Chicago-based Hu-Friedy, which makes dental instruments and systems used to reprocess them, put up adjusted EBITDA of roughly $48 million on $214 million in sales during the twelve months ended May 31.
The deal calls for Little Falls, N.J.-based Cantel to pay $725 million up front – up to $60 million in stock and the rest in cash – and puts another $50 million on the line in commercial milestones. Cantel said the transaction should deliver about $100 million in tax benefits.
“The combination of our two dental businesses provides a clear and immediate opportunity to become the leading provider of a ‘complete circle of protection’ offering for instrument reprocessing workflow and infection prevention and compliance solutions in the dental industry,” Cantel president & CEO George Fotiades said in prepared remarks. “By bringing together our highly complementary dental portfolios, we will create a business that is uniquely positioned to address the most critical workflow needs of our customers while improving patient care. Hu-Friedy brings us the scale, commercial capabilities and portfolio breadth to enable our dental business to be a significant driver of long-term profitable growth for Cantel.”
“We are excited to join forces with Cantel and are looking forward to the opportunities this combination will bring for our customers, employees and other stakeholders,” added Hu-Friedy chairman & CEO Ron Saslow. “As a leader in dental instrumentation and instrument management solutions, Hu-Friedy’s combination with the Cantel portfolio of leading infection prevention dental consumables is a perfect match to further enhance our ability to serve our dental customers.”
Saslow and Hu-Friedy president Ken Serota are slated to lead Cantel’s dental unit after the buyout’s close, expected during the first quarter of Cantel’s fiscal 2020 ending October 31. Cantel dental president Gary Steinberg is due to assist in the transition and integration before retiring at the end of the calendar year, the company said.
Cantel said it expects the acquisition to deliver $10 million in annual cost synergies by the third year after closing. Hu-Friedy is expected to add 10% to adjusted earnings per share during fiscal 2020, “with mid-teens accretion in fiscal year 2021 and further accretion thereafter.”
Perella Weinberg advised Cantel on the deal, with Wachtell, Lipton, Rosen & Katz as counsel. Moelis & Co. advised Hu-Friedy, with Latham & Watkins as counsel.