Michael Barbella, Managing Editor10.11.22
Orthofix and SeaSpine are becoming one company.
The two firms announced a merger agreement this morning, but did not provide financial details of the transaction. The combined entity—which would be worth roughly $693 million (estimated, based on the 12 months ended Sept. 30)—will be named before the deal closes in the first quarter next year. It will distribute products in 68 countries worldwide and employ 1,600 workers. Under the terms of the agreement, unanimously approved by both companies' Boards of Directors, SeaSpine shareholders will receive 0.4163 shares of Orthofix common stock for each share of SeaSpine common stock owned. When the merger closes, Orthofix shareholders will own approximately 56.5% of the combined company, and SeaSpine shareholders will own approximately 43.5% respectively, on a fully diluted basis.
“This transaction significantly advances our mission to deliver quality-driven solutions that make us a partner of choice for surgeons in their work to improve patient mobility,” Orthofix President and CEO Jon Serbousek said. “The combined company’s portfolio of technology, expanded commercial capabilities and ability to make greater investments in innovative solutions provide a clear roadmap for sustainable, top-tier growth and increased competitiveness across a broad spectrum of products and services. We look forward to capitalizing on this merger’s tremendous value creation opportunities.”
According to both companies, the merger's strategic and financial benefits include:
“This transaction brings together two complementary organizations to create an industry leader with the immediate financial strength to self-fund investments that deliver both growth and better patient outcomes," SeaSpine President and CEO Keith Valentine said. "We are excited about the value we can create for the combined company’s shareholders, the new opportunities opened for employees and our ability to now provide surgeons and hospital partners a complete procedural solution using cutting-edge technology at every level.”
Upon the merger's closing, the combined company’s Board of Directors will consist of nine directors, with five designated by Orthofix, including a lead independent director, and four designated by SeaSpine. Serbousek will be executive board chairman, and Valentine will be president, CEO and board member. The remainder of the combined company’s board and leadership team will be named prior to closing and is expected to include representatives from both Orthofix and SeaSpine.
The combined company will be headquartered in Lewisville, Texas. This location will conduct general business, product development, medical education and manufacturing. The new company will retain primary offices in Carlsbad, Calif, with a focus on spinal product innovation and surgeon education, and in Verona, Italy, with an emphasis on product innovation, production, and orthopedic education. Current facilities in Irvine, Calif.; Toronto, Canada; Sunnyvale, Calif.; Wayne, Pa.;, Olive Branch, Miss.; Maidenhead U.K.; Munich; Paris; and Sao Paulo, Brazil will also be retained.
Perella Weinberg Partners LP is serving as financial advisor to Orthofix, and Hogan Lovells U.S. LLP is serving as its legal counsel. Piper Sandler & Co. is serving as financial advisor to SeaSpine, and DLA Piper LLP is serving as its legal counsel.
The two firms announced a merger agreement this morning, but did not provide financial details of the transaction. The combined entity—which would be worth roughly $693 million (estimated, based on the 12 months ended Sept. 30)—will be named before the deal closes in the first quarter next year. It will distribute products in 68 countries worldwide and employ 1,600 workers. Under the terms of the agreement, unanimously approved by both companies' Boards of Directors, SeaSpine shareholders will receive 0.4163 shares of Orthofix common stock for each share of SeaSpine common stock owned. When the merger closes, Orthofix shareholders will own approximately 56.5% of the combined company, and SeaSpine shareholders will own approximately 43.5% respectively, on a fully diluted basis.
“This transaction significantly advances our mission to deliver quality-driven solutions that make us a partner of choice for surgeons in their work to improve patient mobility,” Orthofix President and CEO Jon Serbousek said. “The combined company’s portfolio of technology, expanded commercial capabilities and ability to make greater investments in innovative solutions provide a clear roadmap for sustainable, top-tier growth and increased competitiveness across a broad spectrum of products and services. We look forward to capitalizing on this merger’s tremendous value creation opportunities.”
According to both companies, the merger's strategic and financial benefits include:
- An industry leader in spine and orthopedics portfolios. Combining Orthofix’s and SeaSpine’s portfolios creates a suite of offerings in considerable growth segments of spine and orthopedics. The merged company’s differentiated technologies will include: the M6-C artificial cervical disc, a next-generation artificial disc replacement alternative to spinal fusion; the FLASH Navigation System with 7D Technology—the only approved image guidance system that uses a novel and proprietary camera-based technology and machine-vision algorithms; the Fitbone platform, which includes the currently available intermedullary limb lengthening system; the under-development Fitspine scoliosis solution; and a comprehensive offering of advanced interbody devices featuring WaveForm 3D and NanoMetalene with Reef Topography technologies.
