A Medical Device Daily
Kimberly-Clark (Dallas) reported on Friday that it will add higher-margin medical devices to its healthcare unit by purchasing I-Flow (Lake Forest, California) in a cash deal valued at about $276 million excluding acquired cash and cash equivalents.
Kimberly-Clark will start a tender offer to buy all of I-Flow's outstanding stock at $12.65 per share, or about $324 million. The per share price represents an 8% premium to I-Flow's Thursday closing price of $11.76.
I-Flow's suite of pain management products, led by its flagship line, the ON-Q Pain Relief System (ON-Q), is designed to provide reliable and simple non-narcotic, regional anesthesia therapies that redefine post-surgical recovery by eliminating many of the side effects customarily associated with narcotics. I-Flow has about 1,260 employees and reported net sales of about $133 million for the fiscal year ended Dec. 31, 2008.
"I-Flow will increase our medical device sales by more than 50%, add an innovative and successful technology to our growing portfolio of pain management and surgical solution products, and strengthen the depth and breadth of our sales force," said Joanne Bauer, president of Kimberly-Clark Health Care.
The planned acquisition follows an announcement from the company early last week that it would acquire Baylis Medical's (Montreal) pain management business for an undisclosed sum (Medical Device Daily, Oct. 8, 2009). The Baylis acquisition is being looked at as a way for Kimberly-Clark to boost its standing in the chronic spinal pain management market. Kimberly-Clark's healthcare division — which provides products and educational resources to help prevent, diagnose and manage various healthcare-related infections — has exclusively distributed Baylis Medical's pain management products in the U.S. since 2001.
Both companies' boards have unanimously approved the I-Flow deal, which is targeted to close in 4Q09. The acquisition is expected to add to Kimberly-Clark's earnings starting in 2011.
The same day that the I-Flow deal was reported, the law office of Brodsky & Smith (Ala Cynwyd, Pennsylvania) reported that it is investigating potential claims against the board of of I-Flow relating to the proposed acquisition by Kimberly-Clark. The firm said the investigation concerns "possible breaches of fiduciary duty and other violations of state law related to the I-Flow board's approval of the proposed merger." The firm said the transaction appears to be unfair, in part, given that I-Flow stock was trading at $12.45 a share as recently as Oct. 5, and $12.14 on Sept. 28.
Goldman, Sachs & Co. acted as exclusive financial advisor to I-Flow. Citi served as exclusive financial advisor to Kimberly-Clark.
In other dealmaking activity, Cardo Medical (Los Angeles), a company engaged in the development of orthopedic medical devices, reported that it has acquired substantially all of the assets of Vertebron (Stratford, Connecticut), a spinal implant device company, for $1.3 million in cash.
Vertebron develops spinal implant products focused on fusion technology for the lumbar and cervical spine as well as motion preservation technologies.
Cardo will retain 100% ownership of all Vertebron's implant technologies for spinal surgery. Cardo has also acquired all intellectual property rights owned by Vertebron which includes more than 20 U.S. issued patents and patent applications. Through a previous licensing agreement, Cardo currently markets and distributes the PSS Pedicle Screw and SCP Cervical Pate systems. Cardo Medical will expand its distribution domestically with this acquisition.
Vertebron reported it had generated about $11 million in sales for 2008. On April 21, 2009 Vertebron filed for Chapter 11 bankruptcy protection in the District of Connecticut. The acquisition is the result of a Chapter 11 auction process, approved by the U.S. Bankruptcy Court for the District of Connecticut.
"This acquisition will provide a great springboard to our expanding product portfolio of innovative spinal technologies; and we look forward to a smooth incorporation of these significant assets in the coming quarters," said Andrew Brooks, chairman/CEO of Cardo.