Avalon Acquisition Inc. (AVAC) Adds FPA to The Beneficient Company Deal
Avalon Acquisition Inc. (NASDAQ:AVAC) announced in an 8-K this morning that it has entered into a prepaid forward purchase agreement with RiverNorth SPAC Arbitrage Fund, the purchaser, as it works to close its combination with financial services firm The Beneficient Company, or Ben.
As part of the agreement, RiverNorth agreed to effect certain purchases of shares of Avalon Class A common stock that would have been redeemed in connection with today’s shareholder meeting to approve the business combination. The purchaser has agreed to purchase $25 million worth of Avalon Class A common stock at $10.57.
These shares will not be redeemed in connection with the meeting and will convert into shares of Class A Common Stock of Beneficient and Series A Convertible Preferred Stock of Beneficient upon consummation of the deal. The Series A Preferred Stock will convert in accordance with its terms to shares of Beneficient Class A Common Stock, and RiverNorth will hold an aggregate of 2,956,480 shares of Beneficient Class A Common Stock following the conversion.
The $25 million in proceeds will be disbursed from Avalon’s trust following the completion of its business combination with Ben. Of that, $5 million will be disbursed to Beneficient, with the remaining $20 million to be disbursed to RiverNorth to be held until the maturity date of two years following the closing of the business combination or until its earlier release per the terms of the FPA.
The FPA provides for two categories of shares: 1,064,333 shares as “purchased shares” and the remaining 1,892,147 shares as “prepaid forward shares”.
If RiverNorth has received less than $5 million in gross proceeds by the 10th anniversary of the close of the business combination, then Beneficient has agreed to issue an amount of BCH Preferred Series A-0 Units as consideration for any shortfall amounts less than $5 million from the sale of the purchased shares. The purchaser has agreed for the first six months following the transaction to not sell any shares below $5 per share or to sell more than 10% of the daily trading volume of the Beneficient Class A Common Stock if the VWAP of the Beneficient Class A Common Stock is between $5.00 and $8.00 for any such trading day.
For a period of two years following the closing of the business combination, RiverNorth may sell the prepaid forward shares at a price not lower than $10.57 per share. Upon consummation of any sales, RiverNorth must remit $10.57 per share from the reserve amount to Beneficient. At the maturity date, any remaining reserve amounts will be retained by the purchaser and any unsold prepaid forward shares will be remitted to Beneficient.
The $25 million FPA comes just hours before Avalon intends to hold its shareholder meeting to approve its business combination today at 10:00 a.m. ET.
The SPAC originally inked its $3.5 billion deal with Ben in September 2022. It is funding the transaction with $207 million from its current trust supplemented by a $383 million asset PIPE made up of ”alternative assets, valued at 100% of their most recently reported net asset value at the time of such subscription, including lending money to Variable Interest Entities to finance their acquisition of alternative assets”.