Over-the-counter (OTC) hearing aid maker Eargo, Inc. (Nasdaq: EAR), headquartered in San Jose, Calif, has announced a definitive merger agreement in which Patient Square Capital, Eargo’s principal shareholder, will acquire all of the company's outstanding common stock shares not currently owned by Patient Square for $2.55 per share in cash.

According to the company, the purchase price represents a premium of approximately 52% over the closing price of Eargo common stock on October 27, 2023, the last trading day prior to public disclosure of the transaction.

A special committee of the Board of Directors of Eargo, comprised solely of independent directors and advised by its own independent legal and financial advisors, unanimously recommended approval of the transaction, determining it was in the best interests of Eargo and its shareholders that are not affiliated with Patient Square or such management and director shareholders. Acting upon the recommendation of the Special Committee, the Board approved the transaction.

The transaction is expected to close in the first quarter of 2024 subject to customary closing conditions. Upon completion of the transaction, Eargo will become a private company and will no longer be publicly listed or traded on Nasdaq.

Patient Square Capital became Eargo's majority shareholder in November 2022 when it assumed over two-thirds of the company's shares. Previously, Eargo ran into financial difficulties after it agreed in April 2022 to pay $34.37 million to resolve allegations related to claims for reimbursement to the Federal Employees Health Benefits Program (FEHBP) and was suspended from that program.

Despite these difficulties, Eargo is a reputable manufacturer that has stood behind its products and makes good OTC hearing aids—albeit at a premium price. Eargo 7 released in January 2023 at the Consumer Electronics Show is a rechargeable completely-in-canal (CIC) “invisible” hearing aid with customized sound settings that you can buy online or at retailers. The company's partnership with Victra, a Verizon authorized reseller, has brought it into a reported 1,500 retail outlets. Eargo also has a deal with NationsBenefits, a provider of supplemental benefits for health plans. It also sells Eargo 7, Eargo 6 and Eargo 5 OTC hearing aids online and in retail stores like Best Buy.

Ropes & Gray LLP is acting as legal counsel to Patient Square. Perella Weinberg Partners LP is acting as financial advisor to the Special Committee and Davis Polk & Wardwell LLP is acting as its legal counsel.