- Broad biologics and regenerative technology offerings. The new company’s biologics portfolio will represent one of the broadest industry offerings available, extending tits reach to a greater number of surgeons for use in spine and orthopedics procedures. These biologic solutions include the recently launched Virtuos Lyograft, the first-of-its-kind, shelf-stable and complete autograft substitute; the TrinityElite allograft; the best-in-class OsteoStrand Plus and OsteoSurge 300 demineralized bone matrix (DBM) products with patented Accell Bone Matrix, and the future commercialization of Novosis, a next generation rh-BMP-2 technology via a recent license agreement with CGBio. Regenerative technologies will include the CervicalStim bone growth therapy device, the only FDA-approved PEMF system for cervical treatment; SpinalStim for spine fusion; PhysioStim for the treatment of nonunion fractures; and the recently launched AccelStim bone healing therapy.
- Differentiated and synergistic enabling technologies. The new firm will have a complementary portfolio of technologies that enables it to service the full continuum of surgical care from preoperative planning through surgical navigation. Flagship enabling technologies include the unique FLASH Navigation System with 7D Technology, which is designed to provide visibility during surgery to improve accuracy of screw placement and provide a cost-effective, rapid, radiation-free solution to surgical navigation, and the OrthoNext preoperative planning system.
- Premier offering in high-growth pediatrics market. The merger will create a complementary portfolio of specialized hardware and enabling technologies, including specialized spine, limb deformity, limb reconstruction and software planning and imaging solutions, that enable it to service the full patient continuum of care for pediatric orthopedic surgeons. Currently an $800 million annual market, pediatrics is among the fastest growing markets in orthopedics.
- Strengthened commercial reach in the United States and internationally. With its broader product and services portfolio, increased resources and deep pipeline, the combined company will be able to attract and support larger, dedicated distribution partners. It will also be able to invest in direct sales representatives in select markets to engage even more surgeon users.
- Revenue synergies, cost savings and economies of scale. The companies have identified meaningful cross-selling revenue synergies as a result of cross-selling the complementary portfolios in the United States, the ability to sell SeaSpine’s biologics and 7D technology into Orthofix’s international established channels, the greater breadth of bag to support large distributor conversions and increased product offerings per procedure.
- Strong financial profile with enhanced opportunities for investment. The transaction is expected to be accretive to Orthofix’s standalone adjusted EBITDA by the second full year after close and is expected to be accretive to our existing return on invested capital after fully realizing synergies, including cost savings. The combined company’s strong capital structure will allow it to self-fund certain investments intended to maximize growth potential, including organic and inorganic innovation initiatives, sales force expansion, and field inventory and instrumentation, without the need for equity financing.
“This transaction brings together two complementary organizations to create an industry leader with the immediate financial strength to self-fund investments that deliver both growth and better patient outcomes," SeaSpine President and CEO Keith Valentine said. "We are excited about the value we can create for the combined company’s shareholders, the new opportunities opened for employees and our ability to now provide surgeons and hospital partners a complete procedural solution using cutting-edge technology at every level.”
Upon the merger's closing, the combined company’s Board of Directors will consist of nine directors, with five designated by Orthofix, including a lead independent director, and four designated by SeaSpine. Serbousek will be executive board chairman, and Valentine will be president, CEO and board member. The remainder of the combined company’s board and leadership team will be named prior to closing and is expected to include representatives from both Orthofix and SeaSpine.
The combined company will be headquartered in Lewisville, Texas. This location will conduct general business, product development, medical education and manufacturing. The new company will retain primary offices in Carlsbad, Calif, with a focus on spinal product innovation and surgeon education, and in Verona, Italy, with an emphasis on product innovation, production, and orthopedic education. Current facilities in Irvine, Calif.; Toronto, Canada; Sunnyvale, Calif.; Wayne, Pa.;, Olive Branch, Miss.; Maidenhead U.K.; Munich; Paris; and Sao Paulo, Brazil will also be retained.
Perella Weinberg Partners LP is serving as financial advisor to Orthofix, and Hogan Lovells U.S. LLP is serving as its legal counsel. Piper Sandler & Co. is serving as financial advisor to SeaSpine, and DLA Piper LLP is serving as its legal counsel.