Wright Medical Group, a specialty orthopedic company that provides extremity and biologic solutions, and Tornier, a global medical device company, have entered a definitive merger agreement under which Wright and Tornier will combine in an all-stock transaction with a combined equity value of approximately $3.3 billion.
Each outstanding share of Wright common stock will be exchanged for 1.0309 ordinary shares of Tornier. Wright shareholders will own approximately 52% of the shares of the combined company on a fully diluted basis and Tornier shareholders 48%. For Tornier shareholders, the exchange ratio implies a per share value for Tornier that represents a 28% premium to Tornier's closing share price Oct. 24, the last trading day prior to the parties entering into the agreement.
The combined company will conduct business as Wright Medical Group and will leverage the global strengths of both product brands as a pure play extremities-biologics business. The combined company will have its U.S. headquarters in Memphis, Tenn., home to Wright's current headquarters.
The businesses of Wright and Tornier will be incorporated in the Netherlands, where Tornier has been incorporated and headquartered for approximately eight years. Both companies agreed maintaining Tornier's domicile best supported the growth strategy driving the merger. Over the long term, it is anticipated this structure will provide the company with more accessible cash flow, enhancing its ability to innovate and grow, creating long-term shareholder value.
The U.S. headquarters for the lower extremity and biologics business will be based in Wright's existing facility in Memphis, Tenn., and its Augment team will continue to be based at its facility in Franklin, Tenn. The U.S. headquarters for the upper extremity business will be based within Tornier's existing facility in Bloomington, Minn., and its U.S. engineering center in Warsaw, Ind.
Wright Medical Group will be led by Robert Palmisano, Wright’s president and CEO, who will become president and CEO of the combined company. David Mowry, Tornier's president and CEO, will become executive vice president and chief operating officer of the combined company. Wright Medical Group's board of directors will be comprised of five representatives from Wright's existing board and five from Tornier's existing board.
The merger of Wright and Tornier will create a mid-sized growth company uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopedics—upper extremities, lower extremities and biologics. That leadership will be further enhanced by anticipated final FDA premarket approval of Augment Bone Graft.
Wright has received an approvable letter from the FDA for its premarket approval application (PMA) for Augment Bone Graft indicating the FDA determined Augment Bone Graft to be safe and effective as an alternative to autograft for ankle and/or hindfoot fusion indications and is approvable subject to customary preapproval facilities inspections.
Both companies will benefit from opportunities to accelerate growth through combined direct sales and distribution networks, a broad product portfolio and deep customer relationships. The joint products, R&D, sales and distribution talent, medical education and relationships will allow an increased focus on the needs of surgeon specialists. Similarly, patients will benefit from dedicated research and development teams that will power enhanced innovation across the combined product portfolio.
The amount of cost synergies is expected to be in the range of $40 million to $45 million anticipated to be fully realized by the third year after completion of the transaction. Expense synergy opportunities include: public company expenses, overlapping support function and systems costs, as well as process and vendor consolidation opportunities across the business.