Continuing Consolidation: Greatbatch Snaps Up Lake Region Medical

And the consolidation continues—this time, on the supplier side. In less than two years, three companies have merged into one.
Greatbatch Inc. has agreed to acquire medical device contract manufacturer Lake Region Medical for approximately $1.73 billion in cash and stock, a transformative deal that will create one of the largest medical device OEM suppliers in the world, serving the cardiac, neuromodulation, vascular, orthopedics and advanced surgical markets.

Greatbatch will pay about $478 million in cash and issue about 5.1 million shares and options to Lake Region Medical and assume about $1 billion of net debt. The agreement has been unanimously approved by the boards of directors of both companies.
Frisco, Texas-based Greatbatch develops and manufactures medical device technologies for the cardiac, neuromodulation, vascular and orthopedic markets; and batteries for high-end niche applications in the portable medical, energy, military and environmental markets. Lake Region Medical specializes in point-of-care products in the cardiovascular and advanced surgical markets.

These include offerings in electrophysiology, vascular access, cardiovascular, urology, oncology, orthopedics, laparoscopy, biopsy/drug delivery, and arthroscopy.

Once the transaction closes, the combined company will employ more than 9,000 people and have revenues of approximately $1.5 billion.

“The combination of Greatbatch and Lake Region Medical brings together two highly complementary organizations that can provide a new level of industry-leading capabilities and services to OEM customers while building value for shareholders,” said Thomas J. Hook, president and CEO of Greatbatch. “Through this transformative deal, we are going to be at the forefront of innovating technologies and products that help change the face of healthcare, providing our customers with a distinct advantage as they bring complete systems and solutions to market. In turn, our customers will be able to accelerate patient access to life-enhancing therapies.”

Lake Region Medical was formed through last year’s acquisition of Lake Region Medical by Accellent Inc. Investment firms Kohlberg Kravis Roberts & Co. and Bain Capital bought Massachusetts-based Accellent in 2005. After Accellent bought Minnesota-based Lake Region it adopted the name shortly after.

“I am very proud of the Lake Region Medical team and what they have accomplished over many years,” said Donald J. Spence, chairman and CEO of Lake Region Medical. “Today marks the start of an important new chapter for the company and I am confident the combination of Lake Region Medical and Greatbatch will form an even stronger entity with unmatched technology and manufacturing capabilities to better serve our customers into the future.”

The companies claim the merger will provide a “more comprehensive portfolio of solutions and services” to OEM customers. In addition, it diversifies Greatbatch into the advanced surgical, vascular and interventional cardiology segments of medical technology. The combination creates a company with international scope—with operations in the United States, Latin America, Europe and Asia-Pacific.

Combined revenues in 2014 of Greatbatch and Lake Region Medical were approximately $1.5 billion. According to Greatbatch, the transaction is expected to be double-digit accretive to cash EPS in 2016, the first full fiscal year post closing and “meaningfully more accretive” after. The combined company expects to achieve net annual synergies at the operating profit level of $25 million in 2016, which is expected to increase to at least $60 million in 2018.

At closing, current Greatbatch stockholders are expected to own approximately 83.4 percent of the combined company and current Lake Region Medical shareholders are expected to own approximately 16.6 percent. The transaction is expected to close in the fourth quarter of this year, subject to customary closing conditions and regulatory reviews.