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FOR IMMEDIATE RELEASE
Contact:
Charles W. Federico, Group President and CEO, Orthofix Inc., 704/948-2600
Thomas Hein, CFO, Orthofix Inc., 704/948-2600
Orthofix (OFIX) announces agreement to acquire BREG, Inc.
Acquisition expected to be significantly accretive
Investor conference call tomorrow (Friday) at 11:00 a.m. Eastern Time
"This acquisition is but the first step in our strategy to fortify and
expand our franchises in the three key sectors in orthopedics:
spine, reconstruction, and trauma."
Charles Federico, Group President and CEO
Orthofix International, N.V.
HUNTERSVILLE, N.C./VISTA, Calif., Nov. 20, 2003 - Orthofix (Nasdaq: OFIX)
announced today that it has signed a definitive agreement to acquire privately
held BREG, Inc. -- based in Vista, California, and a market leader in the sale
of orthopedic postoperative reconstruction and rehabilitative products to
hospitals and orthopedic offices -- for the purchase price of $150 million, to
be paid with a combination of cash and Orthofix common stock. Financing for the
transaction will include: $110 million of debt, cash on hand, and Orthofix
common stock valued at $27.8 million. The acquisition is subject to finalization
of financing, approval of BREG shareholders, governmental approval and other
customary closing conditions. It is Orthofix's intention to complete the
acquisition by the end of the year. Orthofix has received a commitment for the
senior secured bank financing for the acquisition from Wachovia Securities.1
Wachovia Securities also acted as financial advisor to Orthofix.
"This acquisition is but the first step in our strategy to fortify and expand
our franchises in the three key sectors in orthopedics: spine, reconstruction,
and trauma. Consequently, we believe this acquisition is not only an outstanding
strategic fit but also will be accretive to Orthofix's revenues, cash flow and
earnings growth in 2004 and going forward," said Charles W. Federico, Group
President and Chief Executive Officer of Orthofix.
The combined company is expected to generate approximately $292 million in total
revenues in 2004, with earnings per share (EPS), subject to a final purchase
price allocation, of approximately $2.60 on a projected 15.6 million diluted
shares (See Table 1, "Projected Post-Acquisition Combined Revenue by Sector").
For the twelve-month period ended September 30, 2003, BREG generated $58.3
million in revenues and $7.7 million in net income.
"The proposed acquisition broadens our product lines, reducing our reliance on
the success of any single product, and enlarges channel opportunities for
Orthofix almost immediately -- we now become a distribution leader in the
office-based and post-operative markets, and will seek opportunities for
cross-
selling products as opposed to sales force integration and reductions. Any
emerging-technology firm looking for distribution into the office-care
environment will see Orthofix as an excellent strategic partner," said Federico.
"Now, with this acquisition, Orthofix has one of the largest sales forces
calling on the orthopedic office."
"Orthofix now has a unique profile within the orthopedic industry: a large and
growing company, with projected 2004 combined revenues approaching $300 million;
a company with the ability to be opportunistic, as evidenced by the proposed
acquisition of BREG; a very profitable company with well-diversified product
lines, some of which rely on `high tech' as a competitive advantage competing in
growing markets in which Orthofix has strong distribution," said Federico. "This
moves Orthofix toward being more similar to the larger orthopedic companies.
"Beyond the strategic fit and potential synergies of this acquisition,"
concluded Federico, "the acquisition also enhances our already strong cash flow.
Furthermore, from a purely financial point of view, the real beauty of this
acquisition is the beneficial EPS effect: it accelerates what already was
expected to be a strong EPS performance."
Added Brad Mason, CEO of BREG: "Having known Charlie and his senior management
team for nearly twenty years and having worked closely together for the past two
years, we know Orthofix is an outstanding partner. In addition to the strategic
benefits, we are particularly excited about the sales opportunities outside of
the United States, which currently accounts for only seven percent of our sales.
With Orthofix's international infrastructure, we should see a positive effect
going forward."
