RTI Biologics is to acquire privately held Pioneer Surgical Technology, headquartered in Marquette, Michigan.
Pioneer is a medical technology company that manufactures and distributes metal and synthetic products in the orthopedics, biologics, spine, trauma and cardiothoracic markets. The acquisition of Pioneer supports RTI’s initiatives to expand its current implant portfolio into metals and synthetics and to grow direct distribution.
“The combination of RTI and Pioneer is an exciting opportunity for both companies and their employees," says Brian K Hutchison, RTI president and chief executive officer. "This acquisition is strongly aligned with RTI’s long term strategic plan, accelerating new growth opportunities and gross margin expansion. Pioneer has built a strong distribution network for their implants, which will be beneficial when we launch our map3 cellular allogeneic bone graft later this year. This acquisition will bring immediate scale, allowing us to reach our strategic goals and take advantage of growth opportunities more quickly than either company could do independently."
“We believe the combination of Pioneer and RTI will be a catalyst for continued growth,” says Daniel Webber, Pioneer’s president and chief executive officer. “The combined company will have a broad portfolio of complementary surgical implants benefiting patients, surgeons and hospitals, as well as advancing the positive momentum we have built at Pioneer. Additionally, RTI’s culture of innovation is a great fit with that of our own employees.”
Under the terms of the merger agreement, RTI will pay USD130m in cash to acquire all the outstanding stock of Pioneer. The transaction will be funded through a combination of cash on hand, a new credit facility and a concurrent private placement of convertible preferred equity from Water Street Healthcare Partners.
RTI has received a commitment from TD Bank, NA, TD Securities USA and Regions Bank for a five-year, USD80m senior secured facility, which includes a USD60m term loan and a USD20m revolving credit facility.
Additionally, RTI has agreed to a USD50m private placement of convertible preferred equity with Water Street, a healthcare-focused private equity firm.
“We are pleased to work with RTI to complete this acquisition and accelerate the company’s strategic plan for growth,” says Curt Selquist, an operating partner with Water Street. “We look forward to contributing our team’s years of experience in the medical products sector and our network of industry relationships to support RTI with continuing to build on its strong foundation.”
The convertible preferred stock will be convertible into shares of RTI common stock, subject to the satisfaction of certain conditions. The convertible preferred stock will also accrue dividends at a rate of six per cent per year, subject to adjustment under specified conditions.
To formalise access to the industry experience of Water Street, RTI has agreed to appoint two directors designated by Water Street to the company’s board of directors, effective at the closing of the transaction.
After the merger transaction is complete, Brian Hutchison, RTI president and chief executive officer, and Robert Jordheim, RTI executive vice president and chief financial officer, will continue to serve in their respective roles. The combined company will be headquartered in Alachua, Florida.
