Tornier Scoops Up OrthoHelix

Tornier N.V. is acquiring OrthoHelix Surgical Designs, Inc. for $135 million plus additional payments over two years, based on revenue milestones.

Tornier made the announcement of the definitive merger agreement in an August 24, 2012, press release.

OrthoHelix develops and market specialty implantable screw and plate systems for the repair of small bone fractures and deformities predominately in the foot and ankle. Tornier focuses on extremities.

According to a company press release, OrthoHelix’s sales for the calendar year 2012, which are all based in the U.S., are projected to reach approximately $29 million, an increase of over 30% compared to 2011. The addition of OrthoHelix is expected to more than double Tornier’s lower extremity revenue and allow Tornier to increase its focus on foot and ankle surgeons.

Douglas Kohrs, Tornier’s president and chief executive officer, said the transaction will enable the company to, “substantially expand our sales coverage of foot and ankle surgeons, significantly enhance our addressable lower extremity market opportunity, and position us to achieve more consistent growth across our upper and lower extremity product categories.”

OrthoHelix’s leading product is its MaxLock Extreme small bone screw and plate systems featuring proprietary anatomic contouring, low profile, and multiplanar fixation. “The combination of OrthoHelix’s broad line of plate and screw systems with Tornier’s ankle arthroplasty, biologics, and other foot and ankle implants is expected to create one of the broadest product and technology offerings to lower extremity surgical specialists in the orthopedic industry. In addition, Tornier plans to utilize its strong international distribution channel to accelerate OrthoHelix’s geographic expansion beyond its current sales base in the U.S., ” stated the company announcement.

Under the terms of the agreement, Tornier has agreed to acquire OrthoHelix for $135 million, which will consist of $100 million in cash and $35 million in Tornier’s stock. Tornier intends to use cash on hand and borrowings to pay for the acquisition. Upon closing, the transaction is expected to be dilutive to Tornier’s 2013 earnings per share, excluding amortization and stock compensation expense, and acquisition and integration related charges, or cash earnings per share, but accretive to its cash earnings per share in 2014.

OrthoHelix will continue to operate under the OrthoHelix name, retain all of its product brand names in the market, and customers will continue to be served by OrthoHelix and their distribution partners. Central operations of the OrthoHelix business will remain based in Medina, Ohio, as will its 80 dedicated employees.

BMO Capital Market analysts Joanne Wuensch said the acquisition logic appears sound, with management looking to build the No. 1 extremities franchise in the world. She observed that OrthoHelix has almost no overlap in its distribution partners with Tornier, just 20% overlap in its customers, and zero revenue outside the U.S., providing the opportunity to drive revenue synergies and its global footprint.

Wuensch said the resulting size and scope of the combined companies will allow further specialization, with more reps dedicated to either the upper or lower extremities areas, creating a dedicated lower extremity effort. She said the price seemed a “bit high, ” but not too far above the average for high-growth medtech companies.