Table 1 Projected Post-Acquisition Combined
Revenue by Sector:
(in millions)
Projected
2004
Spinal $ 58.0
Reconstruction 117.0
Trauma 95.0
Other 22.0
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Total Revenue $ 292.0
In connection with the transaction and contingent upon closing, certain
employees of BREG, including Brad Mason and William Hopson, CFO of BREG, have
entered into employment agreements with Orthofix. In addition, upon closing,
Messrs. Mason and Hopson will receive 150,000 and 50,000 performance accelerated
stock options, respectively, which will vest after four years, although a
portion of such options will be eligible for accelerated vesting if certain
market price targets of Orthofix common stock are satisfied. The options will be
granted by Orthofix in reliance on the NASD exception to shareholder approval
for equity grants to new hires.
INVESTOR CONFERENCE CALL: Orthofix will host a conference call to discuss this
acquisition and related matters. The conference call will be held tomorrow
(Friday, Nov. 21, 2003) at 11:00 A.M. (Eastern Standard Time), 8:00 A.M.
(Pacific Standard Time) and 4:00 P.M. (Greenwich Mean Time). Approximately 10
minutes before the start of the call, investors based in North America who wish
to participate 'live' must dial 800-215-1640. Participants outside of North
America must dial 212-346-6420 and cite reservation number 21166564. In
addition, the call will be audiostreamed 'live' at www.orthofix.com. For those
unable to participate 'live', a recording of the conference call will be
available from 1:00 P.M. (ET), Nov. 21, 2003, until 1:00 PM (ET), Nov. 25, 2003.
Callers based in North America should dial 800-633-8284. Callers outside of
North America should dial 402-977-9140 and cite reservation number 21166564.
Orthofix International, N.V., a diversified orthopedic company, offers a broad
line of minimally invasive surgical, as well as non-surgical, products for the
spine, reconstruction, and trauma market sectors that address the
lifelong-bone-and-joint-health needs of patients of all ages -- making possible
a more active and mobile lifestyle. Orthofix's products are widely distributed
around the world to orthopedic surgeons and patients -- via Orthofix's 380 sales
representatives, and via partnerships with other leading orthopedic product
companies, such as Medtronic Sofamor Danek, Stryker Howmedica, Kendall
Healthcare and Royce Medical. In addition, Orthofix is collaborating in R&D
partnerships with leading medical institutions such as the Wake Forest
University School of Medicine, the Orthopedic Research and Education Foundation,
the Cleveland Clinic Foundation, Innovative Spinal Technologies and the National
Osteoporosis Institute. For more information about Orthofix, please visit
www.orthofix.com.
FORWARD-LOOKING STATEMENTS:
This communication contains certain forward-looking statements under the Private
Securities Litigation Reform Act of 1995. These forward-looking statements,
which may include, but are not limited to, statements concerning the
projections, financial condition, results of operations and businesses of
Orthofix and BREG and the benefits expected to result from the contemplated
transaction, are based on management's current expectations and estimates and
involve risks and uncertainties that could cause actual results or outcomes to
differ materially from those contemplated by the forward-looking statements.
Factors that could cause or contribute to such differences may include, but are
not limited to, the risk that the conditions relating to regulatory clearance
might not be satisfied in a timely manner or at all, risks relating to the
integration of the businesses of Orthofix and BREG, unanticipated expenditures,
the final terms of the financing of this acquisition, changing relationships
with customers, suppliers and strategic partners, risks relating to the
protection of intellectual property, changes to the reimbursement policies of
third parties, changes to governmental regulation of medical devices, the impact
of competitive products, changes to the competitive environment, the acceptance
of new products in the market, conditions of the orthopedic industry and the
economy and other factors described in the most recent reports on Form 10-Q,
most recent reports on Form 10-K and other periodic reports filed by Orthofix
with the Securities and Exchange Commission.
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1 Wachovia Securities is the trade name for the corporate and investment
banking services of Wachovia Corporation and its subsidiaries,
including Wachovia Capital Markets, LLC, member NYSE, NASD, SIPC.