DEFA14A: Avid Bioservices Addresses Stockholder Lawsuits and Demands Amidst Merger Agreement with GHO Capital and Ampersand

Avid Bioservices supplements its proxy statement to address stockholder demands and lawsuits challenging the proposed merger with Space Finco, Inc., a subsidiary formed by affiliates of GHO Capital Partners LLP and Ampersand Management LLC.

Summary

• Avid Bioservices has supplemented its definitive proxy statement filed with the SEC on December 18, 2024, regarding the proposed merger with Space Finco, Inc.
• The supplement addresses thirteen demand letters and two complaints from purported stockholders challenging the merger and disclosures in the proxy statement.
• The company denies the allegations but is providing supplemental disclosures to avoid nuisance, expense, and business delays.
• The merger agreement, dated November 6, 2024, involves Space Mergerco, Inc., a wholly-owned subsidiary of Space Finco, Inc., merging with Avid, with Avid surviving as a wholly-owned subsidiary of Parent.
• The initial proposal from GHO and Ampersand was $10.50 per share, later revised to between $11.50 and $12.00 per share.
• Moelis & Company LLC performed a discounted cash flow (DCF) analysis of Avid using financial forecasts and other information and data provided by Avids management to calculate the present value of the estimated future unlevered free cash flows projected to be generated by Avid.
• Moelis utilized a range of discount rates of 12.00% to 17.00% based on an estimated range of the Company's weighted average cost of capital (WACC).
• The analysis indicated an implied per share reference range for Avid between $8.13 and $11.89, compared to the $12.50 per share merger consideration.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the merger offers a premium to stockholders, the legal challenges and the DCF analysis suggesting a lower valuation create uncertainty.

Positives

• Avid is proactively addressing stockholder concerns and legal challenges related to the merger.
• The company is providing additional disclosures to ensure transparency and avoid potential delays.
• The merger is expected to provide stockholders with $12.50 per share in cash.
• The board of directors considered multiple strategic options to enhance stockholder value, including potential business combinations.

Negatives

• The company is facing legal challenges from stockholders regarding the merger and disclosures.
• The implied per share reference range from the DCF analysis ($8.13 $11.89) is below the merger consideration of $12.50 per share.
• The company has incurred expenses related to legal proceedings and supplemental disclosures.

Risks

• The merger may be delayed or terminated due to legal challenges or regulatory hurdles.
• The company's ability to retain and hire key personnel may be affected by the merger.
• The market price of the company's common stock could be adversely affected by announcements related to the merger.
• There is a risk of unexpected costs or expenses resulting from the proposed transaction.

Future Outlook

The company is focused on completing the merger with Space Finco, Inc. while addressing stockholder concerns and legal challenges. The company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Management Comments

• Avid believes that the disclosures set forth in the proxy statement comply fully with all applicable law and denies the allegations in the Potential Merger Actions.
• Avid specifically denies all allegations that any additional disclosure was or is required or material.

Industry Context

The CDMO industry is experiencing consolidation, with private equity firms showing interest in acquiring companies like Avid. The merger reflects this trend and the desire to enhance stockholder value through strategic transactions.

Comparison to Industry Standards

• The document mentions that Moelis's selected terminal multiple range was informed by the current and ten-year average historical trading multiples of the Company and selected publicly traded CDMOs.
• The document mentions that Moelis used a selected range of unlevered betas and debt to total capitalization ratio informed by the selected publicly traded companies.
• The document mentions Party A and Party B, large companies in the CDMO industry, expressed interest in acquiring Avid.

Legal Proceedings

• Two complaints were filed (captioned Thomas v. Avid Bioservices, Inc., et al., No. 650116/2025 (N.Y. Sup. Ct. filed Jan. 8, 2025) and Miller v. Avid Bioservices, Inc., et al., No. 650141/2025 (N.Y. Sup. Ct. filed Jan. 9, 2025)) by purported stockholders of the Company challenging the proposed Transactions and the disclosures in the proxy statement.
• The Company has received thirteen demand letters, including one that attached a draft complaint, generally seeking certain allegedly omitted information in the proxy statement be disclosed, and one demand letter demanding access to certain books and records pursuant to Section 220 of the Delaware General Corporation Law, from putative stockholders of the Company.

Stakeholder Impact

• Shareholders are impacted by the proposed merger and the legal challenges.
• Employees may be affected by potential changes in employment terms or equity participation.
• Customers and vendors may experience changes in their relationships with the company.

Next Steps

• Stockholder vote on the merger agreement.
• Resolution of legal challenges and demand letters.
• Completion of the merger with Space Finco, Inc.

Key Dates

Keywords

Merger, Avid Bioservices, Proxy Statement, GHO Capital, Ampersand, Stockholder Lawsuits, Acquisition, CDMO