Cellular Biomedicine Group (CBMG) – Going Private – 7% Upside

Current Price: $18.49

Offer Price: $19.75

Upside: 7%

Expected Closing: Q4 2020

Merger Agreement

 

On the 12th of August, Cellular Biomedicine Group signed a definitive agreement to be taken private by a consortium of management and all major shareholders. Consideration stands at $19.75/share (slightly raised from the non-binding in Nov'19). The consortium now holds 54.6% of CBMG and as the company is incorporated in Delaware, the majority of minority shareholder's approval is required. The deal is not subject to financing.

It seems rather likely that this merger will close successfully as:

  • According to our Analysis of US-listed Chinese Going Private Transactions, transactions with a definitive agreement signed almost always go through. Over the years so far, only 1 out of 19 was canceled. Spread currently stands at the average level (7%) for such cases.
  • Novartis (major pharma company with $190bn market cap) is one of the major shareholders of CBMG (owns 7.5%) and has recently joined the consortium.
  • CBMG doesn't look like another fraud story - it has licensing agreements with Novartis and US National Cancer Institute for manufacturing and supplying their products in the Chinese market.

CBMG is a clinical-stage biopharma company. It develops treatments of cancer and stem cell therapies and currently holds 35 patents, while 48 are filed and still pending. Nonetheless, the pipeline is still in a very early stage (Preclinical and Phase 1). From 10K:

CBMG shareholders

In addition to developing their own pipeline, they also manufacture and supply other drugs in the Chinese market.

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