Greatbatch Inc. is pushing into the orthopedic equipment market with its fourth acquisition in less than a month -- a $125 million deal to buy Swiss surgical instrument maker Precimed.
The acquisition extends Greatbatch's push to broaden its medical components business into a rapidly growing segment of the implantable medical equipment market and makes the Clarence-based company one of the top three suppliers to orthopedic device makers.
The deal gives Greatbatch a company that is expected to add $100 million to $120 million to its annual sales next year, while having no impact on its profits, excluding acquisition-related charges, such as research and development and integration expenses.
Greatbatch executives expect the deal to begin adding to the company's profits in 2009.
Precimed makes instruments used in hip and knee replacement surgery, along with spine and trauma products. Its products are used in minimally invasive surgical procedures, while Precimed also makes instruments for joint resurfacing.
"This transaction serves as Greatbatch's entree into the attractive orthopedic market," said Thomas J. Hook, the company's president and chief executive officer.
With the addition of Precimed, Greatbatch now expects its sales next year to reach $500 million to $550 million, with its new orthopedics business accounting for about 23 percent of its revenues, Hook said Tuesday.
At the same time, Greatbatch's reliance on the cardiac rhythm management market, which provided 85 percent of its revenues in 2004, is expected to drop to slightly under half
of the company's revenues next year, he said.
"It really gives us diversification," said Anthony Borowicz, Greatbatch's treasurer. "Our strategy all along has been implantable medical components, and orthopedics are implantable medical components."
Under the terms of the Precimed deal, which is expected to close early next year, Greatbatch will pay $125 million in cash, plus an additional payment of up to $10 million in cash that hinges on its earnings in 2008. The acquisition also includes a company that Precimed previously agreed to purchase but has yet to disclose, Hook said.
Precimed, which was founded in 1988, has about 700 employees at its five factories in Switzerland, Pennsylvania, Indiana and Western Europe, along with its U.S. headquarters in Exton, Pa. The company also has sales offices in Japan, China and Great Britain.
Precimed is the fifth company that Greatbatch has acquired this year. Two of its previous acquisitions -- Minnesota-based Quan Emerteq and Enpath Medical -- give Greatbatch a new line of therapy delivery products, including a line of advanced catheters that can be used to reach parts of a patient's body that normally can't be reached by traditional catheters, along with products that help doctors insert them. A third, Cleveland-based Biomec Medical, expanded Greatbatch's product design capabilities.
On the commercial power side, Greatbatch earlier this month purchased New Jersey-based Engineered Assemblies Corp., expanding its rechargeable battery product lines. Its October purchase of IntelliSensing LLC in Orchard Park gives Greatbatch a line of battery-powered wireless sensors that can measure temperature and pressure for its energy industry customers.
Through a combination of sales growth and cost-cutting, Greatbatch hopes to increase its operating profit margin, expected to be in the 11 percent to 13 percent range next year, by two percentage points a year from 2009 to 2011, Hook said.