What happened

Shares of HC2 Holdings (NYSE:HCHC) rocketed higher on Wednesday after the holding company announced that it had struck a deal to sell a portfolio company for as much as $1 billion if all milestones are met. As of 12:50 p.m. EDT, HS2 stock was up 38%.

So what

HC2 announced that BeneVir Biopharm, a portfolio company within its Pansend Life Sciences subsidiary focused on developing oncolytic immunotherapies for cancer treatment, agreed to be acquired by Janssen Biotech. HC2 owns roughly 76% of BeneVir's equity.

A notepad page with a drawing of a big fish eating a little fish.

Image source: Getty Images.

The deal will bring HC2 $140 million in up-front cash payments when it closes, plus additional payments up to $900 million based on certain predetermined milestones. HC2 could ultimately receive more than $1 billion for the company when all is said and done. The deal is expected to close in the second quarter of 2018.

"This transaction is a defining moment for Pansend and HC2, clearly demonstrating David and Cherine's ability to identify and create value in the life sciences industry," said HC2 CEO Philip Falcone, speaking about David Present and Cherine Plumaker, who lead the Pansend subsidiary.

Now what

With a market capitalization of around $230 million as of Tuesday's close, this deal could bring in a tremendous amount of cash relative to the company's value. While there's no guarantee that the full $1 billion of potential payments will be received, investors are clearly thrilled by this news.

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