RTI Surgical announced on Thursday that A&E Advanced Closure Systems is acquiring its cardiothoracic closure business to for $60 million.
The company also entered into a multi-year contract manufacturing agreement in which it will continue to manufacturing existing products under A&E Medical’s ownership. RTI will also engineer, develop and manufacture any potential future products.
RTI is planning to use the proceeds from the sale to pay off part of its term loan and pay off the rest of it by September 2019. The company’s CEO, Camille Farhat, explained that this is a significant step toward RTI returning to long-term profitable growth.
“We are in the initial stages of our journey and continue to take a methodical approach to evaluating our assets, the attractiveness of the markets in which they reside, our ability to successfully operate those businesses, and whether we are the right owner to grow them over the long term,” he said in a statement.
RTI Biologics acquired Pioneer Surgical Technology in July 2013 and the combined company was named RTI Surgical. The transaction was funded with cash on hand, a 5-year 80 million senior secured credit facility that included a $60 million term loan and $20 million revolving credit facility and $50 million in equity from Water Street Healthcare Partners.
The cardiothoracic closure business was one of several components that RTI Surgical acquired from Pioneer. Under its leadership, the business grew at an annualized rate of more than 25 percent in the last five years.
“When we purchased our cardiothoracic closure business, it was roughly a third of the size it is today,” said Farhat. “By leveraging our strong market expertise and developing a successful sales channel, we have grown this product line into a valuable asset that has become a trusted provider to renowned cardiothoracic surgeons and hospitals.”
RTI Surgical will discuss more detail of the business divestiture and terms of the transaction in its second quarter 2017 earnings call on August 8.
