Orthofix and SeaSpine to combine in merger

Orthofix, a global medical device company with a spine and orthopedics focus, and SeaSpine, a global medical technology company focused on surgical solutions for the treatment of spinal disorders, today announced they have entered into a definitive agreement to combine in an all-stock merger of equals.

The combined company, to be named prior to the transaction’s closing, will be a leading global spine and orthopedics company with highly complementary portfolios of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions and a leading surgical navigation system. With products distributed in 68 countries world-wide, approximately 1,600 employees and a global R&D and manufacturing footprint, the new company would have revenues of approximately $693 million as of the twelve months ended September 30, 2022.

Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, SeaSpine shareholders will receive 0.4163 shares of Orthofix common stock for each share of SeaSpine common stock owned. Following the close of the transaction, Orthofix shareholders will own approximately 56.5 percent of the combined company, and SeaSpine shareholders will own approximately 43.5 percent of the combined company, respectively, on a fully diluted basis.

“This transaction significantly advances our mission to deliver innovative, quality-driven solutions that make us a partner of choice for surgeons in their work to improve patient mobility,” said Jon Serbousek, Orthofix President and Chief Executive Officer. “The combined company’s broad portfolio of technology, expanded commercial capabilities and ability to make greater investments in innovative solutions provide a clear roadmap for sustainable, top-tier growth and increased competitiveness across a broad spectrum of products and services. We look forward to capitalizing on this merger’s tremendous value creation opportunities.”

Keith Valentine, SeaSpine President and Chief Executive Officer, said, “This transaction brings together two complementary organizations to create an industry leader with the immediate financial strength to self-fund investments that deliver both growth and better patient outcomes. We are excited about the value we can create for the combined company’s shareholders, the new opportunities opened for employees and our ability to now provide surgeons and hospital partners a complete procedural solution using cutting-edge technology at every level.”

Strategic and financial benefits of the merger

• An industry leader in spine and orthopedics portfolios. The combination of Orthofix’s and SeaSpine’s portfolios will create an innovative suite of offerings in growth segments of spine and orthopedics. The combined company’s differentiated technologies will include: the M6-C^™ artificial cervical disc, a next-generation artificial disc replacement alternative to spinal fusion; the FLASH^™ Navigation System with 7D Technology, which is the only approved image guidance system that utilizes a novel and proprietary camera-based technology and machine-vision algorithms; the Fitbone^™ platform, which includes the currently available intermedullary limb lengthening system; the under-development Fitspine^™ scoliosis solution; and a comprehensive offering of advanced interbody devices featuring WaveForm^® 3D and NanoMetalene^® with Reef Topography^™ technologies.

• One of the industry’s broadest biologics and regenerative technology offerings. Together, the combined company’s biologics portfolio will represent one of the broadest offerings available, extending the new company’s reach to an even greater number of surgeons for use in spine and orthopedics procedures. These biologic solutions include the recently launched Virtuos^™ Lyograft, the first-of-its-kind, shelf-stable and complete autograft substitute; the market-leading Trinity^™ Elite allograft; the best-in-class OsteoStrand® Plus and OsteoSurge® 300 demineralized bone matrix (DBM) products with patented Accell® Bone Matrix, and the future commercialization of Novosis^™, a next generation rh-BMP-2 technology via our recent license agreement with CGBio.The combined company’s regenerative technologies will include the CervicalStim^™ bone growth therapy device, the only FDA-approved PEMF system for cervical treatment; SpinalStim^™ for spine fusion; PhysioStim^™ for the treatment of nonunion fractures; and the recently launched AccelStim^™ bone healing therapy.

• Differentiated and synergistic enabling technologies. The combined company will have a complementary portfolio of technologies that enables it to service the full continuum of surgical care from preoperative planning through surgical navigation. Flagship enabling technologies include the unique FLASH^™ Navigation System with 7D Technology, which is designed to provide visibility during surgery to improve accuracy of screw placement and provide a cost-effective, rapid, radiation-free solution to surgical navigation, and the OrthoNext^™ preoperative planning system.

• Premier offering in high-growth pediatrics market. The combined company will have a complementary portfolio of specialized hardware and enabling technologies, including specialized spine, limb deformity, limb reconstruction and software planning and imaging solutions, that enable it to service the full patient continuum of care for pediatric orthopedic surgeons. Currently an $800 million annual market, pediatrics is among the fastest growing markets in orthopedics.

• Strengthened commercial reach in the United States and internationally. With its broader product and services portfolio, increased resources and deep pipeline, the combined company will be able to attract and support larger, dedicated distribution partners. It will also be able to invest in direct sales representatives in select markets to engage even more surgeon users.

• Revenue synergies, cost savings and economies of scale. The companies have identified meaningful cross-selling revenue synergies as a result of cross-selling the complementary portfolios in the United States, the ability to sell SeaSpine’s biologics and 7D technology into Orthofix’s international established channels, the greater breadth of bag to support large distributor conversions and increased product offerings per procedure.

In addition, the combination is expected to generate at least $40 million in annualized cost savings not including stock-based compensation within three years following the close of the transaction. Cost savings will be primarily from reductions in redundant overhead and public company costs as well as supply chain efficiencies. Working capital and capital expenditure efficiencies are expected to be driven through economies of scale via higher spinal implant set utilization.

• Strong financial profile with enhanced opportunities for investment. The transaction is expected to be accretive to Orthofix’s standalone adjusted EBITDA by the second full year after close and is expected to be accretive to our existing return on invested capital after fully realizing synergies, including cost savings. The combined company’s strong capital structure will allow it to self-fund certain investments intended to maximize growth potential, including organic and inorganic innovation initiatives, sales force expansion, and field inventory and instrumentation, without the need for equity financing.

Leadership and headquarters
The combined company will be led by an experienced Board of Directors and leadership team that leverages the talent within both organizations.

Upon closing of the transaction, the combined company’s Board of Directors will consist of nine directors, with five designated by Orthofix, including Lead Independent Director, and four designated by SeaSpine.

Jon Serbousek will serve as Executive Chairman of the Board, and Keith Valentine will serve as President and Chief Executive Officer and member of the Board. The remainder of the combined company’s Board and leadership team will be named prior to closing and is expected to include representatives from both Orthofix and SeaSpine.

The combined company will be headquartered in Lewisville, Texas. This location will conduct general business, product development, medical education and manufacturing. The Company will retain primary offices in Carlsbad, CA, with a focus on spinal product innovation and surgeon education, and in Verona, Italy with an emphasis on product innovation, production, and medical education for Orthopedics. Current facilities in Irvine, CA, Toronto, Canada, Sunnyvale, CA, Wayne, PA, Olive Branch, MS, Maidenhead UK, Munich, Germany, Paris, France and Sao Paulo, Brazil will also be retained.

Timing and approvals
The transaction is expected to close in the first quarter of 2023, subject to approval by both companies’ shareholders and customary closing conditions and regulatory approvals. Business Wire