December 7, 2016 — Teleflex Inc. and Vascular Solutions Inc. announced that the companies have entered into a definitive agreement under which Teleflex will acquire Vascular Solutions in a transaction valued at about $1 billion. Vascular Solutions focuses on developing clinical solutions for minimally invasive coronary and peripheral vascular procedures. The company’s product line consists of more than 90 proprietary products and services that are sold to interventional cardiologists, interventional radiologists, electrophysiologists and vein specialists. The combination is expected to greatly accelerate the growth of Teleflex’s vascular and interventional businesses through increased revenue associated with a greater entry into the coronary and peripheral vascular market. The company also said the deal will increased cross-portfolio selling opportunities to both Teleflex and Vascular Solutions customer bases.
“We are extremely excited to announce this definitive agreement with Vascular Solutions, as it represents a significant step forward in our strategy,” said Benson Smith, chairman and CEO of Teleflex. “Vascular Solutions is a truly unique company with differentiated technologies serving the coronary and peripheral vascular markets. They have a demonstrated long-standing track record of delivering double-digit annual revenue growth, stemming from organically developed, patented products that address unmet clinical needs in high-value procedure categories. In addition, they have established a strong franchise focused on interventional cardiology and interventional radiology which complements Teleflex’s existing businesses. Importantly, while we believe Vascular Solutions has compelling growth opportunities as they continue to build their business with their existing product portfolio, we look forward to potential longer-term tailwinds as we benefit from their robust R&D pipeline and our international distribution network moving forward.”
Vascular Solutions’ CEO Howard Root added, “We are delighted with this combination, which will further improve our commitment to coronary and peripheral vascular care by providing greater access to our innovative product offerings for patients around the world, while offering our shareholders immediate value. We have tremendous respect for the Teleflex team, who share our commitment to patients and providers worldwide. We look forward to working closely with the Teleflex team to achieve a smooth transition.”
Smith said similar to Vidacare and LMA, this transaction represents an opportunity to acquire a company that meets key Teleflex objectives, including obtaining a product portfolio that fits into the vendor’s existing strategic business unit franchises to allowing for synergy. The transaction also offers products that provide a superior clinical benefit to existing alternatives and a cost benefit to hospitals, he explained. This transaction also bolsters Teleflex’s leadership and management team with the additions of key members of the Vascular Solutions leadership team who will be instrumental in continuing to drive the business forward, Smith explained.
“For Teleflex shareholders, we expect this transaction to create value by generating attractive financial returns fueled by incremental revenue growth and accretion to our adjusted margins1 and adjusted earnings per share1 beginning in 2017,” Smith said.
Under the terms of the agreement, Teleflex will acquire all of the issued and outstanding shares of Vascular Solutions common stock for $56 per share, in cash. The boards of directors of both Teleflex and Vascular Solutions have unanimously approved the transaction. This transaction is subject to the approval of Vascular Solutions’ shareholders and the satisfaction of customary closing conditions and is expected to close during the first half of 2017.
Strategic, Financial Benefits
Expands Teleflex’s Product Portfolio: The addition of Vascular Solutions will greatly enhance Teleflex’s presence in the interventional cardiology, interventional radiology, and peripheral vascular markets. The combined company will offer more than 150 cardiac, vascular, and interventional access products. Vascular Solutions has a direct U.S. sales force and international independent distributor network.
The transaction is expected to accelerate Teleflex’s sales growth and provides opportunity to capitalize on existing sales channels. Vascular Solutions is a leader in the coronary and peripheral vascular markets and has consistently generated greater than 10 percent revenue growth per year. This acquisition positions Teleflex to enter new, fast-growing markets while also enhancing Vascular Solutions revenue growth and reach by capitalizing on Teleflex’s international presence and distribution network.
The deal also improves the R&D pipeline for Teleflex. Vascular Solutions has a robust pipeline of new and next-generation products that address complex interventions, radial artery catheterizations and embolization procedures. Since launching its initial product, Vascular Solutions has created and developed more than 100 new medical devices, which have been sold to and used by interventional physicians.
The financial rationale of the transaction is expected to create value for Teleflex shareholders and to be accretive to adjusted earnings per share in 2017, including the impact of incremental interest expense associated with financing the transaction. The company expects the acquisition to provide approximately $0.50 in adjusted earnings per share1 accretion in fiscal year 2018 (first full fiscal year post-close) and to be increasingly accretive thereafter. The company anticipates generating synergies of between $40 million to $45 million by fiscal year 2019 (second full fiscal year post-close). The acquisition is expected to generate a return on invested capital that meets the company’s cost of capital in the fourth year and comfortably exceeds the company’s cost of capital in the fifth year.
Financing the Deal
Teleflex has obtained a commitment letter from J.P. Morgan Chase Bank for a new $750 million senior unsecured bridge facility in connection with the planned acquisition. Teleflex plans to finance the acquisition at closing through a combination of availability under its revolving credit facility and a new senior secured term loan facility. Following consummation of the transaction, Teleflex may look to opportunistically issue senior unsecured notes, the proceeds of which will be used to either repay borrowings under the revolving credit or the new senior secured term loan facilities. Over the long-term, Teleflex intends to maintain its debt to adjusted EBITDA (as calculated in accordance with the terms set forth in the company’s existing credit agreement) at approximately 3.0x.
The transaction is structured as a merger, in which Teleflex will acquire all of the outstanding shares of Vascular Solutions at a price of $56 per share. The transaction is expected to close in the first half of 2017 and is subject to approval by Vascular Solutions’ shareholders, the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions.
J.P. Morgan Securities LLC is acting as financial advisor to Teleflex and Simpson Thacher & Bartlett LLP is serving as legal counsel. Guggenheim Securities is acting as financial advisor to Vascular Solutions and Dorsey & Whitney is serving as legal counsel.
For more information: www.teleflex.com