Greatbatch ($GB) is snatching up Lake Region Medical for $1.73 billion to beef up its offerings and expand its global reach, months after the company announced it would spin off its neurostimulation unit to focus on building out its portfolio.
Under the terms of the deal, Frisco, TX-based Greatbatch will shell out about $478 million in cash, issue 5.1 million shares of common stock and options to Lake Region Medical's shareholders. Taking the assumption of about $1 billion debt into account, the deal is valued at about $1.73 billion, the company said in a statement. The acquisition will hand Greatbatch an 83.4% share of the combined company, giving it access to Lake Region Medical's advanced surgical, vascular and interventional cardiology offerings.
Both companies' boards of directors have already signed off on the deal. If all goes to plan, Greatbatch and Lake Region Medical will close the acquisition in the fourth quarter of 2015, the companies said in a statement, creating a combined company with $1.5 billion in 2014 revenues and more than 9,000 employees worldwide.
The buy will also result in "considerable operating synergies resulting in sustained profitable growth," Greatbatch's CFO Michael Dinkins said in a statement. Greatbatch expects the deal to be double-digit accretive to cash EPS in 2016, with the combined company achieving net annual synergies of $25 million. And that growth will only continue, Greatbatch figures, with net annual synergies expected to increase to at least $60 million in 2018, the company said in a statement.
|Greatbatch CEO Thomas Hook|
"The combination of Greatbatch and Lake Region Medical brings together two highly complementary organizations that can provide a new level of industry leading capabilities and services to OEM customers while building value for shareholders," Greatbatch CEO Thomas Hook said in a statement.
The deal comes on the heels of more change for Greatbatch, as the company forges ahead with the spinoff of its Algostim neurostimulation subsidiary. Greatbatch expects to complete the spinoff by the end of this year, creating new, publicly-traded company dubbed Nuvectra. The company is shooting for FDA approval of Nuvectra's first product, the Algovita Spinal Cord Stimulation system, by the end of this year.
Greatbatch's acquisition also points to a bigger trend within the industry, as companies explore ways to cut costs and become more efficient in light of looming pricing pressure, The Wall Street Journal notes. Zimmer ($ZMH) earlier this year shelled out $14 billion for rival orthopedics outfit Biomet to broaden its portfolio of artificial knees, hips and other implants. In July, St. Jude Medical ($STJ) snagged heart pump maker Thoratec ($THOR) for $3.4 billion to counter sluggish growth.
- read Greatbatch's statement
- here's the WSJ story (sub. req.)