Colfax Corporation, a diversified technology company, has decided to separate its fabrication technology and specialty medical technology businesses into two differentiated, independent, and publicly-traded companies.
 
The separation is intended to be structured in a tax-free manner and is targeted to be completed in the first quarter of 2022.
 
“This is an exciting day for Colfax and an important step to unlock the full value inherent in our MedTech and FabTech businesses,” said Matt Trerotola, Colfax president and CEO. “Now is the right time to build on the momentum in both businesses and enable each to better capitalize on its distinct opportunities. Our abilities to successfully develop talent, drive innovation, leverage our Colfax Business System for continuous improvement and acquire attractive businesses are core to both MedTech and FabTech. We believe a separation will better position each business to execute tailored strategies to deliver above-market growth, margin expansion and strong, consistent free cash flow.”
 
“This decision is the result of a thorough strategic review undertaken by the Board with management, reflecting an ongoing commitment to drive long-term value for all stakeholders,” added Mitch Rales, Colfax co-founder and chairman of the Board. “We have now successfully put in place a proven operating model to compound value and have effectively transformed our Company. With two strong management teams, and focused business and capital allocation strategies in place, FabTech and MedTech are poised to accelerate growth and drive increased shareholder value. I look forward to continuing to support and guide each of the management teams as a member of both businesses’ Boards of Directors.”
 
The specialty medical technology company will be led by Colfax CEO Matt Trerotola and Colfax EVP Brady Shirley will serve as chief operating officer. Shirley will join Trerotola on the MedTech Board. Colfax CFO Chris Hix will serve as CFO. Headquartered in Wilmington, Delaware with a significant presence in Dallas, Texas, the company will be renamed before the separation is completed to reflect its strategic focus.
 
The fabrication technology company will be led by current Colfax EVP Shyam Kambeyanda, who will join the FabTech Board. Long-time Colfax financial executive and current ESAB business CFO Kevin Johnson will serve as FabTech’s CFO.  The company will remain headquartered in Maryland and continue to operate under its well-known brand name ESAB.
 
Strategic Rationale
The businesses operate in distinct markets, with unique business opportunities and investment requirements. The Colfax Board, with management, believes the separation will result in material benefits to the standalone companies, including:
 

• Sharpened strategic focus for independent specialty medical technology and fabrication technology companies.
• Increased operating flexibility and resources to capitalize on growth opportunities in their respective markets.
• Capital structures and capital allocation strategies that are tailored to each company’s growth strategy.
• Improved investor alignment with each company’s clear value proposition, and ability for investors to value the two companies based on their distinct strategic, operational and financial characteristics.

 
Medical Technology Company 
The MedTech company is a specialty medical technology growth company. It has top-tier positions in orthopedic segments across the continuum of care, including surgical implants as well as injury prevention and recovery devices, with clear paths to further accelerate growth.
 
The company recently completed several strategic bolt-on acquisitions, strengthening and expanding its position in attractive market segments including extremities reconstruction and therapeutic laser technology for recovery. The company will be comprised of Colfax’s current Medical Technology operating segment, which is expected to generate revenue of approximately $1.4 billion in 2021.
 
The separation is expected to enable MedTechCo to continue to expand its share in high-growth, high-margin served and adjacent markets through strategic M&A and R&D investments. This will position the company with significant opportunities to deliver above-market growth, margin improvement and increased cash flow. Capital deployment is expected to be focused on supporting the company’s strategic growth program.
 
Fabrication Technology Company (ESAB)
ESAB is a fabrication technology leader with a global footprint, track record of product innovation and strong positions in emerging markets. The company has successfully executed its operational improvement strategy to out-grow peers in recent years and significantly increase margins and cash flow.
 
Through strategic bolt-on acquisitions, ESAB has broadened its product and technology offering, extended its geographic reach and expanded into attractive new segments, including gas control for medical and life sciences. ESAB will be comprised of Colfax’ Fabrication Technology operating segment, which is expected to generate revenue of approximately $2.2 billion in 2021.
 
The separation is expected to support ESAB’s leadership in global industrial markets and position it to further increase market share through innovation and commercial excellence. ESAB will focus on complementing its growth with operating improvements to enhance margins and cash flow. It expects to maintain a balanced capital allocation policy focused on growth investments, bolt-on acquisitions, and return of capital to shareholders.