--News Direct--
By Meg Flippin, Benzinga
NewGenIvf Group Ltd. (NASDAQ: NIVF), the fertility services provider in Asia helping couples and individuals obtain access to fertility treatments, is getting closer to completing a reverse merger, announcing it has entered into a binding term sheet regarding the previously announced proposed reverse merger with healthcare company European Wellness Investment Holdings Ltd (EWIHL).
Terms of the deal, if it proceeds, call for NewGen to issue 141.25 million of its ordinary shares to the shareholders of European Wellness Investment Holdings at a price of $3.20 per share or $452 million. Once the deal is closed, European Wellness Investment Holdings shareholders will own about 61.6% equity interest in NewGen. In April, the two parties signed a non-binding agreement for the reverse merger and have now decided to pursue it. At the time NewGen said the deal would unlock synergies, help it expand its global reach and improve fertility outcomes for its customers.
Stronger Together
“We are pleased to announce this significant milestone in our discussions with EWIHL, which represents a substantial evolution from our initial non-binding term sheet in April. While we previously explored various alternatives, our ongoing engagement with EWIHL has consistently shown the strongest strategic alignment and potential for value creation,” Siu Wing Fung Alfred, founder, chairman, and CEO of NewGen said. “The signing of this binding term sheet demonstrates the progress we’ve made in our negotiations and provides us with a clear path to definitive agreements. The proposed transaction structure reflects our mutual commitment to creating a stronger combined entity at a valuation that we believe represents fair value for both parties.”
To support the deal NewGen said in November it secured a $100 million equity line of credit (ELOC), expandable to $500 million from White Lion Capital LLC. NewGen said the ELOC provides the company with “substantial” financial flexibility and highlights the confidence White Lion Capital has in its business model and potential growth.
Best Merger Partner Wins
Prior to the binding term sheet with EWIHL, NewGen had pursued a reverse merger with COVIRIX Medical Pty Ltd., a pharmaceutical company, but ultimately decided to move forward with EWIHL in light of improved conditions. NewGen said EWIHL’s healthcare products complement its fertility treatments and that its distribution network and healthcare facilities present opportunities for cross-selling between the two companies. What’s more, NewGen said EWIHL’s valuation metrics are positive and that the combined entity will be profitable and compare favorably to NewGen’s peers in terms of EPS. Revenue at EWIHL has been consistently growing over the years from about $16.6 million in fiscal year 2021 to $24.8 million in fiscal year 2023. For fiscal year 2024, EWIHL expects revenue of about $58 million. By 2027, the company expects to have annual revenues of $142.5 million.
If the deal is completed by year-end, NewGen said the combined net profit will be as much as $11.12 million with EPS at $0.07. NewGen believes that given the current price-to-earnings ratio of fertility stocks is around 20 times, its stock may get a boost on the deal news. After all, rival Safe Fertility Group Public Company Limited (SAFE.BK) is trading at about 19 times earnings, Jinxin Fertility Group Limited (1951.HK) sports a PE ratio of nearly 27 times earnings and Progyny, Inc. (PGNY) is trading at 26 times earnings.
The potential deal comes as the global fertility treatment market is taking off, driven by increasing infertility rates. The market was valued at $45.52 billion in 2024 and is projected to reach $87.31 billion by 2033, growing at a CAGR of 8.2% during the forecast period.
Delisting Off The Table?
The deal will also improve the company’s liquidity and visibility in the capital markets and support its continued listing on the Nasdaq. Late last month NewGen received a notice that its stock was at risk of being delisted due to non-compliance with two listing rules. If the reverse merger is completed, the combined company will satisfy the market capitalization requirements to maintain its listing. NewGen scheduled a hearing with Nasdaq to appeal the delisting and plans to cite the reverse merger as one of the reasons NewGen will qualify for continued listing.
“We have been formally granted a hearing to appeal the previously announced delisting notice, which stays any further action by Nasdaq pending the hearing process. We are pursuing multiple strategic options to maintain our listing status, including the option to transfer to the Nasdaq Capital Market and our recently secured funding arrangements,” said Alfred. “Importantly, these funding mechanisms are designed to strengthen our financial position and address our listing compliance requirements. Looking ahead, we are confident that this combination with EWIHL will create significant value for our shareholders while strengthening our ability to serve patients.”
NewGen’s quest to find a reverse merger partner appears to be behind it, thanks to its binding agreement with EWIHL. With the fertility treatment market in growth mode and with a deal bringing cross-selling options, NewGen may be able to ride the growth in the fertility markets in the months and years to come.
Featured photo by Camylla Battani on Unsplash.
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