DEFA14A: Avid Bioservices to be Acquired by GHO and Ampersand for $12.50 per Share

Avid Bioservices is set to be acquired by Space Finco, Inc., backed by GHO and Ampersand, for $12.50 per share in cash, representing a significant premium to its recent trading price.

Summary

• Avid Bioservices has entered into an agreement to be acquired by Space Finco, Inc., a company backed by GHO and Ampersand.
• The acquisition price is $12.50 per share in cash.
• The Avid Board of Directors is recommending that stockholders vote in favor of the transaction.
• The investor presentation highlights the benefits of the transaction, including significant, immediate, and certain cash value for Avid stockholders.
• The transaction reflects a robust process conducted by the Board to maximize value and de-risks Avid's future as a standalone company.
• The deal price represents a 63.8% premium to the closing price on June 4, 2024, and a 21.9% premium to the 20-day VWAP.
• The transaction delivers a meaningful premium relative to the Company's intrinsic value, including a 24.9% premium to the midpoint of the Company's discounted cash flow analysis based on management's probability-adjusted five-year plan.
• The implied multiples of the transaction exceed the trading multiples of selected publicly traded comparable companies.
• The company believes the market has already priced in its investments in capacity to date and other industry tailwinds.
• The Board brought in Moelis to evaluate strategic alternatives available to the Company, advise throughout the process, prepare financial analysis and render a fairness opinion.
• The process was conflict-free and included outreach to 24 strategic and financial parties.
• The transaction de-risks Avid's future as a standalone company, considering challenges in the operating environment and execution risks.
• The transaction price of $12.50 per share implies a present value for performance within the range of the most optimistic financial projections.
• The Avid Board of Directors Unanimously Recommends that Avid Stockholders Vote FOR the proposed transaction with GHO and Ampersand.

Sentiment

Score: 8

Explanation: The document presents a positive outlook due to the acquisition offer, the premium for shareholders, and the Board's recommendation. However, it also acknowledges industry challenges and risks, preventing a higher score.

Positives

• Significant premium offered to Avid stockholders at $12.50 per share.
• Immediate and certain cash value for stockholders.
• Board's recommendation to approve the transaction.
• Robust process undertaken to maximize value.
• De-risks Avid's future as a standalone company.
• The company believes the market has already priced in its investments in capacity to date and other industry tailwinds.
• The transaction price of $12.50 per share implies a present value for performance within the range of the most optimistic financial projections.

Negatives

• The document highlights challenges facing the biologics manufacturing industry, including uncertainty around biotech funding, geopolitical tensions, and increasing competition.
• Financial analysis of Avid's probability-adjusted five-year plan indicated that the Company's growth prospects were below its own previous guidance as well as analysts consensus.
• Avid's stock price experienced significant volatility historically as well as during the process.
• Analysts estimates for Avid have been consistently revised lower over time, exposing the risks and uncertainty to the standalone plan.

Risks

• Uncertainty around the availability of biotechnology funding.
• Rising geopolitical tensions and implications on supply chain.
• Industry-wide macroeconomic headwinds.
• Highly competitive operating environment.
• Customer concentration.
• Execution risk around ability to scale Viral Vector business.
• Quality of pipeline and exposure to emerging biotech.
• The timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed transaction that could delay the consummation of the proposed transaction or cause the parties to abandon the proposed transaction.
• The occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement entered into in connection with the proposed transaction.
• The possibility that the Company's stockholders may not approve the proposed transaction.
• The risk that the parties to the merger agreement may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all.
• Risks related to disruption of management time from ongoing business operations due to the proposed transaction.
• The risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the Company's common stock.
• The risk of any unexpected costs or expenses resulting from the proposed transaction.
• The risk of any litigation relating to the proposed transaction.
• The risk that the proposed transaction and its announcement could have an adverse effect on the ability of the Company to retain and hire key personnel and to maintain relationships with customers, vendors, partners, employees, stockholders and other business relationships and on its operating results and business generally.

Future Outlook

The document contains forward-looking statements regarding the completion of the proposed sale of Avid to GHO and Ampersand, and the company's expectations, intentions, or strategies regarding the future.

Management Comments

• The Avid Board of Directors recommends Avid Stockholders vote FOR the transaction today.
• The Avid Board of Directors Unanimously Recommends that Avid Stockholders Vote FOR the proposed transaction with GHO and Ampersand.

Industry Context

The document references comparable companies like Bachem, Catalent, Lonza, Oxford Biomedica, and PolyPeptide, indicating that Avid operates within the broader CDMO (Contract Development and Manufacturing Organization) industry.

Comparison to Industry Standards

• The implied multiples of the transaction exceed the trading multiples of selected publicly traded comparable companies including Bachem, Catalent, Lonza, Oxford Biomedica and PolyPeptide.
• The document compares Avid's adjusted EBITDA multiples to those of other CDMOs, noting that the transaction multiple exceeds the median for both FY25E and FY26E.
• Sensitivity B's implied revenue CAGR of 18.9% is 650bps higher than the median consensus estimate revenue CAGR of 12.4% for selected publicly traded CDMOs over the same period.

Stakeholder Impact

• Stockholders will receive $12.50 per share in cash.
• The transaction could affect the ability of the Company to retain and hire key personnel and to maintain relationships with customers, vendors, partners, employees, stockholders and other business relationships and on its operating results and business generally.

Next Steps

• Seek stockholder approval at a special meeting.
• Close the transaction, anticipated to occur as soon as possible thereafter.

Key Dates

Keywords

acquisition, Avid Bioservices, GHO, Ampersand, merger, CDMO, stockholders, transaction, premium