New Jersey-based med-tech company Integra LifeSciences (NASDAQ: IART) said it made a binding offer to acquire the Johnson & Johnson (NYSE: JNJ) Codman Neurosurgery business for $1.045 billion in cash. Codman Neurosurgery offers a portfolio of devices focused on advanced hydrocephalus, neuro-critical care and operative neurosurgery. If the binding offer is accepted, upon closing, Integra will be a leading global provider of neurosurgical products.
“This proposed transformational acquisition of Codman Neurosurgery creates compelling value for our shareholders, employees and patients,” said Peter Arduini, Integra’s president and CEO. “Its innovative portfolio and global reach will enable us to enhance our position in the neurosurgery market, while also building a global infrastructure that will benefit Integra as a whole. We look forward to welcoming the more than 600 Codman Neurosurgery employees to the Integra team.”
Codman Neurosurgery’s existing portfolio and new product pipeline in advanced hydrocephalus, neuro-critical care and electrosurgery complement Integra’s leading products and pipeline in tissue ablation, dural repair and cranial stabilization.
The acquired products reportedly generated $370 million in revenue during 2016 with an EBITDA margin of about 31%.
Integra expects the deal to be accretive to adjusted EPS by at least $0.22 in the first full year after closing and increasing thereafter, and to GAAP EPS by the end of the third year. The acquisition is expected to also accelerate the path to achieving Integra’s aspirational targets of $2 billion in revenue and 30% adjusted EBITDA margin. Integra expects the Codman Neurosurgery revenue to experience some initial disruption in the first year of the combination, and to then grow 3% to 6% longer term. Integra expects to provide detailed guidance regarding the financial impacts of this transaction upon closing.
Integra has obtained committed financing for the acquisition from BofA Merrill Lynch and JPMorgan. BofA Merrill Lynch is serving as exclusive financial advisor and Latham & Watkins LLP is acting as legal advisor to Integra.
The deal, which has been approved by Integra’s Board of Directors, is subject to customary closing conditions, including regulatory approvals, and is expected to close in two steps: first, in the approximately 24 principal countries during the fourth quarter of 2017; and subsequently, in the remaining countries on a rolling basis.