MedSource Technologies Acquired by UTI Corp. for $230 Million

Strategic Insights -

MedSource Technologies, a provider of engineering, manufacturing, and supply-chain management services to the medical device industry, has been acquired by UTI Corp. for $230 million. The deal, led by DLJ Merchant Banking Partners, a private equity unit of Credit Suisse First Boston, combines the two companies to create a leader in the medical device outsourcing space. MedSource, which was launched in 1999 with backing from financial sponsors, will be jointly owned by DLJ Merchant Banking Partners, KRG Capital, and other co-investors.

Key Takeaways:

  • The acquisition price is $230 million, with UTI paying $7.10 in cash per MedSource common share, a 20% premium to the average price over the past 30 days.
  • DLJ Merchant Banking is investing $100 million in the deal, with KRG Capital and other co-investors contributing the remaining amount.
  • MedSource provides engineering, manufacturing, and supply-chain management services to the medical device industry, employing 2,000 workers at 13 facilities in five countries.
  • The merged entity will be jointly owned by DLJ Merchant Banking Partners, KRG Capital, and other co-investors, pending regulatory and shareholder approval.
  • The deal follows a leveraged recapitalization of San Antonio-based medical devices maker Kinetic Concepts Inc. last August, where DLJ Merchant Banking and GS Capital Partners invested $72 million.
  • MedSource shares shot up 15.7% in afternoon trading Wednesday to $6.90 per share.

Statistics:

  • MedSource recorded revenue of $136.3 million for the nine months ended March 28, a 4.7% increase over its prior-year period.
  • The company posted pro forma net income of $4.2 million in that period, up from $3.6 million a year earlier.
  • UTI Corp. has 2,000 employees at 13 facilities in five countries.
  • KRG Capital took a minority stake in a predecessor to UTI in July 1999, and the same month UTI filed to hold an initial public offering for up to $115 million of its common stock.

Sources:

  • "KRG, DLJ buy MedSource," by Kelly Holman and David Carey, April 28
  • The Deal (www.TheDeal.com)
  • Securities filings at the time of MedSource's IPO plans in December 2000.