RTI Surgical has sold its cardiothoracic closure business to A&E Advanced Closure Systems, LLC (A&E Medical) for $54m in cash plus an additional $6m in contingent cash consideration.
Concurrent with the sale of the business, RTI has entered into a multi-year Contract Manufacturing agreement whereby RTI will continue to support the cardiothoracic business under A&E Medical’s ownership through the manufacturing of existing products and the engineering, development and manufacturing of potential future products.
RTI intends to use the proceeds from the sale to pay down a portion of its term loan as it extends the maturity of its existing credit facility through September 2019.
“The sale of our cardiothoracic closure business is a significant first step toward focusing our business and advancing our efforts to return RTI to long-term profitable growth through disciplined execution and building scale to extend distribution of our high-quality products in those areas that offer the greatest opportunities to benefit our customers, employees and shareholders,” said Camille Farhat, RTI chief executive officer.
“We are in the initial stages of our journey and continue to take a methodical approach to evaluating our assets, the attractiveness of the markets in which they reside, our ability to successfully operate those businesses, and whether we are the right owner to grow them over the long term.”
The cardiothoracic closure business was one of several components of Pioneer® Surgical Technology, which RTI acquired in July of 2013. Through focused R&D and disciplined direct channel strategy, RTI grew the cardiothoracic closure franchise at a compounded annual growth rate of over 25% over the last five years, transforming the business into a leading global provider of cardiothoracic sternal metal cable and plating systems.
“We believe this sale is a great example of RTI’s core competency in creating value in OEM product lines,” Mr. Farhat continued. “When we purchased our cardiothoracic closure business, it was roughly a third of the size it is today. By leveraging our strong market expertise and developing a successful sales channel, we have grown this product line into a valuable asset that has become a trusted provider to renowned cardiothoracic surgeons and hospitals. The RTI Board and management determined that in joining with A&E Medical, and through having access to Vance Street Capital’s industry knowledge, our cardiothoracic closure business will have even greater opportunity to grow and thrive, to the benefit of its customers and employees and A&E Medical.”
“RTI’s cardiothoracic closure business is an excellent strategic fit with A&E Medical and we are excited to add its high-quality platform to A&E Medical’s global portfolio,” said Brian Martin, partner, Vance Street Capital.
Eric Sklar, president, A&E Medical, added, “This business is strategically aligned with A&E Medical’s growth areas and we look forward to working with RTI’s cardiothoracic closure team to integrate the combined portfolio of medical products and cardiovascular surgical solutions and provide customers with an even broader array of cardiothoracic medical product choices.”
In connection with the sale transaction, Stephens Inc. acted as financial advisor to RTI Surgical and Holland & Knight LLP as legal counsel. Paul Hastings LLP acted as legal counsel to A&E Medical. In regards to extending RTI’s credit facility, TD Bank and First Tennessee Bank served as the co-lead banks.