REG - Adv Medical Solutns. - Proposed acquisition of Peters Surgical

Advanced Medical SolutionsAnnouncement

13/03/2024 07:15

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RNS Number : 6047G  Advanced Medical Solutions Grp PLC  13 March 2024

13 March 2024

 

Advanced Medical Solutions Group plc

("AMS" or the "Group")

 

Proposed acquisition of Peters Surgical

~ Transformational acquisition of Peters Surgical strengthens AMS's position
as a leading global specialist in tissue repair and skin closure ~

 

~ Acquisition expected to deliver high single-digit earnings accretion in the
first full year ~

 

 

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), a world-leading
specialist in tissue-healing technologies, is pleased to announce it has
entered into an agreement for the proposed acquisition of Peters Surgical, a
leading global provider of specialty surgical sutures, mechanical haemostasis
and internal cyanoacrylate devices.

 

The total maximum cash consideration payable is €141.4 million
(approximately £120.8 million) structured as follows:

·      Initial cash payment of €132.5 million (approximately £113.2
million) payable on completion on a debt-free, cash-free basis

·      Earnout of up to €8.9 million (approximately £7.6 million)
payable on delivery of US regulatory approvals, achievement of FY24 revenue
and gross margin targets, and satisfying certain inventory and tax conditions

 

Highlights

·      Peters Surgical is one of the leading European providers of
speciality surgical products, generating revenues of €84.0 million in the
twelve months to 31 December 2023

·      Strengthens AMS's position as a leading global specialist in
tissue repair and skin closure, with a complementary product portfolio

·      Significant long-term cost and commercial synergies, including
increased direct sales capabilities, geographic expansion and cross-selling
opportunities

·      Expected to deliver high single digit earnings accretion in the
first full year of ownership, being FY25

·      Transaction is expected to complete at the end of June 2024

·      Post-acquisition pro forma leverage of c.1.5x which is expected
to reduce materially thereafter

 

Chris Meredith, Chief Executive Officer of AMS, said: "Peters Surgical is an
ideal fit for AMS in terms of its complementary expertise, global reach and
potential for synergies with AMS's existing portfolio. As well as broadening
our portfolio, AMS will benefit from the shared capabilities of the two
companies, including direct sales channels, distribution networks, and
manufacturing locations. We're thrilled to have secured such a
transformational deal which aligns perfectly with our acquisition strategy."

 

Liz Shanahan, Chair of AMS, said: "AMS has successfully delivered organic and
M&A growth via strategic bolt-on deals over the past few years. Today sees
us deliver a much larger transformative acquisition according to plan and this
significantly expands and strengthens the Group's product offering and global
reach. This deal puts us on a very strong footing and the Board is extremely
confident in the Group's future outlook."

 

Thierry Herbreteau, Chief Executive Officer of Peters Surgical, said: "Peters
Surgical has grown into one of the leading European providers of speciality
surgical products thanks to the hard efforts of all the team and the support
of Eurazeo. We are excited about the opportunities that this combination with
AMS, a world leading specialist in tissue-healing technologies, and the
benefits that the transaction can bring to physicians, patients and
employees."

 

A briefing for sell-side analysts will take place at 10am this morning. Please
contact AMS@consilium-comms.com (mailto:AMS@consilium-comms.com) for further
details.

 

Information on Peters Surgical

The Board of AMS has conditionally agreed to acquire 100 per cent. of the
share capital and voting rights of Peters Surgical from Peters Surgical
shareholders including the private asset manager, Eurazeo. Peters Surgical is
a manufacturer and distributor of high-quality surgical closure devices
including sutures, haemostatics clips, haemostatic clamps and internal glues.
The portfolio is focused on surgical specialties in the Cardiovascular
("CV''), Visceral, and Digestive Urology and Gynaecological ("DUG") surgical
indication areas. Headquartered in France, Peters Surgical was founded in 1926
and today employs approximately 650 people around the world.

 

Peters Surgical operates a fully integrated business model including research
and product development, regulatory and clinical affairs, device manufacture,
distribution, commercial and after-sales service. It owns manufacturing
facilities in France, Thailand, India and Germany.

