Wright Medical Purchases by Microport of China 2013
News Release
Wright Medical Group, Inc. and MicroPort Scientific Corporation Enter Into
Definitive Agreement Under Which MicroPort Will Acquire Wright’s OrthoRecon
Business
Transaction Transforms Wright Medical into High Growth Extremities and Biologics
Pure Play and Expands Growth Opportunities for OrthoRecon Business
Purchase Price of $290 Million Cash…
ARLINGTON, Tenn.-(BUSINESS WIRE)-Jun. 19, 2013- Wright Medical Group, Inc.
(NASDAQ: WMGI) today announced a definitive agreement under which MicroPort
Medical B.V., a subsidiary of MicroPort Scientific Corporation (HK: 0853), will
acquire Wright’s OrthoRecon business. The purchase price is $290 million,
subject to a net working capital adjustment, and is payable in cash at closing,
which is expected to occur by the end of the third quarter or early in the
fourth quarter of 2013.
Wright’s OrthoRecon business consists of hip and knee implant products and
generated global revenue of approximately $269 million in 2012. The OrthoRecon
business has established hip and knee franchise brands including DYNASTY and
CONSERVE hips, PROFEMUR modular stems, SUPERPATH minimally invasive hip surgical
instrumentation, and ADVANCE and EVOLUTION medial-pivot knee implants. According
to industry research, the worldwide hip and knee reconstruction market is
approximately $14 billion in 2012. In addition, the China Hip and Knee implant
market is estimated to be approximately $1.3 billion by 2018 and is growing at
approximately 17% per year.
Robert Palmisano, president and chief executive officer of Wright Medical,
stated, “Over the last 18 months, we have made significant progress in
transforming our business to dramatically accelerate growth in our foot and
ankle business, build a growing, global OrthoRecon business, and significantly
improve cash flow. This next step in our transformation should enable both
businesses to flourish as separate, global companies focused in their unique
market space with strong management teams that will position them for continued
success. In addition, as a smaller, high-growth Extremities company with
breakthrough biologic opportunities, we will now be able to devote our full
resources and attention on accelerating growth opportunities in this area,
including improving sales productivity, extending the global reach and
penetration of our products in key international markets, and seeking to gain
U.S. regulatory approval for Augment Bone Graft. We believe this will enhance
our ability to create significant shareholder value.”
Palmisano continued, “In my experience, companies are bought, not sold, and such
was the case in this transaction, as there were several suitors for this very
valuable business. We are pleased we have found an excellent strategic buyer in
MicroPort, a company that is deeply committed to the success of the OrthoRecon
business and will continue to provide the focus and investment to enable it to
reach its full potential. Also, very importantly, this will provide our
OrthoRecon employees with opportunities for career growth and development. We
are grateful to our OrthoRecon employees for their dedication and hard work, and
we look forward to working with MicroPort to ensure a seamless transfer and the
continued success of the OrthoRecon business as part of MicroPort.”
After closing, the OrthoRecon business will continue to be headquartered in
Arlington, Tennessee and Ted Davis, who is currently president of Wright’s
OrthoRecon business, will lead the MicroPort Orthopedic business.
The transaction is subject to customary closing conditions, including MicroPort
shareholder approval and receipt of regulatory clearances.
Wright’s Extremities segment, which includes foot and ankle, biologics and upper
extremity, generated global revenues of approximately $214 million in 2012.
Following the divestiture, Wright Medical expects to be well positioned and
committed to accelerating growth in its foot and ankle business and increasing
U.S. foot and ankle sales productivity to $1 million per rep in 2014.
Additionally, Wright expects to be adjusted EBITDA positive in 2014 with the
opportunity for significant adjusted EBITDA growth in 2015 and beyond.
Net after-tax proceeds for Wright Medical, including transaction costs, are
estimated to be approximately $260 million. Wright intends to use these net
proceeds to fund transition costs of $25 million to $35 million and the
remainder to fund growth opportunities for its Extremities and Biologics
business and pay certain retained liabilities of the OrthoRecon business.
