Are the barbarians back at the gate?
In a move harkening the heyday of the leveraged buyout, a private equity firm and two Canadian pension funds agreed to pony up about $6 billion, including acquired debt, for Kinetic Concepts Inc. (NYSE:KCI).
The $68.50-per-share price represents a 6 percent premium on KCI’s $64.49 closing price on Wall Street yesterday and a 16 percent premium on the San Antonio, Texas-based wound management company’s closing price July 5, the day before rumors spread on The Street that KCI was in play.
The transaction is valued at approximately $6.3 billion and includes KCI’s outstanding debt, according to a release put out by Apax Partners. The London-based private equity firm, which bills itself as “an independent global partnership focused solely on long-term investment in growth companies,” has raised more than $33 billion in funds to support deals in the financial & business services, healthcare, media, retail & consumer and technology sectors.
Apax teamed up with the Canada Pension Plan Investment Board and the Public Sector Pension Investment Board to get the deal done.
“The consortium plans to work actively in partnership with the management of KCI to further invest in the global medical products sector to expand the company’s core business, develop innovative products and extend into new geographies where significant opportunities exist,” Apax officials said in a prepared release. The deal is expected to close in the second half of 2011.
The Blackstone Group, the PE colossus with a $16 billion buyout fund and a history of big bets on med-tech, was rumored to be the front-runner in the race for KCI as recently as late last week. The deal is one of the largest leveraged buyouts since before the global recession of 2008.
KCI, founded in 1976, makes products for the wound care, bariatric and critical care markets. It pulled in just over $256 million in profit on $2.02 billion in sales in 2010.
The company has had its share of legal battles with Smith & Nephew Group plc (NYSE:SNN) in their long-running war over negative-pressure wound therapy. The grudge match between the companies has played out in courts in Europe and the U.S., with each notching victories and setbacks.