Regeneration Technologies and Tutogen Medical have approved a definitive agreement to merge the two companies in a tax-free, stock-for-stock exchange. The combined entity will be “a provider of sterile biologic solutions for patients worldwide, with a diverse mix of implants and distributors.”
Under the terms of the merger agreement, Tutogen shareholders will receive 1.22 shares of newly issued RTI common stock in exchange for each share of Tutogen common stock they own. Based on RTI’s closing stock price of $10.54 per share on Nov. 12, this represents a value of $12.86 per Tutogen share, or an aggregate equity value of approximately $263 million. Upon completion of the merger, RTI stockholders will own approximately 55 percent of the combined company and Tutogen stockholders will own 45 percent of the company, on a diluted basis.
Available synergies include approximately $5 million to $6 million in identified cost savings, once fully realized, and potential revenue enhancement opportunities. The combined company is expected to have more than $30 million in cash by year end and will be generating positive operating cash flow. Given the strong position, future acquisitions seem likely.
Specific benefits of the merger include the diversification of markets, enabling the combined company to offer more patients its sterile, biological products. RTI focuses on implants addressing the spine, sports medicine, bone graft substitutes and general orthopedics markets. Tutogen has a complementary focus on dental implants and surgical specialties including urology, obstetrics/gynecology, breast reconstruction, hernia, ophthalmology and ENT markets, as well as implants addressing the spine market.
The combined revenue product mix is estimated to be:
- 32% spine
- 17% dental
- 16% sports medicine
- 10% bone graft substitutes
- 14% international
- 5% surgical specialties
- and 6% attributed to other categories
The combined distribution and marketing team should offer significant cross distribution opportunities. Distributors of RTI’s products include Medtronic, Stryker, Orthofix, Wright Medical, Exactech and Zimmer, among others. Distributors of Tutogen’s implants include Zimmer, Davol (a subsidiary of C.R.Bard), Mentor, Coloplast and IOP Inc.
The new company will be headquartered in Alachua, Florida with Brian Hutchison leading the company as Chairman and CEO. Tom Rose, the current CFO of RTI, will serve in the same capacity at combined entity. Guy Mayer, President and CEO of Tutogen, will become President of the combined company, with a focus on international activities and sales and marketing.
The transaction is expected to close in the first quarter of 2008.