A SPAC I (NASDAQ:ASCA) has entered into a definitive agreement to combine with fertility services provider NewGenIvf at an enterprise value of $50 million.

Hong Kong-based NewGenIvf provides a full range of fertility services through clinics in four Southeast Asian countries.

The combined company is expected to be renamed First Fertility Group and trade on the Nasdaq once the deal is completed in the third quarter of 2023.

Transaction Overview

A SPAC I has an estimated $37.3 million in its current trust after seeing 47.4% of shares redeemed in an extension vote earlier this week.

The parties have not yet filed their merger documents or an investor presentation, but A SPAC I’s profile page will be updated once additional information is made available.

Quick Takes: A SPAC I did not technically need to schedule an extension vote for this month before announcing this deal.

It already had the right to extend its deadline twice for three months each in exchange for a $0.10 per share in the trust account each time. But, to gain some extra time and flexibility, A SPAC I sought to switch this to six one-month extensions at $0.05 per share with the option for two more months at $0.06 per share each.

Assuming it was already nearing a definitive agreement with First Fertility, the SPAC likely knew it didn’t need every cent in its trust to get the deal to close. But, it was a safe bet that more time would be necessary given that the average SPAC in 2023 has required more than eight months to get from announcement to close.

The story of First Fertility is perhaps similar with some clear advantages to going public in how it can flexibly scale its business, but it is in some ways difficult to see why a listing is necessary. Currently, First Fertility operates as a chain of four clinics in Hong Kong, Bangkok, Phnom Penh, Cambodia, Bishkek, Kyrgyzstan.

The parties’ press release notes that the company strives to “become the leading fertility service provider in Southeast Asia within the next five years” and notes that the lifted travel restrictions post-pandemic make this an ideal time to go public.

But, if First Fertility is already successful out of its current locations, it is unclear what is stopping it from continuing to branch out into its white space in the four countries where it already has a presence or open up in neighboring markets. Public share capital could make a roll-up of independent fertility clinics throughout the region much more feasible. But, if this is the strategy, it is not explicitly stated.

However, the company’s locations and mention of travel in the release hint that the company could be expecting a rise in cross-border surrogacy. Kyrgyzstan has seen steep rises in the numbers of women willing to act as surrogate mothers for couples in neighboring countries because they can make upwards of $30,000 for doing so, while local salaries averaged $220 per month as of 2018.

It is yet to be seen whether First Fertility will be positioned to be a winner in a post-pandemic boom in baby-making in one form or the other, but a “baby bump” has been observed in the US at least.

Retail investors hoping to trade on a baby boom may have already been looking at Myovant Sciences (NYSE:MYOV), Progyny (NASDAQ:PGNY) and INVO Bioscience (NASDAQA:INVO), each of which specialize in fertility treatments.

First Fertility could be destined to struggle to maintain Nasdaq listing requirements at its scale. But, if it stays there, it would join a cohort of companies that have largely gained favorable public valuations despite the fact that most are not profitable on an EBITDA basis.

Myovant trades at 7x current revenue, while INVO trades at 2.6x and Progyny is the only of the three turning a profit, trading at 4x revenue and 131x EBITDA.

ADVISORS

• Jun He Law Offices is serving as legal advisor to NewGen in connection with the Transaction.
• Loeb & Loeb LLP is serving as legal advisor to A SPAC I in connection with the Transaction.
• Haiwen & Partners, DFDL (Thailand) Limited is serving as legal advisor to A SPAC I in connection with the Transaction.
• Kalikova & Associates law firm is serving as legal advisor to A SPAC I in connection with the Transaction.
• Ogier is serving as legal advisor to A SPAC I in connection with the Transaction.