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| Prevena Incision Management System--Courtesy of Acelity |
Private equity players took wound care company Kinetic Concepts private in a $5 billion buyout in 2011. Then these investors rolled in wound care peer Systagenix for $485 million in October 2013. Prior to that, KCI had already beefed itself up with the 2008 acquisition of tissue regeneration player LifeCell for $1.7 billion.
The company that resulted from all this wheeling and dealing is Acelity, which has filed for an IPO worth up to $100 million. However, Wall Street is speculating that this figure is just a placeholder and that the IPO financing will actually target a total closer to $1 billion.
Acelity generates substantial revenue--but it's not profitable. In the first half of 2015, Acelity had $905.7 million in revenues, with an operating loss of $22.2 million during that period. About 29% of its revenues were generated ex-U.S. last year.
The company has been loaded up with debt--with the most recent figure at $4.8 billion. It said it would use some of the IPO financing to refinance its $610 million in 12.5% senior notes that's due in November 2019. But the remainder of its debt comes due even sooner than that, mostly in 2018. Acelity had $141 million in cash at June 30.
Acelity is comprised of two businesses: Advanced Wound Therapeutics, which includes devices and wound dressings, and Regenerative Medicine, which markets biologic matrices for reconstructive surgeries.
The revenue increase of 4.7% for the first half of 2015 over the same period a year earlier was driven by AWT device rental revenues with an increase in volume--which was offset by lower Regenerative Medicine revenue and AWT sales revenue. But rental revenues had declined during each of the two prior years.
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| Cellutome Epidermal Harvesting System--Courtesy of Acelity |
In order to boost revenues, Acelity expects to focus on the existing businesses, as well as to introduce new technologies including Prevena for closed surgical incisions and CelluTome for epidermal skin grafting.
Apax Partners, along with Canadian pension funds Canada Pension Plan Investment Board (CPPIB) and the Public Sector Pension Investment Board (PSP Investment) were behind the original KCI take-private deal and they remain the primary shareholders in Acelity.
A trio of bulge bracket banks have lined up to lead the IPO: J.P. Morgan, Goldman Sachs and BofA Merrill Lynch. That bodes well for the PE-backed wound care giant being able to pull-off a giant offering—even in the rocky market environment that's leading into the fall.
- here is the SEC filing