Biote Announces $60 Million Agreement to Repurchase 8.3 Million Shares and Cancel Approximately 4.0 Million Earnout Shares

Rhea-AI Summary

Biote (NASDAQ: BTMD) has reached a $60 million agreement with stockholder Marci M. Donovitz to resolve ongoing litigation. The company will repurchase approximately 8.3 million shares and cancel around 4.0 million earnout shares owned by Ms. Donovitz. The repurchases, averaging $7.23 per share, will be executed over a three-year schedule. This settlement aligns with Biote's capital allocation strategy and aims to enhance long-term shareholder value. Biote's management believes this transaction represents an advantageous use of capital, eliminating future earnout obligations and consolidating share control.

Positive

• Biote will repurchase approximately 8.3 million shares and cancel approximately 4.0 million earnout shares.
• The average repurchase price is $7.23 per share.
• The repurchase aligns with Biote's capital allocation strategy.
• The transaction aims to enhance long-term shareholder value.
• Biote is resolving ongoing litigation with Marci M. Donovitz.

Negative

• None.

Financial Analyst

Biote's decision to repurchase approximately 8.3 million shares and cancel 4.0 million earnout shares reflects a significant capital allocation strategy. Repurchasing shares generally indicates the company's confidence in its current financial health and future growth prospects. By reducing the number of outstanding shares, the company potentially increases earnings per share (EPS), benefiting existing shareholders as they now have a larger claim on future profits.

The fact that these shares are being repurchased at an average price of $7.23 per share provides some insight into what the company perceives as a fair valuation. This may suggest to investors that Biote considers its shares undervalued or at least fairly valued at this price point.

Funding the repurchases according to its capital allocation strategy is pivotal. Efficient use of capital is essential in maintaining liquidity while enhancing shareholder value. It's noteworthy that this transaction is expected to be spread over three years, indicating a structured approach to manage cash flow and financial stability.

In the short term, investors should be aware that while share repurchases can improve EPS and perceived value, they also deplete cash reserves. The long-term benefits hinge on Biote's ability to generate sustainable growth and profitability, justifying this capital allocation.

Legal Expert

Resolving the Donovitz Litigation with a mutual release of all claims is a strategic move by Biote. Legal disputes can be costly and distract management from core business operations. By settling, Biote eliminates ongoing legal expenses and uncertainties, which can be a relief for investors wary of prolonged litigation.

The inclusion of a voting agreement and the acceleration of the purchase schedule in the event of a change of control are critical terms. These provisions ensure that management retains control and aligns with long-term strategic goals. In a change of control scenario, accelerating the purchases ensures that the agreed repurchases are executed swiftly, possibly preventing any disruptions from new ownership dynamics.

Additionally, the cancellation of earnout shares without additional monetary consideration simplifies the company's equity structure. Earnout shares can complicate financial projections and investor perceptions due to their contingent nature based on performance milestones.

IRVING, Texas--(BUSINESS WIRE)-- biote Corp. (NASDAQ: BTMD) (“Biote” or the “Company”), a leading solutions provider in preventive health care through the delivery of personalized hormone optimization and therapeutic wellness, today announced it has signed a binding term sheet with Marci M. Donovitz, stockholder of Biote, to resolve litigation (“Donovitz Litigation”). For $60 million in the aggregate, Biote will repurchase all of the approximately 8.3 million of the Paired Interests and/or Class A Shares, as applicable, owned by Ms. Donovitz and will release and cancel all of the approximately 4.0 million Paired Interests subject to contractual earnout provisions (“earnout shares”) owned by Ms. Donovitz for no additional monetary consideration. Biote intends to fund the repurchases in accordance with its existing capital allocation strategy.

The settlement agreement to be entered into between Biote and Ms. Donovitz will include (i) a customary mutual release of all claims arising out of or relating to the Donovitz Litigation; (ii) the negotiation of and entry into a voting agreement with customary terms acceptable to the Company; and (iii) the acceleration of the purchase schedule in the event of a change of control. The settlement agreement is expected to include customary representations, warranties and agreements by the parties in addition to the terms described above.

Terry Weber, Biote Chief Executive Officer, commented, “We are pleased to reach an agreement with Ms. Donovitz that enables us to repurchase approximately 8.3 million of our outstanding shares and cancel approximately 4.0 million earnout shares. Through this agreement and our agreement with Dr. Gary S. Donovitz, Biote is repurchasing a total of 26.7 million shares and cancelling a total of approximately 8.0 million earnout shares for no additional consideration. These repurchases are consistent with our capital allocation strategy and our efforts to build long-term shareholder value. We continue to focus on driving profitable growth as we establish Biote as a leader in evidence-based therapeutic wellness.”

