Wright Medical To Sell Large Joints Business To Corin Holdings

Wright Medical Group N.V. (NASDAQ:WMGI) , a global provider of medical extremities and biologics products, recently entered into an agreement with Corin Holdings limited over the divestment of its ‘legacy Tornier’ business for $33 million (€29.7 million) in cash.

The transaction is expected to close by the end of the third quarter or early in the fourth quarter of 2016, subject to certain closing conditions.

Notably, after taxes and deal costs (transaction and transition costs), Wright Medical will be left with $20 million of cash. This divestiture will allow Wright Medical to better focus on its high-growth extremities and biologics businesses and fortify its market position.

Corin Holdings is a globally renowned orthopedic manufacturer, primarily based in Europe. On the other hand, the Tornier unit of Wright Medical is a ‘clinically proven portfolio’ of hip and knee implant systems that has a global reach (especially France and Europe). The portfolio includes Dynacup and Meije Duo hip implants, and HLS KneeTec and HLS Noetos knee implants.

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Following the closure of the deal, Wright Medical is supposed to retain the exclusive rights to make use of the ‘Tornier’ brand name on its products. However, the acquired products will transit to ‘Corin’ brand name after a certain period. Notably, the Tornier business will continue to headquarter in Montbonnot, France.

The Large Joint segment has been experiencing lower sales over the past few quarters. In the first quarter of 2016, Large Joint sales declined across both the U.S. and international markets. In the U.S., sales were down 43.5% year over year to $26 million while international sales declined 3.3% year over year to $11.7 million.

Wright Medical is currently in the process of determining the financial impact of the transaction. The company had expected the segment to contribute $37 million in sales and adjusted EBITDA of approximately $5 to $6 million. Although the transaction will hurt EBITDA, management reiterated its earlier guidance of $30–$35 million.

However, revenue is now projected in the range of $668–$678 million, down from the earlier range of $705–$715 million for full-year 2016.

Zacks Rank & Key Picks

Wright Medical has a Zacks Rank #3 (Hold).

Better-ranked stocks in the medical space are ABIOMED Inc. (NASDAQ:ABMD) , Mesa Laboratories Inc. (NASDAQ:MLAB) and BioTelemetry Inc (NASDAQ:BEAT) . All the three stocks sport a Zacks Rank #1 (Strong Buy).