Merit Medical acquires DFine for $98M (3 X sales)
Merit Medical pays $98m for DFine’s spine devices (MassDevice)
San Jose, Calif.-based DFine makes the StabiliT line of devices, for injecting bone cement into vertebral fractures, and the Star spine tumor ablation system. Jordan, Utah-based Merit said its new interventional oncology & spine division will unite those products with its own line of oncology devices, including embolics, microcatheters and biopsy products.
DFine put up $33.4 million in sales last year, ¾ of that coming from the U.S. Both of its devices have 510(K) clearance in the U.S. and CE Mark approval in the European Union, Merit said.
Some of the nearly $98 million purchase price will be used to pay off about $28 million in DFine debt and to cover deal expenses, according to a regulatory filing; another $9.75 million went into an 18-month escrow account against indemnification claims for Merit, with a further $5 million put into a 9-month escrow account to cover Merit’s costs if the integration expenses are greater than expected.
“We are delighted to have Dfine join Merit,” chairman & CEO Fred Lampropoulos said in prepared remarks. “Our relationship began a few years ago when Merit was asked to provide key device components for DFine’s StabiliT and StabiliT MX products. In addition to the spinal compression fracture segment, we believe DFINE’s Star tumor ablation kit complements and enhances Merit’s oncology business.”
“We believe the restructuring of the sales divisions – cardiovascular, peripheral and IOS – will enable us to devote greater focus on Merit’s broad portfolio of products, align our sales and marketing efforts with Merit’s goal of achieving a more therapeutic and disease state centered product offering, and enhance opportunities for future growth,” Lampropoulos added. “Although DFine has a presence in Germany and Austria, as well as limited distribution partners, we believe there are many opportunities in Australia, Canada, Japan, China, the Nordic countries and other regions. We anticipate that DFine’s IP portfolio of approximately 110 U.S. and international patents will provide substantial coverage for many years ahead.”
Merit said it expects the deal to be neutral to adjusted earnings per share this year but add 5¢ to 8¢ next year. Reported EPS are slated to take a -24¢ to -26¢ hit this year on amortization and restructuring costs; that narrows to -5¢ to -7¢ per share in 2017, the company said.
Canaccord Genuity advised Merit on the deal, with Piper Jaffray advising DFine.