 

Peters Surgical sells products in over 90 countries with direct sales
infrastructure in France, Belgium, Germany, Poland and India; and with a
hybrid sales model in the APAC region and the US. Peters Surgical generated
revenues of €75.5 million in 2022 and €84.0 million in 2023.

 

Products

The largest product category by revenue is the Peters Surgical range of
absorbable and nonabsorbable sutures. Peters Surgical promotes speciality
focused products including CV, thoracic, DUG and ophthalmic sutures. The
suture portfolio has been largely designed by surgeons and is supported by a
significant number of internationally renowned surgeons around the globe and
will significantly enhance AMS's suture positioning and the RESORBA(®) range.
In addition, Peters Surgical has a comprehensive range of titanium haemostatic
clips and Vascular Temporary Occlusion (VTO) clamps and supplies a range of
internal surgical glue products using a novel cyanoacrylate formulation which
can complement the AMS LiquiBand(®) Fix8 range.

 

Financial information

The table below summarises Peters Surgical's audited financial information
from 31 December 2021 and 2022  and Peters Surgical's unaudited financial
information extracted from management information for the financial year to 31
December 2023.

 

 Year ended 31 December (€ millions)    2021  2022  2023
 Revenue                                64.6  75.5  84.0
 Reported EBITDA (1)                    1.9   7.1   10.6

   1. 2021 and 2022 EBITDA presented on pre-IFRS 16 and 2023 EBITDA is the
assessment by AMS's Directors based on extractions from unaudited financial
information

 

The Directors believe that under AMS ownership, excluding synergies, Peters
Surgical should deliver organic revenue growth of more than 4% at a gross
margin of approximately 55% and an adjusted EBITDA margin of approximately
13%.

 

Acquisition rationale

In Peters Surgical, the Board believes it has identified a substantial
acquisition that fulfils all of AMS's strategic criteria: expanding the
Group's presence in the operating room, increasing the portfolio and sales of
AMS branded products, increasing direct selling capabilities and volumes and
expanding its global footprint.

 

In addition to capitalising on existing technologies and infrastructure, the
transaction provides the Group with substantial long-term cost and commercial
synergies:

 

·      Portfolio & indication expansion - Combining highly
complementary portfolios of surgical products creates a leading player in
tissue repair and skin closure and can accelerate the move to expanded
indications for current products;

 

·      Formation of a major global speciality supplier - Positioning AMS
as one of the world's most complete, diverse, and unique suture, glue and clip
manufacturers with a focus on high-quality, specialty products;

 

·      Increased direct sales capability in key territories - Adding
direct sales teams in France, Belgium, India and Poland allows AMS products to
be sold directly into these strategic markets while adding Peters Surgical
products into AMS's direct channel portfolios in UK, Germany, Austria, the
Czech Republic;

 

·      Expansion of commercial footprint in key regions - Utilising
Peters Surgical's APAC, US and EMEA commercial footprint will expedite and
expand AMS's ambitions in those regions;

 

·      Leverage of distribution networks - Optimising each of AMS's and
Peters Surgical's global partnerships and distribution networks would maximise
cross-selling opportunities in markets where both businesses are strongest,
with complementary yet differentiated footprints in Europe and Asia;

 

·      Improved manufacturing efficiency - Leveraging the enlarged
Group's manufacturing capacity to optimise production capabilities and
profitability.

 

 

Anticipated impact of the Acquisition on AMS

The Acquisition is expected to complete at the end of June 2024 following the
completion of the anticipated requirement for French Foreign Direct Investment
screening, which the Directors are confident will be approved without
condition. No other regulatory approvals are anticipated. The cash
consideration will be funded by a new debt facility which includes a £60
million term loan facility and £30 million revolving credit facility,
together (the "New Debt Facility") with the balance of the consideration to be
funded by the Group's cash.

 

The Directors anticipate that the Acquisition will deliver significant
commercial and operational synergies, the majority of which will crystallise
in 2026 and beyond once the regulatory aspects are completed.

