Integra LifeSciences Holdings Corporation will purchase Ascension Orthopedics for approximately $65 million in cash, subject to adjustments, the two companies announced Monday.
Austin, Texas-based Ascension develops and distributes a range of implants for the shoulder, elbow, wrist, hand, foot and ankle. When combined with Integra's business, the products will represent approximately 45 percent of Integra's Orthopedics revenues. In particular, Ascension will add a significant upper extremity and shoulder portfolio to Integra's offerings.
"Ascension is an ideal strategic fit for Integra, as it reinforces our commitment to and presence in the fast-growing extremities space," said Stuart Essig, Integra's CEO, in a statement.
Ascension will also bring to Integra its differentiated pyrolytic carbon technology. PyroCarbon is a specific form of carbon with specially manufactured crystalline structures that give it excellent strength and wear characteristics. Ascension's PyroCarbon has decades of clinical support defining its durability, wear resistance and biocompatibility.
"We are very excited to become a part of Integra," said Guy Mayer, President and CEO of Ascension in a statement. "Integra's dedicated sales force and strong balance sheet provide the stability and infrastructure necessary for us to fuel growth and emerge as a leader in the important extremities market."
Ascension generated approximately $19 million in revenue in the twelve months ended June 2011. Although Ascension has grown its revenues each year since its inception in 1996, it has not operated profitably.
Integra expects to provide detailed guidance regarding the financial impacts of this transaction when it reports its financial results for the third quarter of 2011. Upon closing, Integra preliminarily expects this acquisition to add negligible revenues to its third quarter 2011, approximately $4 million to its fourth quarter 2011 revenues, and $20 million for the year 2012 revenues, in each case net of potential lost business attributable to the integration.
Excluding transaction and integration related costs and charges, the combined organization is expected to generate significant recurring cost savings by the third quarter of 2012. Integra expects this acquisition to have a negligible impact on its third quarter adjusted earnings per share and a dilutive impact of 5 to 6 cents on its fourth quarter adjusted earnings per share in 2011, and a greater dilutive impact on its quarterly 2011 GAAP earnings per share.
Heading into 2012, Integra expects the acquisition to be 6 to 8 cents dilutive to full year 2012 adjusted earnings per share, with dilution in the first half of the year followed by a neutral to slightly accretive second half. Integra expects a greater dilutive impact to Integra's 2012 GAAP earnings per share.
"As Ascension has generated operating losses of about $2 million per quarter, the transaction will be dilutive to Integra's earnings for several quarters," said Jack Henneman, Integra's CFO in a statement. "As we restructure the business, we expect substantial savings to come from reducing redundant costs and increasing the efficiency of the organization. The transaction should become accretive to both adjusted and GAAP earnings by the second half of 2012. We will provide more detailed guidance on the scope and pace of the integration during our third quarter conference call next month."
Integra plans to fund this transaction from cash on hand and borrowings under its line of credit. The transaction is subject to customary closing conditions and is expected to close by the end of September.