Manufacturing divestment boosts RTI Surgical

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RTI Surgical’s move to sell its original equipment manufacturing business to Montagu Private Equity for $490m has delighted its long-suffering shareholders. The deal is huge for the orthopaedics company, which had a market cap of only $203m before the deal was announced. RTI’s stock closed up 63% yesterday after it said it would rid itself of the unit, which the sellside sees as the slowest-growing out to 2024, according to EvaluateMedTech’s consensus forecasts. RTI plans to remake itself as a pure-play spine business; its spinal therapies unit includes the products it obtained from the acquisitions of Zyga Technology two years ago and Paradigm Spine last March, and is forecast to grow much more rapidly than the manufacturing business. As well as investing in its spine offering, the company intends to become debt-free – it had $51.6m total liabilities at the end of October. $480m of Montagu’s payment comes as cash; the other $10m is unspecified.

RTI Surgical
    Global sales ($m)
Unit Segment 2019 2020e 2022e 2024e CAGR
Orthopaedics Original equipment manufacturing 125 128 137 146 +3%
Orthopaedics Legacy international 26 27 29 31 +3%
Orthopaedics/ other Sports medicine and orthopaedics 55 56 59 62 +2%
Spine Zyga 5 5 7 8 +13%
Spine Paradigm US 27 43 61 79 +24%
Spine Paradigm OUS 9 11 13 14 +11%
Spine Established therapies 76 78 85 92 +4%
  Total company revenues 323 348 391 433 +6%
Source: EvaluateMedTech.

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