 

The Directors expect the Acquisition to be earnings neutral in 2024 (excluding
transaction-related costs) and to deliver high single-digit earnings accretion
in the twelve months ending 31 December 2025 1  (#_ftn1) , the first full
financial year post-completion.

 

AMS plans to work with Peters Surgical's senior management (including the
current Peters Surgical CEO, Thierry Herbreteau) during the integration to
identify how best to utilise the additional substantial skills and experiences
of Peters Surgical's employees for the benefit of the new enlarged AMS Group.
The Directors' primary focus is on maintaining business continuity and
retaining critical talent, to ensure a smooth transition whilst also
dedicating resource to the successful integration and future growth of the two
businesses.

 

New Debt Facilities

AMS has arranged new debt facilities to fund part of the cash consideration of
the Acquisition which comprise:

(i)    a £60 million amortising term loan facility; and

(ii)    a £30 million revolving credit facility

 

Both the term loan and the revolving credit facility mature in March 2027 and
thereafter can be extended by two consecutive twelve-month periods. Interest
on drawn funds will be charged at the SONIA interest rate plus an initial bank
margin of 1.75%, with this margin expected to reduce in 2025 in line with
forecasted leverage reductions.

 

The Directors expect the initial proforma net debt to EBITDA ratio of the
Enlarged Group to be approximately 1.5 x and to reduce materially thereafter.

 

 

Group current trading and prospects

The Group announced its preliminary results to 31 December 2023 today. The
preliminary results were in line with guidance and detailed the significant
commercial, regulatory and clinical progress being made by the Group as it
continues to build its platform for growth and invest in its portfolio of
next-generation products.

 

 

 

For further information, please contact:

 

 Advanced Medical Solutions Group plc                  Tel: +44 (0) 1606 545508
 Chris Meredith, Chief Executive Officer

 Eddie Johnson, Chief Financial Officer

 Michael King, Investor Relations

 ICR Consilium                                         Tel: +44 (0) 20 3709 5700
 Mary-Jane Elliott / Matthew Neal / Lucy Featherstone

 Evercore                                              Tel: +44 (0) 20 7653 6141

 Simon Elliott / Torera Oyewo

 Investec Bank PLC (NOMAD & Broker)                    Tel: +44 (0) 20 7597 5970
 Gary Clarence / David Anderson

 HSBC Bank plc (Broker)                                Tel: 44 (0) 20 7991 8888
 Sam McLennan / Joe Weaving / Stephanie Cornish

 

About Advanced Medical Solutions Group plc

AMS is a world-leading independent developer and manufacturer of innovative
tissue-healing technology, focused on quality outcomes for patients and value
for payers. AMS has a wide range of surgical products including tissue
adhesives, sutures, haemostats, internal fixation devices and internal
sealants, which it markets under its brands LiquiBand®, RESORBA®,
LiquiBandFix8®, LIQUIFIX™ and Seal-G®. AMS also supplies wound care
dressings such as silver alginates, alginates and foams through its
ActivHeal® brand as well as under white label. Since 2019, the Group has
made five acquisitions: Sealantis, an Israeli developer of innovative internal
sealants; Biomatlante, a French developer and manufacturer of surgical
biomaterials, Raleigh, a leading UK coater and converter of woundcare and
bio-diagnostics materials, AFS Medical, an Austrian specialist surgical
business and Connexicon, an Irish tissue adhesives specialist.

 

AMS's products, manufactured in the UK, Germany, France, the Netherlands, the
Czech Republic and Israel, are sold globally via a network of multinational or
regional partners and distributors, as well as via AMS's own direct sales
forces in the UK, Germany, Austria, the Czech Republic and Russia. The Group
has R&D innovation hubs in the UK, Ireland, Germany, France and Israel.
Established in 1991, the Group has more than 800 employees. For more
information, please see www.admedsol.com (http://www.admedsol.com/) .

 

 

(#_ftnref1) 1 This statement is not intended, nor is to be construed as a
profit forecast or to be interpreted to mean that earnings per AMS Share for
the current or future financial years, or those of the Enlarged Group, will
necessarily match or exceed the historical earnings per AMS share.

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