Arlington, Tenn.-based Wright said the deal calls for it to pay $55 million up front in cash and another $20 million worth of WMGI stock slated to be locked up for a year after the deal closes. Another $5 million is contingent on "the achievement of certain revenue milestones in 2014 and 2015," according to a press release.
"The acquisition of Biotech International is an excellent fit for our extremities business, enabling us to immediately expand our direct foot and ankle presence in Europe and add a base of extremity revenue that we can effectively grow on a go-forward basis. In addition, Biotech’s products complement our existing foot and ankle portfolio and include several specialized products that expand our extremities product offering. We plan to utilize Biotech’s strong direct sales channel in France and established distributor presence in emerging markets to extend the reach of our international distribution network and further accelerate growth opportunities in our global extremities business," Wright president & CEO Robert Palmisano said in prepared remarks.
The deal for Biotech International also calls for the French firm to spin out its dental business ahead of the completion of the deal, which is expected to occur during the 4th quarter. Wright said it expects the deal to be neutral to adjusted EBIDTA in 2014 and accretive after that.
Biotech International posted extremities revenues "in the $15 million range" for the 12 months ended June 30, according to the release.
"We are delighted to partner with a company that shares Biotech’s commitment to building a high-growth, global extremities business. We believe that Wright Medical, with its global leadership position in the foot and ankle market and expertise in medical education and product development, is the ideal partner to accelerate growth and realize the full potential of Biotech’s sales channels around the world. We look forward to working with Wright to ensure a seamless transfer and the continued success of our business as part of Wright Medical," Biotech International president Bruno Thevenet and, co-founder Philippe Veran said in a prepared statement.
In June, Wright agreed to ditch its OrthoRecon hip and knee business to focus on its extremities business. Leerink Swann analyst Richard Newitter said today the the Biotech International deal helps shore up a weakness in Wright’s operations outside the U.S.
"We had been expecting OUS expansion to be an area of M&A focus for WMGI, and management has been indicating this in recent months," Newitter wrote in a note to investors this morning. "Biotech’s products and sales channel (>90% of revenue derived OUS) will immediately provide WMGI with a bigger revenue base in Europe and, more importantly – through the addition of 10 direct sales reps (1 sales manager) – expands the company’s direct foot & ankle (F&A) distribution presence in France, elsewhere in the EU (Italy, Spain) and in Brazil. Biotech also brings a complementary product portfolio to WMGI’s F&A bag with minimal product overlap."
WMGI shares were down 2.6% to $26.70 apiece today as of about 10:45 a.m.