Orthofix International N.V. has announced that the company signed an agreement to sell its sports medicine business to Water Street Healthcare Partners, a strategic private equity firm headquartered in Chicago that is focused exclusively on the health care industry.
Water Street Healthcare Partners will acquire Orthofix’s Sports Medicine Business Unit, which operates as Breg Inc., for the purchase price is $157.5 million, which is payable in cash at closing, according to an Orthofix press release.
The sale is expected to occur during the second quarter of 2012. Net proceeds to Orthofix from the sale are anticipated to be approximately $140 million, which will be used for the prepayment of debt as required by Orthofix’s existing credit agreement, according to the release.
“With the divestiture of the Sports Medicine business, we are now able to devote Orthofix’s full resources and attention to strengthening our value proposition around our repair hardware and regenerative biologics and stimulation solutions,” Robert Vaters, president and chief executive officer of Orthofix, stated in the release. “We believe this deleveraging event and resulting borrowing capacity will allow us to expand and enhance both our Spine and Orthopedic business units in a way that accelerates our ability to create shareholder value.”
Chris Sweeney, partner for Water Street, stated in the Orthofix release, “We are pleased that Orthofix has entrusted Water Street to grow Breg. We see tremendous opportunity to build on Breg’s leadership position and create greater long-term value in the organization. We will leverage our team’s deep medical products knowledge, extensive operating experience and network of relationships to strategically expand Breg’s innovative products and global presence.”
According to the release, Orthofix International acquired its sports medicine business in 2003 with the purchase of Breg. The sports medicine business provides a portfolio of bracing and cold therapy products to treat a variety of sports medicine related conditions.
The sports medicine business was Orthofix’s lowest gross margin business and the company expects its gross margin profile to increase approximately 200 to 300 basis points after the sale, officials noted in materials for a conference call about the sale that was scheduled to be held on April 24.