Posted on | June 19, 2013 | No Comments
Wright Medical Group, Inc.(NASDAQ: WMGI) today announced a definitive agreement under which MicroPort Medical B.V., a subsidiary of MicroPort Scientific Corporation (HK: 0853), will acquire Wright’s OrthoRecon business. The purchase price is $290 million, subject to a net working capital adjustment, and is payable in cash at closing, which is expected to occur by the end of the third quarter or early in the fourth quarter of 2013.
Wright’s OrthoRecon business consists of hip and knee implant products and generated global revenue of approximately $269 million in 2012. The OrthoRecon business has established hip and knee franchise brands including DYNASTY® and CONSERVE® hips, PROFEMUR® modular stems, SUPERPATH™ minimally invasive hip surgical instrumentation, and ADVANCE® and EVOLUTION® medial-pivot knee implants. According to industry research, the worldwide hip and knee reconstruction market is approximately $14 billion in 2012. In addition, the China Hip and Knee implant market is estimated to be approximately$1.3 billion by 2018 and is growing at approximately 17% per year.
Robert Palmisano, president and chief executive officer of Wright Medical, stated, “Over the last 18 months, we have made significant progress in transforming our business to dramatically accelerate growth in our foot and ankle business, build a growing, global OrthoRecon business, and significantly improve cash flow. This next step in our transformation should enable both businesses to flourish as separate, global companies focused in their unique market space with strong management teams that will position them for continued success. In addition, as a smaller, high-growth Extremities company with breakthrough biologic opportunities, we will now be able to devote our full resources and attention on accelerating growth opportunities in this area, including improving sales productivity, extending the global reach and penetration of our products in key international markets, and seeking to gain U.S. regulatory approval for Augment® Bone Graft. We believe this will enhance our ability to create significant shareholder value.”
Palmisano continued, “In my experience, companies are bought, not sold, and such was the case in this transaction, as there were several suitors for this very valuable business. We are pleased we have found an excellent strategic buyer in MicroPort, a company that is deeply committed to the success of the OrthoRecon business and will continue to provide the focus and investment to enable it to reach its full potential. Also, very importantly, this will provide our OrthoRecon employees with opportunities for career growth and development. We are grateful to our OrthoRecon employees for their dedication and hard work, and we look forward to working with MicroPort to ensure a seamless transfer and the continued success of the OrthoRecon business as part of MicroPort.”
After closing, the OrthoRecon business will continue to be headquartered in Arlington, Tennessee and Ted Davis, who is currently president of Wright’s OrthoRecon business, will lead the MicroPort Orthopedic business.
The transaction is subject to customary closing conditions, including MicroPort shareholder approval and receipt of regulatory clearances.
Wright’s Extremities segment, which includes foot and ankle, biologics and upper extremity, generated global revenues of approximately $214 million in 2012. Following the divestiture, Wright Medical expects to be well positioned and committed to accelerating growth in its foot and ankle business and increasing U.S. foot and ankle sales productivity to $1 millionper rep in 2014. Additionally, Wright expects to be adjusted EBITDA positive in 2014 with the opportunity for significant adjusted EBITDA growth in 2015 and beyond.
Net after-tax proceeds for Wright Medical, including transaction costs, are estimated to be approximately $260 million. Wright intends to use these net proceeds to fund transition costs of $25 million to $35 million and the remainder to fund growth opportunities for its Extremities and Biologics business and pay certain retained liabilities of the OrthoRecon business.
As a result of the transaction, Wright Medical plans to update its financial guidance on its second quarter conference call, which is currently scheduled for August 1, 2013, and its previous guidance is no longer valid. However, Wright is providing Extremity segment revenue guidance for 2013 of approximately $235 million to $240 million, which anticipates some potential minor, short-term dis-synergies as a result of the transaction. Beginning in the second quarter of 2013, the OrthoRecon segment will be accounted for as a discontinued operation in Wright’s GAAP and non-GAAP income statements. Wright plans to provide additional details regarding the financial impact of the transaction when it reports it second quarter 2013 results.
An investor presentation will be available on Wright’s investor website at www.wmt.com.
In connection with this transaction, Deutsche Bank Securities Inc. and Ropes & Gray LLPadvised Wright Medical.
Wright Medical’s Conference Call and Webcast
Wright Medical’s management team will host a conference call Thursday, June 20, 2013, starting at 8:00 a.m. Central Time. The live dial-in number for the call is 866-788-0544 (U.S.) / 857-350-1682 (International). The participant passcode for the call is “Wright.” To access a simultaneous webcast of the conference call via the internet, go to the “Corporate – Investor Information” section of the Company’s website located at www.wmt.com.
A replay of the conference call by telephone will be available starting at 9:30 a.m. Central Time on June 20, 2013 and continuing through June 27, 2013. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 53923011. A replay of the conference call will also be available via the internet starting today and continuing for at least 12 months. To access a replay of the conference call via the internet, go to the “Corporate – Investor Information – Audio Archives” section of the Company’s website located at www.wmt.com.
The conference call may include forward-looking statements. See the cautionary information about forward-looking statements in the “Safe-Harbor Statement” section of this press release.
About Wright Medical
Wright Medical Group, Inc. is a global orthopaedic company that provides solutions that enable clinicians to alleviate pain and restore their patients’ lifestyles. The company is the recognized leader of surgical solutions for the foot and ankle market and markets its products in over 60 countries worldwide. For more information about Wright Medical, visitwww.wmt.com.