23andMe going public at $3.5B via merger with Branson's blank check company

23andMe spit kit
23andMe's merger with VG Acquisition Corp. will help drive additional investment in key growth initiatives across 23andMe’s consumer health and therapeutics businesses, the company said. (23andMe)

23andMe is merging with VG Acquisition Corp., a special purpose acquisition company founded by billionaire Richard Branson, to go public.

The deal values the consumer genetic testing company at $3.5 billion, including debt.

The deal is expected to close in the second calendar quarter of 2021. VG Acquisition Corp. will change its New York Stock Exchange ticker symbol, and the combined company’s securities will trade under the ticker symbol “ME,” the companies announced Thursday.

“As a fellow industry disruptor as well as an early investor in 23andMe, we are thrilled to partner with Sir Richard Branson and VG Acquisition Corp. as we approach the next phase of our business, which will create new opportunities to revolutionize personalized healthcare and medicine,” said Anne Wojcicki, CEO and co-founder of 23andMe, in a statement.

"We have always believed that healthcare needs to be driven by the consumer, and we have a huge opportunity to help personalize the entire experience at scale, allowing individuals to be more proactive about their health and wellness. Through a genetics-based approach, we fundamentally believe we can transform the continuum of healthcare," Wojcicki said.

RELATED: Has home DNA testing hit its high-water mark? 23andMe to lay off 100 as sales turn: CNBC

"Of the hundreds of companies we reviewed for our SPAC, 23andMe stands head and shoulders above the rest,” said Branson, Virgin Group founder, in a statement. “As an early investor, I have seen 23andMe develop into a company with enormous growth potential. Driven by Anne’s vision to empower consumers, and with our support, I’m excited to see 23andMe make a positive difference to many more people’s lives.”

The deal will help drive additional investment in key growth initiatives across 23andMe’s consumer health and therapeutics businesses, the company said.

The stock and cash transaction is expected to deliver up to $759 million of gross proceeds through the contribution of up to $509 million of cash held in VG Acquisition Corp.’s trust account and a concurrent $250 million private placement in public equity of common stock, priced at $10 per share.

Wojcicki and Branson are each investing $25 million into the $250 million PIPE. Other investors include Fidelity Management & Research Company LLC, Altimeter Capital, Casdin Capital and Foresite Capital.

Current shareholders of 23andMe will own 81% of the combined company. A merger with a SPAC allows 23andMe to go public without the uncertainty of holding an initial public offering.

Launched in 2006, 23andMe sells direct-to-consumer genetic testing kits that people can use to find out more about their own DNA and what it says about their potential health issues and ancestry.

RELATED: Health tech funding snapshot—Everlywell banks $175M to expand at-home testing; 23andMe scores $82M and more

But sales have since slowed, and executives have attributed the slowdown to a lack of repeat customers in the space and concerns about DNA privacy risks. 23andMe and rival Ancestry both announced layoffs last year.

Competitor Ancestry.com was acquired by private equity firm Blackstone Group for $4.7 billion last year.

Wojcicki told The Wall Street Journal Thursday that the company was shifting away from ancestry to focus on the health market. “We have always seen health as a much bigger opportunity," she said.

In recent years, 23andMe has expanded efforts to turn genetic data from its more than 10 million customers into therapies. It struck a deal to collaborate on drug development with GlaxoSmithKline, which took a $300 million stake in the company in 2018.

23andMe is also developing drug candidates on its own. The company says it has a broad pipeline of more than 30 therapeutic programs spanning oncology as well as respiratory and cardiovascular diseases. 

RELATED: Everlywell nabs former 23andMe, Livongo exec as new president

Private tech companies have been looking to merge with a SPAC or blank check company as a nontraditional route to going public rather than a typical IPO. With the IPO market rattled by COVID-19 and wild volatility, it has become a more attractive way to go public.

There has been an increasing number of technology-focused blank check companies issued in recent months, including SOC TelemedHims & HersClover HealthAugmedix, Butterfly Network and Talkspace.

Citi is serving as lead financial adviser, capital markets adviser and placement agent to 23andMe. Morgan, Lewis & Bockius LLP is serving as legal counsel to 23andMe.

Credit Suisse acted as lead financial adviser, capital markets adviser and placement agent to VG Acquisition Corp. LionTree Advisors acted as financial adviser, and Davis Polk & Wardwell LLP is serving as legal counsel to VG Acquisition Corp.