Orthofix, SeaSpine to combine into $700M orthopedics player in merger of equals

In a case of life imitating orthopedics, Orthofix and SeaSpine—makers of devices to heal bone fractures and bridge gaps in the spine—will fuse together in what they’ve termed a merger of equals.

Both companies have spent decades developing broad portfolios of devices and implants used in orthopedic and spinal procedures. Combining the two, according to their joint announcement on Tuesday, will result in the creation of a still-unnamed medtech with around $700 million in annual revenue.

Under the terms of their all-stock deal, current SeaSpine shareholders will receive around 0.4 shares of Orthofix stock in exchange for each of their existing SeaSpine shares. That’ll give SeaSpine stock owners a nearly 44% stake in the combined company, while Orthofix’s shareholders will hold onto the remaining 57%.

The deal has already been unanimously approved by both companies’ boards of directors and is expected to be finalized in the first quarter of next year, pending shareholder approval and the completion of other regulatory requirements.

At that point, the new company—complete with a new name that’ll be unveiled before the deal closes—will make its headquarters in Orthofix’s home base of Lewisville, Texas, while holding onto SeaSpine’s main offices in Carlsbad, California. It’ll also retain another 10 facilities located throughout the U.S., Canada, Europe and South America that are currently owned by the two companies.

Keith Valentine, who has led SeaSpine as president and CEO since 2015, will take on the same role at the new company, while Orthofix’s chief executive, Jon Serbousek, will serve as executive chairman of its board.

The combined entity will boast a workforce of about 1,600 employees and a global reach across nearly 70 countries, as well as annual revenues in the high nine figures. According to the Tuesday announcement, Orthofix and SeaSpine together raked in around $693 million for the year ending September 30, and the companies’ latest estimates for calendar year 2022 place their combined total as high as $703 million.

Plus, the duo said that they’re expecting the merger to drum up at least $40 million in yearly cost savings within three years of the deal’s close. It’s also expected to begin adding to Orthofix’s standalone earnings by the second full year, boosted by its ability to self-fund investments in new innovations and the expansion of its sales force and field inventory.

The news of their merger sent Orthofix and SeaSpine’s stock prices in opposite directions. While SeaSpine saw its stock open at $5.94 on Tuesday morning—about 7% higher than Monday afternoon’s closing price—Orthofix’s shares plummeted, falling more than 18% when the market opened to hit $15.