Getinge is currently a major player in pressure ulcer prevention and healing in many European markets, while KCI’s primary geographical area of strength is the North American market. The combination of Getinge’s and KCI’s TSS business creates a global platform with strong positions in most key markets, with significant potential for portfolio and operational synergies. The TSS portfolio and operations will be integrated into Getinge Extended Care under the ArjoHuntleigh brand.
About Therapeutic Support Systems
The TSS business includes a comprehensive portfolio of specialty therapeutic beds, mattress replacement systems and other support surfaces and patient mobility devices. TSS has a particularly strong portfolio for therapeutic wound care, bariatric care and critical care settings. TSS had revenues of USD 247 million in 2011, with approximately 1300 employees globally with sales locations in the US, Canada, Germany, Austria, Italy Switzerland, the UK and France. In 2011, the US market accounted for 60% of the TSS business, with Europe accounting for approximately 30%. Similar to Getinge Extended Care’s Therapeutic Surfaces business, rental is the primary business model applied for serving customers in acute and post-acute care. The acquisition will enable Getinge Extended Care to achieve a balance between equipment sales and recurring revenues, and the business in the US will increase significantly, in line with its strategic goals.
“The acquisition of TSS provides an optimal extension of Getinge’s Extended Care business, boosting the competencies of our operations. It has the potential to offer substantial value, innovation and choice to our customers around the world,” says Johan Malmquist, CEO, Getinge Group.
Sales and operational synergies
Integration of TSS with Extended Care’s Therapeutic Surfaces business is expected to create operational synergies in sales, distribution operations, manufacturing and headquarter functions. The complementary nature of the two product portfolios is expected to generate channel synergies and increased customer value. TSS has strong positions in critical and bariatric care while Extended Care’s focus has been in general care. Both portfolios have complementary products for Intensive Care Units (ICUs).
The acquisition of TSS takes the form of a carve-out, whereby Getinge purchases all assets and intellectual property associated to the TSS business. The acquisition price, debt-free, is USD 275 million (enterprise value), which corresponds to an EV/EBITDA multiple of 5.7x based on annual profit in 2011 on a stand-alone basis. Acquiring TSS’s net assets will result in goodwill, which is fully tax deductible at a tax value of approximately USD 30 million (not included in the above-mentioned multiple). Transaction and restructuring costs will amount to USD 35 million, of which USD 25 million will be charged to Getinge’s profit in the fourth quarter of 2012. The remaining USD 10 million will be charged next year. The acquisition is pending approval of the competition authorities in several countries and Getinge expects the transaction to be completed in the fourth quarter of 2012. The acquisition is expected to contribute to Getinge’s profit per share in 2013, including restructuring and financing costs and goodwill adjustments. The transaction will be financed through a bridge loan.