RTI Surgical (NSDQ:RTIX) said today it sold its cardiothoracic closure business to Vance Street Capital portfolio company A&E Advanced Closure systems for $60 million.
Through the deal, RTI Surgical will receive an initial $54 million in cash with an additional $6 million in contingent cash consideration for its cardiothoracic closure business, which was part of its Pioneer Surgical Technology acquisition in July 2013 and provides cardiothoracic sternal metal cable and plating systems.
As part of the transaction, RTI Surgical said it inked a multi-year contract manufacturing agreement to continue to support the divested biz under A&E’s ownership, providing manufacturing of products and engineering, development and manufacturing of future products.
“RTI’s cardiothoracic closure business is an excellent strategic fit with A&E Medical and we are excited to add its high-quality platform to A&E Medical’s global portfolio” Vance Street Capital partner Brian Martin said in prepared remarks.
“This business is strategically aligned with A&E Medical’s growth areas and we look forward to working with RTI’s cardiothoracic closure team to integrate the combined portfolio of medical products and cardiovascular surgical solutions and provide customers with an even broader array of cardiothoracic medical product choices,” A&E Medical prez Eric Sklar said in a prepared statement.
RTI said it plans to use funds from the sale to pay down portions of its term loan as it extends its existing credit facility through September 2019.
“The sale of our cardiothoracic closure business is a significant first step toward focusing our business and advancing our efforts to return RTI to long-term profitable growth through disciplined execution and building scale to extend distribution of our high-quality products in those areas that offer the greatest opportunities to benefit our customers, employees and shareholders. We are in the initial stages of our journey and continue to take a methodical approach to evaluating our assets, the attractiveness of the markets in which they reside, our ability to successfully operate those businesses, and whether we are the right owner to grow them over the long term. We believe this sale is a great example of RTI’s core competency in creating value in OEM product lines. When we purchased our cardiothoracic closure business, it was roughly a third of the size it is today. By leveraging our strong market expertise and developing a successful sales channel, we have grown this product line into a valuable asset that has become a trusted provider to renowned cardiothoracic surgeons and hospitals. The RTI Board and management determined that in joining with A&E Medical, and through having access to Vance Street Capital’s industry knowledge, our cardiothoracic closure business will have even greater opportunity to grow and thrive, to the benefit of its customers and employees and A&E Medical,” RTI CEO Camille Farhat said in a press release.
In March, RTI Surgical said it settled a proxy challenge from Krensavage Partners, entering into an agreement which will increase the size of the board and added a nominee from the investor group.