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Integra LifeSciences to Acquire Codman Neurosurgery for Over $1 Billion

By GlobeNewswire | February 15, 2017

Accelerates Integra's strategy to achieve aspirational targets of $2 billion in revenue and 30% adjusted EBITDA margin.

Integra LifeSciences Holdings Corporation today announced that it has made a binding offer to acquire the Johnson & Johnson Codman Neurosurgery business for a price of $1.045 billion in cash. Codman Neurosurgery offers a portfolio of devices focused on advanced hydrocephalus, neuro-critical care and operative neurosurgery. If the binding offer is accepted, upon closing, Integra will be a global provider of neurosurgical products.
"This proposed transformational acquisition of Codman Neurosurgery creates compelling value for our shareholders, employees and patients," said Peter Arduini, Integra's president and chief executive officer. "Its innovative portfolio and global reach will enable us to enhance our position in the neurosurgery market, while also building a global infrastructure that will benefit Integra as a whole. We look forward to welcoming the more than 600 Codman Neurosurgery employees to the Integra team."
Codman Neurosurgery's existing portfolio and new product pipeline in advanced hydrocephalus, neuro-critical care and electrosurgery complement Integra's products and pipeline in tissue ablation, dural repair, and cranial stabilization. Together, this comprehensive portfolio will offer customers around the world complete solutions for neurosurgery and the scale to invest and bring new technologies to patients worldwide. The acquired products generated approximately $370 million in revenue during 2016 with an EBITDA margin of about 31% (unaudited).
Codman Neurosurgery is a part of Depuy Synthes Companies of Johnson & Johnson.
Expected Financial Impact of the Transaction
Integra expects the transaction to be accretive to adjusted EPS by at least $0.22 in the first full year after closing and increasing thereafter, and to GAAP EPS by the end of the third year. This acquisition is expected to also accelerate the path to achieving Integra's aspirational targets of $2 billion in revenue and 30% adjusted* EBITDA margin. Integra expects the Codman Neurosurgery revenue to experience some initial disruption in the first year of the combination, and to then grow 3% to 6% longer term. Integra expects to provide detailed guidance regarding the financial impacts of this transaction upon closing. 
Integra has obtained committed financing, subject to customary closing conditions, from BofA Merrill Lynch and JPMorgan in connection with the planned acquisition.  The company plans to finance the acquisition at the closing through a combination of cash on hand, availability under its revolving credit facility and a new senior secured term loan facility.  Following consummation of the transaction, Integra will focus on near-term cash flow generation to reduce portions of outstanding debt. Over the long term, Integra intends to maintain its debt to adjusted EBITDA (as calculated in accordance with the terms set forth in Integra's existing Credit Agreement) at or below 3.5x.
The information and consultation process with the employees' representative bodies in applicable jurisdictions, including France, Germany and Switzerland, is under way. Upon completion of that process, Integra expects to enter into a definitive purchase and sale agreement for the proposed acquisition.
The proposed transaction, which has been approved by Integra's Board of Directors, will also be subject to customary closing conditions, including regulatory approvals. The transaction is expected to close in two steps: first, in the approximately 24 principal countries during the fourth quarter of 2017; and subsequently, in the remaining countries on a rolling basis.
Integration Plans
Integra has put in place a detailed integration plan with a dedicated team comprising senior management from both Integra and Codman Neurosurgery. Integra has also engaged a management strategy consulting firm, as well as specialized consulting firms in certain functional areas, to enhance the integration team's efforts. Integra is confident in its ability to achieve identified revenue and cost targets as it builds a successful global organization.
BofA Merrill Lynch is serving as exclusive financial advisor and Latham & Watkins LLP is acting as legal advisor to Integra.
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