As a result of the transaction, Wright Medical plans to update its financial
guidance on its second quarter conference call, which is currently scheduled for
August 1, 2013, and its previous guidance is no longer valid. However, Wright is
providing Extremity segment revenue guidance for 2013 of approximately $235
million to $240 million, which anticipates some potential minor, short-term dis-synergies
as a result of the transaction. Beginning in the second quarter of 2013, the
OrthoRecon segment will be accounted for as a discontinued operation in Wright’s
GAAP and non-GAAP income statements. Wright plans to provide additional details
regarding the financial impact of the transaction when it reports it second
quarter 2013 results.
An investor presentation will be available on Wright’s investor website at
www.wmt.com.
In connection with this transaction, Deutsche Bank Securities Inc. and Ropes &
Gray LLP advised Wright Medical…
About Wright Medical
Wright Medical Group, Inc. is a global orthopaedic company that provides
solutions that enable clinicians to alleviate pain and restore their patients’
lifestyles. The company is the recognized leader of surgical solutions for the
foot and ankle market and markets its products in over 60 countries worldwide.
For more information about Wright Medical, visit www.wmt.com.
Cautionary Note Regarding Forward-Looking Statements
This press release may contain “forward-looking statements” as defined under
U.S. federal securities laws. These statements reflect management’s current
knowledge, assumptions, beliefs, estimates, and expectations and express
management’s current view of future performance, results, and trends. Forward-
looking statements may be identified by their use of terms such as anticipate,
believe, could, estimate, expect, intend, may, plan, predict, project, will, and
other similar terms. Forward-looking statements are subject to a number of risks
and uncertainties that could cause actual results to materially differ from
those described in the forward-looking statements. The reader should not place
undue reliance on forward-looking statements. Such statements are made as of the
date of this press release, and we undertake no obligation to update such
statements after this date. As with all transactions, there is a risk that
failure to obtain necessary approvals, or other intervening events, could
prevent the transaction described in this press release from closing, or could
delay the closing. In addition, risks and uncertainties that could cause our
actual results to materially differ from those described in forward-looking
statements are discussed in our filings with the Securities and Exchange
Commission (including those described in Item 1A of our Annual Report on Form
10-K for the year ended December 31, 2012, and as may be supplemented in our
Quarterly Reports on Form 10-Q). By way of example and without implied
limitation, such risks and uncertainties include: failure to realize the
anticipated financial and other benefits from the acquisition of BioMimetic
Therapeutics, Inc. or a delay in realization thereof; failure to obtain, or a
delay in obtaining, FDA approval of Augment Bone Graft, or a material limitation
on the scope of such approval; lower than anticipated market acceptance of, or
annual market demand for, Augment Bone Graft; future actions of the United
States Attorney’s office, the FDA, the Department of Health and Human Services
or other U.S. or foreign government authorities, including those resulting from
increased scrutiny under the Foreign Corrupt Practices Act and similar laws,
that could delay, limit or suspend our development, manufacturing,
commercialization and sale of products, or result in seizures, injunctions,
monetary sanctions or criminal or civil liabilities; failure to obtain the FDA
or other regulatory clearances needed to market and sell our products; any
actual or alleged breach of the Corporate Integrity Agreement to which we are
subject through September 2015 which could expose us to significant liability
including exclusion from Medicare, Medicaid and other federal healthcare
programs, potential criminal prosecution, and civil and criminal fines or
penalties; adverse outcomes in existing product liability litigation; new
product liability claims; inadequate insurance coverage; the possibility of
private securities litigation or shareholder derivative suits; demand for and
market acceptance of our new and existing products; potentially burdensome tax
measures; recently enacted healthcare laws and changes in product reimbursement
which could generate downward pressure on our product pricing; lack of suitable
business development opportunities; inability to capitalize on business
development opportunities; product quality or patient safety issues; challenges
to our intellectual property rights; geographic and product mix impact on our
sales; our inability to retain key sales representatives, independent
distributors and other personnel or to attract new talent; inventory reductions
or fluctuations in buying patterns by wholesalers or distributors; inability to
realize the anticipated benefits of restructuring initiatives; negative impact
of the commercial and credit environment on us, our customers and our suppliers;
and the potentially negative effect of our ongoing compliance enhancements on
our relationships with customers and our ability to deliver timely and effective
medical education, clinical studies, and new products.
Source: Wright Medical Group, Inc.
Wright Medical Group, Inc.
Julie D. Tracy, 901-290-5817
Sr. Vice President, Chief Communications Officer
julie.tracy@wmt.com