What happened

Shares of Aimmune Therapeutics (AIMT) jumped by an eye-popping 170% in pre-market trading Monday morning. The biotech's stock is screaming higher this morning in response to a $2.6 billion merger agreement -- on a fully diluted basis -- with Nestle's (NSRGY 2.15%) Health Science division (a.k.a NHSc). The deal is expected to close in the fourth quarter of 2020. 

Through this merger, NHSc will acquire the full commercial rights to Aimmune's Food and Drug Administration-approved peanut allergy drug Palforzia. This buyout represents a hefty 74% premium compared to where Aimmune's shares were trading upon market close last Friday.

Two businessmen shaking hands over a table.

Image source: Getty Images.

So what

Digging into the details, Nestle's Health Science division reportedly agreed to pay $34.50 per share in cash in order to acquire the remaining common shares of Aimmune that it did not already own. Prior to this tie-up, NHSc held a 25.6% equity stake in the small-cap drugmaker. 

Although Palforzia's initial commercial launch has gotten off to a sluggish start due to the ongoing pandemic, Wall Street thinks this first-of-its kind peanut allergy medication can eventually achieve blockbuster status (greater than $1 billion in annual sales). If true, Nestle's $2.6 billion investment in Aimmune will turn out to be a flat-out bargain.  

Now what

While Aimmune might have provided a richer return on investment for its shareholders over the long term, this merger agreement is arguably a favorable outcome for its stakeholders. After all, the biotech's stock has been losing value at a breakneck pace since the start of the year, thanks to Palforzia's slower-than-expected rollout.