Greatbatch (GB) to Acquire Lake Region Medical in ~$1.73B Deal
- Wall Street ends volatile week sharply higher
- Disney (DIS) Dips As Streaming Business Shows Signs of Slowing Down, Analysts 'Very Bullish' on LT Opportunity
- Airbnb (ABNB) Bookings Up 52% to Help Sales Beat, Seen as a 'Blow Out Quarter' as More Upside is Left
- DoorDash (DASH) Reports Bigger Loss and a Sales Beat, Shares Soars on Strong Guidance and Two Upgrades to 'Buy'
- Coinbase (COIN) To Add Dogecoin Trading in the Next Few Weeks
Greatbatch (NYSE: GB) announced that it has entered into a definitive agreement to acquire Lake Region Medical for approximately $1.73 billion in cash and stock, a transformative deal that will create one of the largest medical device OEM suppliers in the world serving the cardiac, neuromodulation, vascular, orthopaedics and advanced surgical markets.
Greatbatch develops and manufactures critical medical device technologies for the cardiac, neuromodulation, vascular and orthopaedic markets; and batteries for high-end niche applications in the portable medical, energy, military, and environmental markets. Lake Region Medical helps bring life changing products from concept to point-of-care in the cardio & vascular and advanced surgical markets. These include offerings in electrophysiology, vascular access, cardiovascular, urology, oncology, orthopaedics, laparoscopy, biopsy/drug delivery, and arthroscopy.
Once the transaction has closed, the combined company will employ over 9,000 individuals globally with revenues of approximately $1.5 billion.
"The combination of Greatbatch and Lake Region Medical brings together two highly complementary organizations that can provide a new level of industry leading capabilities and services to OEM customers while building value for shareholders," said Thomas J. Hook, president and chief executive officer, Greatbatch.
"Through this transformative deal, we are going to be at the forefront of innovating technologies and products that help change the face of healthcare, providing our customers with a distinct advantage as they bring complete systems and solutions to market. In turn, our customers will be able to accelerate patient access to life enhancing therapies."
The transaction is consistent with Greatbatch's strategy of achieving profitable growth and continuous improvement to drive margin expansion.
"I am very proud of the Lake Region Medical team and what they have accomplished over many years," said Donald J. Spence, chairman and chief executive officer, Lake Region Medical. "Today marks the start of an important new chapter for the Company and I am confident the combination of Lake Region Medical and Greatbatch will form an even stronger entity with unmatched technology and manufacturing capabilities to better serve our customers into the future."
"We expect considerable operating synergies resulting in sustained profitable growth, as well as double-digit adjusted cash EPS growth," said Michael Dinkins, executive vice president and chief financial officer of Greatbatch.
Strategic and Financial Benefits of the Transaction
Greatbatch and Lake Region Medical believe the combination positions the company for enhanced product development and manufacturing services to customers across multiple medical device segments, as well as the energy and portable medical markets. The combination adds diversification and scale across product lines, customers, industries and geographies. The transaction is double-digit accretive to Greatbatch adjusted cash EPS in 2016 and meaningfully more accretive thereafter.
- More comprehensive portfolio of solutions and services to OEM customers: Both companies have highly-regarded positions with OEM customers in different sub-segments of the cardiac rhythm management, neuromodulation, vascular, orthopaedics and advanced surgical market segments. As a result, the newly combined company will be able to offer a substantially more comprehensive portfolio for customers utilizing the best technologies, providing a single point of support, and driving optimal outcomes.
- Added scale and diversification: The combination creates a company with operations in the United States, Latin America, Europe and Asia-Pacific. The combination also broadens proprietary technologies and high volume, world-class manufacturing capabilities. In addition, it diversifies Greatbatch into the advanced surgical, vascular and interventional cardiology segments of medical technology.
- Enhanced customer access and experience: Both Greatbatch and Lake Region Medical bring decades of innovation, R&D design excellence, operating excellence and committed partnerships with customers. Greatbatch expects to leverage the expanded R&D resources, manufacturing capabilities and reputation for innovation, quality and reliability to increase partnership opportunities with legacy customers. The combined company in partnership through OEM customers is ultimately expected to help hospitals, physicians and the healthcare systems improve patient outcomes in a cost-effective manner.
- Stronger financial profile and solid earnings accretion: 2014 combined revenues of Greatbatch and Lake Region Medical were approximately $1.5 billion. The transaction is expected to be double-digit accretive to cash EPS in 2016, the first full fiscal year post closing and meaningfully more accretive thereafter. The combined company expects to achieve net annual synergies at the operating profit level of $25 million in 2016 which is expected to increase to at least $60 million in 2018.
- Strong balance sheet and cash flow generation: The combined company is expected to generate strong cash flow from operations resulting from the continued operating profitability, operating synergies and approximately $360 million of net operating loss carryforwards (NOL's) at Lake Region Medical acquired in the transaction. The NOL's will be subject to traditional Section 382 limitations. The company expects the strong cash flow to enhance future financial flexibility.
In the transaction, Greatbatch will pay approximately $478 million in cash, issue an aggregate of 5.1 million shares of common stock and options to Lake Region Medical's equity holders and assume approximately $1 billion of Lake Region Medical net debt.
The agreement has been unanimously approved by the Boards of Directors of both companies. The cash portion of the transaction will be financed with existing cash on hand as well as proceeds from a fully committed financing loan package led by M&T Bank, Credit Suisse and KeyBanc Capital Markets. At closing, current Greatbatch stockholders are expected to own approximately 83.4% of the combined company and current Lake Region Medical shareholders are expected to own approximately 16.6%. The transaction is expected to close in the fourth quarter of 2015 subject to customary closing conditions and pending completion of all necessary regulatory reviews.
Piper Jaffray is acting as exclusive financial advisor and Hodgson Russ LLP is acting as legal advisor to Greatbatch. Simpson Thacher & Bartlett LLP is acting as legal advisor to Lake Region Medical.
Greatbatch President & Chief Executive officer, Thomas J. Hook, and Executive Vice President and Chief Financial Officer, Michael Dinkins, will host a conference call today at 8:30 a.m. EDT to discuss the definitive agreement. The conference call can be accessed from the Greatbatch website at www.greatbatch.com. The conference line is (866) 562-8327and the conference ID is 22878619.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Graphic Packaging (GPK) to Acquire AR Packaging from CVC Funds for $1.45 Billion in Cash
- Glatfelter (GLT) Completes Acquisition of Georgia-Pacific’s U.S. Nonwovens Business
- Innovative Industrial Properties Inc. (IIPR) Reports Acquisition of Pennsylvania Property
Create E-mail Alert Related CategoriesCorporate News, Guidance, Hot Corp. News, Hot M&A, Management Comments, Mergers and Acquisitions
Related EntitiesCredit Suisse, Piper Jaffray, KeyBanc, Earnings, Definitive Agreement
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!