Under the terms of the agreement, which has been unanimously approved by the boards of directors of both Wright and
Tornier, each outstanding share of Wright common stock will be exchanged for 1.0309 ordinary shares of Tornier. Upon completion of the merger, Wright shareholders will own approximately 52% of the shares of the combined company on a fully diluted basis and Tornier shareholders will own approximately 48%. For Tornier shareholders, the exchange ratio implies a per share value for Tornier that represents a 28% premium to Tornier’s closing share price on October 24, 2014, the last trading day prior to the parties entering into the agreement.
Following the closing of the transaction, the combined company will conduct business as
Wright Medical Group N.V. and will leverage the global strengths of both product brands as a pure play Extremities-Biologics business. The combined company will have its U.S. headquarters in Memphis, TN, where Wright’s current headquarters is located. Wright Medical Group N.V. will be led by Robert Palmisano, who will become president and chief executive officer of the combined company. David Mowry, Tornier’s president and chief executive officer, will become executive vice president and chief operating officer of the combined company. Wright Medical Group N.V.’s board of directors will be comprised of five representatives from Wright’s existing board and five representatives from Tornier’s existing board, including Robert Palmisano and David Mowry.
The merger of Wright and
Tornier will create a mid-sized growth company uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopaedics – Upper Extremities, Lower Extremities and Biologics. That leadership will be further enhanced by anticipated final U.S. Food and Drug Administration ( FDA) premarket approval of Augment® Bone Graft, adding additional depth to what will be one of the most comprehensive extremity product portfolios in the industry as well as providing a platform technology for future new product development. The highly complementary nature of the two businesses will give the combined company significant diversity and scale across a range of geographies and product categories.
As announced separately today, Wright received an Approvable Letter from the
FDA for its Premarket Approval Application (PMA) for Augment® Bone Graft. The approvable letter indicates that FDA determined Augment® Bone Graft to be safe and effective as an alternative to autograft for ankle and/or hindfoot fusion indications and is approvable subject to customary preapproval facilities inspections.
Palmisano continued, “Today’s positive news on the approvability of Augment Bone Graft is a major milestone that paves the way for commercialization in the U.S. and further underscores our strength in Biologics. This is expected to be a significant catalyst and meaningful new future growth driver for our business.”
Both companies will benefit from opportunities to accelerate growth through combined direct sales and distribution networks, a broad product portfolio and deep customer relationships. The joint products, R&D, sales and distribution talent, medical education and relationships will allow an increased focus on the needs of surgeon specialists. Similarly, patients will benefit from dedicated research and development teams that will power enhanced innovation across the combined product portfolio.
This stock-for-stock merger allows shareholders of the combined company to benefit from operational and cost synergies. Once integrated, the companies anticipate revenues of the combined business growing in the mid-teens and adjusted EBITDA margins approaching 20% in three to four years.
The amount of cost synergies is expected to be in the range of
$40 million to $45 million anticipated to be fully realized by the third year after completion of the transaction. Expense synergy opportunities include: public company expenses, overlapping support function and systems costs, as well as process and vendor consolidation opportunities across the business.
Wright anticipates that the transaction will be accretive to the combined companies’ adjusted EBITDA in the second full-year after completion of the transaction.
Upon completion of the transaction, the businesses of Wright and
Tornier will be combined and incorporated in the Netherlands, where Tornier has been incorporated and headquartered for approximately 8 years. Both companies agreed that maintaining Tornier’s domicile best supported the growth strategy driving the merger. Over the long term, it is anticipated that this structure will provide the company with more accessible cash flow, enhancing its ability to innovate and grow, creating long-term shareholder value.
The U.S. headquarters for the Lower Extremity and Biologics business will be based in Wright’s existing facility in
Memphis, TN, and its Augment team will continue to be based at its facility in Franklin, TN. The U.S. headquarters for the Upper Extremity business will be based within Tornier’s existing facility in Bloomington, MN and its U.S. engineering center in Warsaw, IN.
The transaction is expected to be taxable, for U.S. federal income tax purposes, to shareholders of Wright.
The transaction is subject to the customary closing conditions, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as Wright and
Tornier shareholder approval.
In addition, TMG Holdings Cooperatief U.A., an affiliate of
Warburg Pincus, which holds approximately 22% of Tornier’s outstanding ordinary shares, has evidenced its support by entering into an agreement to vote in favor of the transaction.
The transaction is expected to close in the first half of 2015.