RTI Surgical Holdings Inc. agreed to sell its original equipment manufacturing business to private equity firm Montagu Private Equity LLP in a $490 million deal that will make the surgical implant company a pure-play spine business.
The company's board has approved the transaction, for which Montagu will pay $480 million in cash and certain other considerations, totaling $490 million.
RTI Surgical said the deal is subject to shareholder and customary regulatory approvals and is expected to close in the first half of 2020.
The original equipment manufacturing, or OEM, business will continue to develop and manufacture certain products for RTI Surgical under a contractual relationship, according to a Jan. 13 news release.
RTI Surgical plans to use the proceeds from the deal to repay debts and for continued investments in its global spine portfolio.
"The sale of the OEM business to Montagu completes the first phase of our strategic transformation to reduce complexity, drive operational excellence and accelerate the growth of RTI Surgical," said RTI Surgical President and CEO Camille Farhat.
Farhat said the company expects the spine business will have generated global revenues in the range of $118 million to $119 million with gross margins of about 75% in 2019.
After the deal, the continuing business is expected to be debt-free and have about $175 million to $200 million of cash on the balance sheet to support its growth, which will be further driven by the novel therapies portfolio and an expected minimum of 10 new product introductions during each of the next two years, the CEO added.
OEM segment revenues for the fourth quarter of 2019 are expected to be about $47 million and global spine segment revenues are expected in the range of $32 million to $33 million, primarily driven by solid progression of the novel therapies portfolio, delivering over 20% sequential growth compared to the third quarter 2019.
For full year 2019, OEM segment revenues are expected to be about $189 million and global spine segment revenues are expected in the range of $118 million to $119 million.
Piper Sandler was the exclusive financial adviser to RTI Surgical with Sidley Austin and Holland & Knight as legal advisers for the deal. Weil Gotshal & Manges LLP was legal adviser to Montagu.