Biologics CDMO Avid Bioservices announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act with respect to its pending $1.1 billion acquisition by GHO Capital Partners and Ampersand Capital Partners.
“With this milestone behind us, we are one step closer to completing this transaction and delivering significant, immediate and certain value to our stockholders,” Avid CEO Nick Green said in a statement.
In November 2024, Avid announced that it entered into a merger agreement to be acquired by funds managed by GHO and Ampersand in an all-cash transaction.
The pending transaction, which was unanimously approved by Avid’s board of directors, “remains on track to occur in the first quarter of 2025, subject to Avid stockholder approval and satisfaction of other customary closing conditions,” the company said this week.
“We continue to firmly believe the transaction is in the best interest of all Avid stockholders and we encourage stockholders to vote FOR the transaction today,” Green said.
Last month, Avid started mailing proxy materials and a letter to stockholders in connection with the pending deal. A special meeting to vote on the transaction, which is open to all Avid stockholders of record as of Dec. 11, 2024, is slated for Jan. 30, 2025.
Stephens analyst Jacob Johnson in a note to investors said the deal to take Avid private “is likely to go through as proposed.” Johnson pointed out that “a large private CDMO and large international public company in the CDMO industry, respectively, expressed interest in Avid” in 2022 and 2023, though neither went beyond initial interest.
William Blair analyst Max Smock in a note to investors on GHO/Ampersand’s proposed Avid acquisition wrote that “the abbreviated timeline for closing suggests this transaction should be relatively straightforward.” While there “may be some potential disappointment with the takeout price,” Smock said that “based on our call with management we would be surprised if there is enough shareholder support to prevent the transaction.”
Last month, Avid announced financial results for the second quarter and six months ended October 31, 2024. Revenues for Q2 increased 32% compared to the same period last year, while revenues for the first six months of fiscal 2025 were up 17%, thanks to boosts in manufacturing and process development.
Avid said that its backlog was $220 million, an increase of 11%, and that it expects a significant amount of that backlog will be recognized as revenue over the next five fiscal quarters.
However, in a note to investors, Johnson pointed out that Avid’s fiscal year 2025 projection of $158 million of revenue is below the guidance of $160 million to $168 million, adding that the “forward revenue projections are also below consensus forecasts.”
Johnson noted that Avid’s two largest customers in fiscal year 2024 represented 46% of revenue (33% and 13%, respectively) and that if the product outlook for these customers declines, the CDMO will be negatively impacted.
“While we see meaningful upside to Avid revenues and profitability, the company still has substantial unused capacity. Filling this capacity will require execution,” Johnson wrote.
Smock in a note to investors said the key risks for Avid over the next three to five years include “reputational harm stemming from quality-assurance problems with the FDA or other regulators; a slowing in orders from the company’s top customer; a material reduction in biotech funding; and a slower-than-expected ramp-up in cell and gene therapy work leading to facility underutilization and margin pressure.”