This is a sign of the financial situation in late 2022 where acquirers have a lower tolerance for risk.
Original deal was $315M up front + $100M if future milestones are met.
Revised deal is $100M up front + $215M if future milestones are met.
Is BioVentus taking advantage of the new financial macro landscape to put less capitial up front?
Or is BioVentus having to finance the deal with higher debt rates?
Read my alert in May – WARNING: The tightening is beginning.
NEW PRESS RELEASE
Bioventus Inc. (Nasdaq: BVS) (“Bioventus” or the “Company”), a global leader in innovations for active healing, announced today that it has entered into an amendment to the Option and Equity Purchase Agreement for its pending acquisition of CartiHeal (“Amended Acquisition Agreement”).
“CartiHeal represents an important breakthrough for the treatment of osteoarthritis and osteochondral defects of the knee with significant long-term potential, and we are excited to have reached an amendment that we believe will be favorable to our stakeholders and enable us to complete the acquisition,” commented Ken Reali, Bioventus’ chief executive officer. “The ability to defer a significant portion of the upfront cash consideration allows us to continue investing in our near-term strategy for growth while maintaining financial flexibility. Bioventus possesses multiple short- and mid-term growth drivers that are further enhanced by CartiHeal, and we continue to work towards realizing the potential of our portfolio to deliver sustained double-digit growth and margin expansion.”
The Amended Acquisition Agreement reduces the closing payment to $50 million (in addition to $50 million deposited into escrow last year) from the original $315 million that was previously agreed. The remaining $215 million of the purchase price (the “Deferred Amount”) will instead be paid to CartiHeal stockholders upon the earlier of the achievement of certain milestones or the occurrence of certain installment payment dates. The Deferred Amount will be paid in five tranches commencing in 2023 and ending no later than 2027.
Bioventus will pay interest on each tranche of the Deferred Amount, at a rate of at 8% annually, until such tranche is paid. Additionally, the approximately $135 million payable to CartiHeal’s stockholders upon the achievement of $100 million in trailing twelve-month sales will now be payable upon the achievement of $75 million in trailing twelve-month sales.
Bioventus expects the acquisition to close by the end of July 2022, subject to closing conditions, with an up-front payment to CartiHeal’s stockholders of approximately $108 million (inclusive of the $50 million previously deposited into escrow by Bioventus and in addition to approximately $8 million of CartiHeal’s transaction-related fees and expenses that Bioventus has agreed to pay). The Company intends to finance the payment due at closing with additional debt. The Company is finalizing an amendment to its existing Credit and Guaranty Agreement to increase its current Term Loan to facilitate the closing of the acquisition. The payments of the Deferred Amount are anticipated to be made through the Company’s free cash flow and expansion of its existing credit facility.
Bioventus delivers clinically proven, cost-effective products that help people heal quickly and safely. Its mission is to make a difference by helping patients resume and enjoy active lives. The Innovations for Active Healing from Bioventus include offerings for Pain Treatment, Restorative Therapies and Surgical Solutions. Built on a commitment to high quality standards, evidence-based medicine and strong ethical behavior, Bioventus is a trusted partner for physicians worldwide. Bioventus and the Bioventus logo are registered trademarks of Bioventus LLC.