Daily News: October 13, 2017

Deutsche, Capital One, Fifth Third Support CryoLife Buy of JOTEC

CryoLife, a medical device and tissue processing company focused on cardiac and vascular surgery, entered into a definitive agreement to acquire JOTEC, a German-based, privately-held developer of technologically differentiated endovascular stent grafts, and cardiac and vascular surgical grafts, focused on aortic repair.

Under terms of the definitive agreement, CryoLife will acquire JOTEC for an upfront payment of $225 million, subject to certain adjustments, consisting of 75% in cash and 25% in CryoLife common stock issued to JOTEC’s shareholders. CryoLife expects to finance the transaction and related expenses, as well as refinance its existing $69 million term loan, with new $255 million senior secured credit facilities, consisting of a $225 million institutional term loan B and a $30 million undrawn revolving credit facility, $56.25 million in CryoLife common stock and available cash on hand. The senior secured credit facilities are fully underwritten by Deutsche Bank, Capital One and Fifth Third Bank, and are expected to be syndicated to investors prior to closing of the acquisition.

The combination of CryoLife and JOTEC will create a company with a product portfolio focused on aortic surgery, and will position CryoLife to compete in the endovascular surgical markets.

Pat Mackin, chairman, president and CEO of CryoLife, said, “We believe this acquisition will enable CryoLife to deliver sustained, high single-digit revenue growth, while also diversifying our revenues into a significantly larger addressable market. JOTEC has a technologically differentiated product portfolio addressing the $2 billion global market for stent grafts used in endovascular and open repair of aortic diseases. Their advanced product portfolio has allowed them to achieve a 17% revenue CAGR over the past five years, significantly outpacing the growth in the overall European market. We expect the acquired portfolio to continue to post double-digit growth outside of the United States for at least the next five years. In addition, the acquisition will leverage our global infrastructure and accelerate our ability to go direct in Europe, and will foster considerable cross-selling opportunities between the CryoLife and JOTEC product portfolios. The transaction will also drive gross margin expansion and accelerate our trajectory towards 20% or higher operating margins. We believe this will position CryoLife to deliver growth in non-GAAP EPS at a CAGR of at least 20% over the next five years.”

Mackin added, “We also expect the JOTEC new product pipeline and R&D capabilities to drive longer-term growth beyond the five year horizon, particularly as their most innovative products enter the U.S. market. We plan to utilize CryoLife’s clinical and regulatory expertise to gain FDA approval for these products, which we believe will allow for entry into the U.S. market.”

Thomas Bogenschütz, CEO of JOTEC, said, “CryoLife is ideally positioned to accelerate adoption of our products through its highly complementary and global cardiac and vascular surgery business. We are looking forward to working with CryoLife’s team to drive growth of our existing business, expand into new geographies and accelerate our R&D initiatives in key markets such as the U.S.”