Bluebird Bio Warns of Potential Bankruptcy as Buyout Faces Another Delay
Bluebird Bio, a Massachusetts-based biotech company specializing in gene therapy, has issued a stark warning to its investors regarding the potential bankruptcy of the firm due to delays in its acquisition process. The company’s struggles are highlighted by the insufficient response from shareholders to a tender offer from private equity firms Carlyle Group and SK Capital. As of now, only 25.6% of Bluebird’s outstanding shares have been tendered, far below the 50%-plus-one share threshold required for the deal to close.
Stalled Progress in Shareholder Participation
The buyout offer has been extended multiple times as investors have been slow to act. Carlyle and SK Capital announced on May 13 that shareholders now have until the end of May 28, U.S. EDT, to tender their shares. The previous deadline had been May 12, but the lack of substantial interest prompted another extension. According to Bluebird’s securities filing, only about 2.5 million shares were tendered as of the close of business on May 12, an indication of the hesitance amongst shareholders.
The Purchase Offer Details
The acquisition proposal, originally announced on February 21, includes an offer of $3 per share, plus a contingent value right (CVR) that could add an additional $6.84 per share if sales of Bluebird’s three commercial gene therapies—Zynteglo, Lyfgenia, and Skysona—reach $600 million over any twelve-month period by the end of 2027. However, this CVR target appears challenging, as Bluebird recorded only $83.8 million in total revenue for 2024, raising significant doubts about the future performance of its gene therapies.
The Financial Implications of Possible Bankruptcy
With the ongoing delay in the buyout, Bluebird is facing severe financial repercussions. The company has warned that without closing the merger by June 20, they would be at a significant risk of default on their loan agreements with Hercules Capital. Bluebird has made it clear that if the company is not acquired, the alternative could lead to bankruptcy or liquidation, leaving shareholders with little hope of recovering their investments.
The company’s annual report indicates that current cash resources, aided by ongoing cost-cutting measures, could sustain operations through the second quarter of 2025, which ends next month. Nevertheless, the path ahead for Bluebird seems increasingly perilous as time runs short.
Potential Rivals and Shareholder Sentiment
Some Bluebird shareholders may be biding their time, holding out for a potentially better offer, despite the increasing risks. A rival bidder, Ayrmid, had entered the scene in late March with an initial offer of $4.50 per share. However, after three weeks of negotiations, Ayrmid failed to present a binding proposal and did not secure the financing needed to back the deal. Consequently, Bluebird’s board has reaffirmed its support for the Carlyle-SK agreement amid the uncertainty.
Concluding Thoughts
The situation at Bluebird Bio underscores the volatile nature of biotech mergers and acquisitions and the precarious position of companies relying on such transactions for survival. Carlyle and SK Capital may exhibit patience in their pursuit of an acquisition, but Bluebird’s time is running out. Without significant shareholder support for the existing offer, the biotech is faced with a grim future that could culminate in bankruptcy, highlighting the high stakes involved in this pivotal moment.
As investors watch closely, the outcome of Bluebird’s tender offer will no doubt have significant implications not only for the business itself but also for the broader landscape of biotech mergers and acquisitions.