Bob Peterson, Biote Chief Financial Officer, said, “This agreement represents an advantageous use of capital that we believe will contribute to long-term shareholder value. We view the aggregate price of this transaction to be attractive when considering the present value of the repurchases and the benefit of eliminating earnout shares.”

Under the terms of the settlement, Biote will repurchase any and all of the Class A common units of Biote Holdings, LLC (“Holdings Units”), shares of Class V common stock of the Company (“Class V Shares” and together with the Holdings Units, “Paired Interests”) and shares of Class A common stock of the Company (“Class A Shares”) currently beneficially owned by Ms. Donovitz.

The repurchases of Paired Interests or Class A Shares, at an average price of $7.23 per share, will occur over the following three-year schedule:

1. Approximately 4.1 million Paired Interests (or Class A Shares, if applicable) will be repurchased for $30.0 million on or before June 28, 2024 (the “Closing Date”);
2. Approximately 1.4 million Paired Interests will be repurchased for $10.0 million on or before the 12-month anniversary of the Closing Date;
3. Approximately 1.4 million Paired Interests will be repurchased for $10.0 million on or before the 24-month anniversary of the Closing Date; and
4. Approximately 1.4 million Paired Interests will be repurchased for $10.0 million on or before the 36-month anniversary of the Closing Date.

About Biote

Biote is transforming healthy aging through innovative, personalized hormone optimization and therapeutic wellness solutions delivered by Biote-certified medical providers. Biote trains practitioners to identify and treat early indicators of aging conditions, an underserved global market, providing affordable symptom relief for patients and driving clinic success for practitioners.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Some of the forward-looking statements can be identified by the use of forward-looking words. Statements that are not historical in nature, including the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “hope,” “anticipate,” “believe,” “seek,” “target,” “continue,” “could,” “might,” “ongoing,” “potential,” “predict,” “would” and other similar expressions, are intended to identify forward-looking statements. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual results or developments to differ materially from those expressed or implied by such forward-looking statements, including but not limited to: the success of our dietary supplements to attain significant market acceptance among clinics, practitioners and their patients; our customers’ reliance on certain third parties to support the manufacturing of bio-identical hormones for prescribers; our and our customers’ sensitivity to regulatory, economic, environmental and competitive conditions in certain geographic regions; our ability to increase the use by practitioners and clinics of the Biote Method at the rate that we anticipate or at all; our ability to grow our business; the significant competition we face in our industry; the impact of strategic acquisitions and the implementation of our growth strategies; our limited operating history; our ability to protect our intellectual property; the heavy regulatory oversight in our industry; changes in applicable laws or regulations; the inability to profitably expand in existing markets and into new markets; the possibility that we may be adversely impacted by other economic, business and/or competitive factors, including recent bank failures; and future exchange and interest rates. The foregoing list of factors is not exhaustive. You should carefully consider the risks and uncertainties described in the “Risk Factors” section of Biote’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 and other documents filed by Biote from time to time with the Securities and Exchange Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Biote assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Biote does not give any assurance that it will achieve its expectations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240620343538/en/

Investor Relations:

Eric Prouty

AdvisIRy Partners

eric.prouty@advisiry.com

Media:

Press@biote.com

Source: biote Corp.

FAQ

What is the total value of Biote's agreement to repurchase shares?

Biote's agreement to repurchase shares is valued at $60 million.

How many shares will Biote repurchase under the new agreement?

Biote will repurchase approximately 8.3 million shares.

What is the average repurchase price per share for Biote's new agreement?

The average repurchase price per share is $7.23.

What will Biote cancel as part of the settlement with Marci M. Donovitz?

Biote will cancel approximately 4.0 million earnout shares.

How will Biote fund the repurchase of shares?

Biote intends to fund the repurchases in accordance with its existing capital allocation strategy.

What is the stock symbol for Biote ?

The stock symbol for Biote is BTMD.

Over what period will Biote execute the share repurchase?

Biote will execute the share repurchase over a three-year period.

What is the purpose of Biote's share repurchase agreement?

The purpose is to resolve litigation, enhance long-term shareholder value, and align with Biote's capital allocation strategy.