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04 Feb 2021 | 13:07

Branson's Spac merges with DNA tester 23andMe

(Sharecast News) - A blank cheque company founded by Richard Branson has agreed to merge with 23andMe, a US DNA test and healthcare company in a deal valuing the business at $3.5bn (£2.6bn). 23andMe's chief executive Anne Wojcicki and Branson will each invest $25m into a $250m private investment in public equity offering. Other investors include Fidelity, Altimeter Capital and Casdin Capital. The company's current shareholders will own 81% when the deal is completed.

The merger with the Virgin founder's VG Acquisition vehicle is one of a wave of deals done by special purpose acquisition companies (Spacs) set up to take private companies public while bypassing initial public offerings.

Wojcicki launched the company in 2006 to sell tests alerting customers to potential health risks but this fell foul of regulators. She then switched to ancestry testing before going back to health tests after getting approval from the US regulator.

As genetic testing's popularity waned the company went into drug development, working with GlaxoSmithKline, which paid $300m for a stake in 2018. Branson said he had invested in the business at an early stage.

"Of the hundreds of companies we reviewed for our Spac, 23andMe stands head and shoulders above the rest," Branson, said. "As an early investor, I have seen 23andMe develop into a company with enormous growth potential."

Branson's space tourism business, Virgin Galactic, became a public company in 2019 in a deal with serial blank cheque investor Chamath Palihapitiya's Spac.

Spacs usually have two years to buy a target using proceeds from investors once they are set up. David Solomon, Goldman Sachs's chief executive, said on 19 January the boom was not sustainable in the medium term.

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