Bluebird Bio's Private Equity Buyout Amended, Boosting Upfront Cash for Shareholders

Bluebird bio, a once-promising cell therapy company, has announced an amendment to its pending private equity buyout deal, offering shareholders a higher upfront cash payment in lieu of potential future earnings. This development comes as the company faces imminent financial peril, with warnings of potential bankruptcy if the deal is not finalized soon.

Revised Deal Structure

The amended agreement with private equity firms Carlyle and SK Capital Partners now gives shareholders the option to receive $5 per share in cash upfront, a significant increase from the original offer of $3 per share. However, this comes at the cost of forfeiting the previously offered contingent value right (CVR), which would have entitled shareholders to an additional $6.84 per share upon achieving certain net sales milestones.

This revision values bluebird bio at approximately $48.9 million, up from the initial $30 million upfront valuation. The company's board of directors has urged shareholders to accept this amended offer, emphasizing that it "represents the only viable option for stockholders to receive consideration for their shares."

Financial Urgency and Market Response

The amendment comes at a critical juncture for bluebird bio, which has been grappling with severe financial challenges. In a recent regulatory filing, the company warned that failure to close the deal promptly would result in an immediate default on a loan, potentially forcing the company to seek bankruptcy protection.

The urgency of the situation is underscored by the fact that the deal, initially announced in late February, has yet to close nearly three months later. A competing offer from investment firm Ayrmid, which proposed a 50% premium on the original Carlyle and SK Capital deal, also fell through, leaving bluebird bio with limited options.

The market responded positively to the amended deal, with bluebird bio's shares surging 50% at market close on Wednesday. This reaction suggests that shareholders view the increased upfront payment as a preferable outcome given the company's precarious financial position.

Next Steps and Implications

Shareholders now have until May 29 to tender their shares under the revised terms. Carlyle and SK Capital have already received all necessary regulatory clearances to close the deal, removing potential hurdles to its completion.

The outcome of this deal holds significant implications for bluebird bio's future. Once valued at over $11 billion and known for its cutting-edge cell therapy treatments, the company now faces the stark reality of potential bankruptcy if shareholders do not accept the amended offer. This situation serves as a stark reminder of the volatile nature of the biotech industry and the challenges faced by companies in maintaining financial stability while pursuing innovative therapies.