLC. At this point, Cyclo ceases to exist as a separate legal entity and becomes part of Rafael’s broader corporate structure.

This structure allows Rafael to preserve the legal and financial integrity of the merger, while also maximizing tax and operational efficiencies. These types of mergers are especially common in life sciences deals where intellectual property and R&D continuity are paramount.

Share Conversion: The Exchange Ratio Explained

At the heart of the merger lies the Exchange Ratio, a formula that dictates how much Rafael stock Cyclo shareholders will receive for each of their shares. And this is where things get particularly interesting — and potentially contentious.

Key Details:

Valuation of Cyclo Common Stock: Each share is valued at $0.95.
Discount Factor: This valuation represents an approximately 75% discount to Cyclo’s market trading price on August 21, 2024 — the date the merger agreement was signed.
Initial Estimated Exchange Ratio: 0.3112 shares of Rafael Class B Common Stock for each Cyclo share.
Updated Estimate (as of February 12, 2025): 0.3567 shares.

This exchange is not static. The final ratio will be based on several variables including:

Rafael’s cash reserves, real estate holdings, marketable securities
Amounts loaned to Cyclo during the interim period
Rafael’s outstanding liabilities and Class B share count at closing

In other words, the ratio is dynamic, and while it provides a roadmap for shareholders, it is not a guaranteed fixed rate.

Class B Stock: What Cyclo Shareholders Are Actually Getting

Cyclo shareholders are receiving Rafael Class B Common Stock, not Class A. This distinction is important for one major reason — voting power.

Class B Stock Voting Rights: 1/10 of a vote per share
Class A Stock Voting Rights: 3 votes per share

So, while Cyclo shareholders may end up owning around 22.1% of the outstanding Rafael equity, their voting influence is significantly diminished, making up only 12.9% of total voting power.

This dual-class structure consolidates control in the hands of existing Rafael insiders, most notably Howard Jonas, who is both the controlling shareholder and has agreed to vote in favor of the merger.

Impact on Warrants, Options, and Convertible Securities

This merger also has detailed implications for holders of options and warrants issued by Cyclo.

Employee Stock Options: Will convert to options to purchase Rafael Class B stock at an adjusted price, using the exchange ratio.
Outstanding Warrants: These will also convert into Rafael Class B stock equivalents. However, certain warrant holders have the option to receive a cash settlement instead of stock.
Public Warrants: Those traded on exchanges will remain tradable, now representing Rafael Class B stock, and Rafael is registering both the warrants and their underlying shares under its registration statement.

This meticulous approach to convertible securities signals a merger that aims to preserve investor rights and streamline the transition, while minimizing market disruption.

What Happens to Cyclo Stock?

After the merger closes:

Cyclo Common Stock (CYTH) will be delisted from the Nasdaq Capital Market.
Cyclo will cease to exist as a separate public entity.
Rafael Class B Common Stock (RFL) will continue to trade on the NYSE.

So, Cyclo shareholders will find their accounts updated with Rafael Class B shares, and all future stock activity will shift from Nasdaq to NYSE under the RFL ticker.

Shareholder Approval: Where the Votes Stand

Both Rafael and Cyclo stockholders must approve the transaction. However, a substantial portion of the vote is already lined up in favor.

Rafael: Howard Jonas has pledged his shares in favor of the deal.
Cyclo: Rafael already owns 39.5% of Cyclo stock. Cyclo’s directors and officers, who hold about 8.1%, have also agreed to vote in favor.

Together, these commitments account for 47.6% of Cyclo's outstanding shares, putting the deal close to majority support.

Cyclo Special Meeting:

Date: March 20, 2025
Location: Offices of Fox Rothschild LLP, New York, NY
Record Date for Voting: February 13, 2025

Shareholders can vote in person or via proxy — either online or by mail.

Strategic Intent Behind the Merger

Why is Rafael acquiring Cyclo in the first place?

The answer lies in the synergistic potential between Rafael’s financial strength and Cyclo’s innovative biotech pipeline. Cyclo has been focused on advancing clinical trials targeting rare and neurological diseases using cyclodextrin-based therapies. While the promise is there, Cyclo has lacked the capital to push development into later-stage trials and commercialization.

Rafael, with its cash reserves, real estate holdings, and a strong investment portfolio, provides exactly the kind of platform needed to support that growth. In turn, Cyclo gives Rafael direct exposure to the biotech and life sciences sectors — a strategic pivot from being a passive holding company to becoming a biotech operator.

Risk Factors and Considerations

Of course, no merger comes without risks, and this one is no exception.

Potential Risks Include:

Regulatory Delays: Though no antitrust issues are expected, regulatory hurdles can always arise.
Integration Challenges: Merging corporate cultures, systems, and management structures takes time.
Shareholder Lawsuits: The steep discount for Cyclo shares could raise concerns from minority investors.
Valuation Shifts: Final exchange ratio depends on fluctuating asset values and liabilities.

The proxy statement outlines these risks in detail, and shareholders are strongly encouraged to read through the Risk Factors section before casting a vote.

What’s Next for Investors?

Cyclo Shareholders:

Will hold a stake in Rafael’s Class B shares
Will lose Nasdaq listing visibility but gain access to NYSE-traded stock
Will experience diminished voting rights but maintain equity exposure

Rafael Shareholders:

Get increased biotech exposure
Could see long-term value from Cyclo’s development pipeline
Retain control thanks to dual-class stock structure

The Broader Market:

Will view this as a test case for holding companies entering clinical-stage biotech
Could anticipate more such deals if this one proves successful

Wrapping It All Up

The proposed merger between Rafael Holdings and Cyclo Therapeutics is more than a simple acquisition. It’s a calculated strategic move that aims to unite financial strength with scientific innovation. While the mechanics are complex, the intent is clear: build a more resilient, future-focused biotech entity.

For shareholders, this is a moment to weigh both short-term impacts and long-term opportunity. Whether this deal delivers depends not just on the math of the exchange ratio, but on how effectively Rafael can unlock the potential within Cyclo’s pipeline. Stay informed, vote thoughtfully, and monitor developments as they unfold. Conduct your own due dillegence prior to making any investment decisions and do not rely on statements made here.

Frequently Asked Questions

Will I lose my Cyclo shares?

Yes, they’ll be converted into Rafael Class B shares, based on the final exchange ratio. You won’t lose value — it will just be represented differently.

Why was the valuation so low for Cyclo?

Rafael assumed the financial risk of funding Cyclo post-agreement via loans. That plus Cyclo’s ongoing capital needs justified the steep discount from market price.

When will I see new Rafael shares in my account?

Shortly after the closing date, which will follow the March 20, 2025, shareholder meetings — assuming approvals are granted.

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