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Orthopedic and Dental Industry News Complete Archive »

Wright Medical and Tornier Agree to Merger BY ANDREW VAHRADIAN, OCTOBER 28, 2014

Wright Medical Group and Tornier N.V. entered into a definitive merger agreement under which Wright and Tornier will merge in an all stock transaction with a combined equity value of approximately $3.3 billion, or 5.5x LTM revenues.

Under the terms of the agreement, each outstanding share of Wright common stock will be exchanged for 1.0309 ordinary shares of Tornier. After the merger closes, Wright and Tornier shareholders will own approximately 52% and 48% of the shares of the combined company on a fully diluted basis respectively.

The company will conduct business as "Wright Medical Group N.V." and will be domiciled in the Netherlands, where Tornier has been headquartered for eight years. The company will base its Lower Extremity & Biologics business in Memphis, TN, where Wright’s current headquarters is located, while its Upper Extremity businesses will be based within Tornier’s existing facility in Bloomington, MN and its U.S. engineering center in Warsaw, IN.

Robert Palmisano, Wright's current Chief Executive Officer (CEO), will become President & CEO of the combined company, while David Mowry, Tornier's President & Chief Executive Officer, will become Executive Vice President & Chief Operating Officer. Additionally, the company's Board of Directors will comprise of five representatives from both Wright's and Tornier's existing boards, including Robert Palmisano and David Mowry.

The transaction creates a pure play Extremities-Biologics company with comprehensive and complementary upper and lower extremity product portfolios. Furthermore, the deal provides the company with a significant amount of diversity and scale across various geographies and product categories, expands the capability of selling biologic products across an expanded upper and lower extremities product portfolio, and combines two research and development teams, all with the aim of accelerating the company's route to profitability and a stronger financial profile.

The combined company's annual revenues will be greater than $600 million and be roughly split: 41% Lower Extremity, 40% Upper Extremity, 12% Sports Medicine & Biologics and 9% large joint. Once integrated, the companies anticipate revenues of the combined business growing in the mid-teens and adjusted EBITDA margins approaching 20% in three to four years. Additionally, the transaction is expected to be accretive to the combined companies’ adjusted EBITDA in the second full-year after completion of the transaction.

The company projects the amount of cost synergies to be in the range of $40 to $45 million and are expected to be fully realized by the third year after completion of the transaction. Cost synergy opportunities include: public company expenses, overlapping support function and systems costs, as well as process and vendor consolidation opportunities across the business.

The company anticipates its stock will continue to trade on the NASDAQ Global Select Market (NASDAQ GS) under ticker "WMGI". The transaction is expected to close 1H:15.

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