Alvotech and Oaktree Acquisition Corp II, a special purpose acquisition company sponsored by an affiliate of Oaktree Capital Management, have entered into a definitive merger agreement.
Upon completion of the transaction, the combined company’s securities are expected to be traded on NASDAQ under the symbol “ALVO.”
“Alvotech is in a unique position to impact the global healthcare ecosystem in a positive way and transform patient’s lives. Biosimilar medicines can increase access for patients whilst lowering cost for healthcare systems, and that helps to align our mission with all of our stakeholders. We believe this transaction will accelerate our ability to achieve our vision, and we could not be more excited about what the future holds for Alvotech,” says Mark Levick, CEO of Alvotech.
“Oaktree Acquisition Corp.’s strategy is guided by the same principles that are core to Oaktree’s broader investment philosophy, with a focus on long-term partnership and value creation. The Oaktree Acquisition Corp. franchise was formed to identify and partner with high-quality, growing companies that are making pivotal strides in their respective industries, and Alvotech is a clear fit with its meaningful contributions to sustainability within the healthcare ecosystem,” says Howard Marks, Co-Chair of Oaktree.
Key transaction terms
The business combination is expected to deliver gross proceeds to Alvotech in excess of $450 million (assuming no redemptions). This includes cash proceeds of approximately $250 million from Oaktree Acquisition Corp. II’s trust account (assuming no redemptions); in excess of $150 million from private placement (PIPE) investors (the “PIPE Transaction”), including among others, funds managed by Suvretta Capital, Athos (the Strüngmann Family Office), CVC Capital Partners, Temasek, YAS Holdings, Farallon Capital Management, Sculptor Capital Management and premier Icelandic investors including Arctica Finance, Arion Bank, and Landsbankinn; and a $50 million equity commitment from existing shareholders to be funded prior to the end of 2021. The combined company will have an implied initial enterprise value of approximately $2.25 billion and will be well-positioned to continue investing in the growth of its biosimilar pipeline.
“The combined company will have an implied initial enterprise value of approximately $2.25 billion and will be well-positioned to continue investing in the growth of its biosimilar pipeline.”
As part of the transaction, Alvotech’s existing equity holders have committed to roll 100% of their equity into the combined company. Leading existing institutional backers of Alvotech, including among others, Aztiq Pharma Partners, led by founder and Chairman Mr. Robert Wessman, Alvogen with CVC Capital Partners and Temasek as lead investors, Fuji Pharma from Japan, YAS Holdings from Abu Dhabi, Shinhan from Korea, Baxter Healthcare SA from the US, and Athos (the Strüngmann Family Office) from Germany intend to roll 100% of their shares into the combined company. Assuming no public shareholders of Oaktree Acquisition Corp. II exercise their redemption rights, current Alvotech equity holders will own approximately 80%, Oaktree Acquisition Corp. II shareholders will own approximately 11%, and PIPE investors will own approximately 7% of the issued and outstanding ordinary shares, respectively, of the combined company at closing.
The transaction also includes earn-out provisions tied to the trading price of the combined company’s shares, reflecting an alignment of interest with shareholders. Oaktree Acquisition Corp. II’s sponsor is deferring 1.25 million founder shares into an earn-out at share price hurdles of $12.50 and $15.00. The transaction also includes an earn-out to existing shareholders of Alvotech, consisting of 38.3 million shares, which will vest evenly at share price hurdles of $15.00 and $20.00.
The transaction, which has been unanimously approved by the boards of directors of each Alvotech and Oaktree Acquisition Corp. II, is subject to, among other customary closing conditions, approval by shareholders of Oaktree Acquisition Corp. II, and shareholders of Alvotech, with the holders of a majority of the votes required to approve the transaction having provided commitments to approve the transaction. The transaction is expected to close in the first half of 2022.
Photo of Mark Levick, CEO, Alvotech