Wright and
Tornier Creating the Premier High-Growth Extremities-Biologics Company
OCTOBER 27, 2014
1
Filed by Wright Medical Group, Inc.
pursuant to Rule to Rule 425
Under the Securities Act of 1933
Deemed filed pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Wright Medical Group, Inc.
Commission File No. 001-35823 |
This presentation
includes forward-looking statements. These forward-looking statements generally
can be identified by the use of words such as anticipate,
expect,
plan,
could,
may,
will,
believe,
estimate,
forecast,
goal,
project,
and other words of
similar meaning.
Forward-looking statements in this presentation include, but are not limited to,
statements about the benefits of the transaction; potential synergies and cost savings
and the timing thereof; future financial and operating results; the expected timing of
the completion of the transaction; the combined companys plans, objectives,
expectations and intentions with respect to future
operations,
products
and
services,
the
approvable
status
and
anticipated
final
PMA
approval
of
Wrights
Augment
®
Bone
Graft
product,
and the positive effects such final approval is anticipated to have on the combined
business. Each forward-looking statement contained in
this presentation is subject to risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by such statement.
Applicable risks and uncertainties include, among others, uncertainties as to the timing of
the transaction; uncertainties as to whether Tornier shareholders and Wright
shareholders will approve the transaction; the risk that competing offers will be made; the
possibility that various closing conditions for the transaction may not be satisfied or
waived, including that a governmental entity may prohibit, delay or refuse to grant
approval for the consummation of the transaction, or the terms of such approval; the
effects of disruption from the transaction making it more difficult to maintain
relationships with employees, customers, vendors and other business partners; the risk
that shareholder litigation in connection with the transaction may result in significant costs of defense, indemnification
and liability; other business effects, including the effects of industry, economic or
political conditions outside of Wrights or Torniers control; the failure to
realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of Wright and
Tornier may not be combined successfully, or such combination may take longer, be more
difficult, time-consuming or costly to accomplish than expected; operating costs
and business disruption following completion of the transaction, including adverse
effects on employee retention and on Wrights and Torniers respective
business relationships with third parties; transaction costs; actual or contingent
liabilities; the adequacy of the combined companys capital resources; failure or delay
in ultimately obtaining FDA approval of Wrights Augment
®
Bone Graft for commercial sale in the United States, failure to
achieve the anticipated benefits from approval of Augment Bone
Graft, and the risks identified under the heading Risk Factors
in Wrights Annual Report on Form 10-K, filed with the SEC on February 27,
2014, and Torniers Annual Report on Form 10-K, filed with the SEC on February 21,
2014, as well as both companies subsequent
Quarterly Reports on Form 10-Q and other information filed by each company with the
SEC. Wright and Tornier caution investors not to place considerable reliance on
the forward-looking statements contained in this presentation. You are encouraged
to read Wrights and Torniers filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking
statements in this presentation speak only as of the date of this release, and Wright and
Tornier undertake no obligation to update or revise any of these statements.
Wrights and Torniers businesses are subject to substantial risks and
uncertainties, including those
referenced above.
Investors, potential investors, and others should give careful consideration to these risks
and uncertainties. Cautionary Note Regarding Forward-Looking
Statements 2 |
Note on
Non-GAAP Financial Measures 3
Wright and Tornier use non-GAAP financial measures, including EBITDA, as adjusted. Their
respective management teams believe that the presentation of these measures provides
useful information to investors and that these measures may assist investors in
evaluating their respective companys operations, period over period. EBITDA
is calculated by adding back to net income charges for interest, income taxes and
depreciation and amortization expenses. While it is not possible to reconcile the adjusted
EBITDA forecast in this presentation to the nearest metric under U.S. generally
accepted accounting principles (GAAP) of the combined business without unreasonable
effort, the adjusted EBITDA forecast excludes non-cash stock based compensation
expense and non-operating income and expense, as well as the expected impact of such items
as transaction and transition costs, impacts from the sale of Wrights OrthoRecon
business and costs associated with distributor conversions and non-competes, all of
which may be highly variable, difficult to predict and of a size that could have
substantial impact on the combined companys reported results of operations for a period. Investors should
consider these non-GAAP measures only as a supplement to, not as a substitute for or as
superior to, measures of financial performance prepared in accordance with GAAP. |
In connection
with the proposed merger, Tornier plans to file with the U.S. Securities and Exchange Commission (SEC) a registration
statement on Form S-4 that will include a joint proxy statement of Wright and Tornier that
also constitutes a prospectus of Tornier. Wright and Tornier will make the joint
proxy statement/prospectus available to their respective shareholders. Investors are urged to
read the joint proxy statement/prospectus when it becomes available, because it will contain
important information. The registration statement,
definitive
joint
proxy
statement/prospectus
and
other
documents
filed
by
Tornier
and
Wright
with
the
SEC
will
be
available
free
of
charge
at
the
SECs
website
(www.sec.gov)
and
from
Tornier
and
Wright.
Requests
for
copies
of
the
joint
proxy
statement/prospectus and other documents filed by Wright with the SEC may be made by
contacting Julie Tracy, Senior Vice President and
Chief
Communications
Officer
by
phone
at
(901)
290-5817
or
by
email
at
julie.tracy@wmt.com,
and
request
for
copies
of
the
joint
proxy statement/prospectus and other documents filed by Tornier may be made by contacting
Shawn McCormick, Chief Financial Officer
by
phone
at
(952)
426-7646
or
by
email
at
shawn.mccormick@tornier.com. Wright, Tornier,
their respective directors, executive officers and employees may be deemed to be participants in the solicitation of
proxies from Wrights and Torniers shareholders in connection with the proposed
transaction. Information about the directors and executive
officers
of
Wright
and
their
ownership
of
Wright
stock
is
set
forth
in
Wrights
annual
report
on
Form
10-K
for
the
fiscal
year
ended December 31, 2013, which was filed with the SEC on February 24, 2014 and its proxy
statement for its 2014 annual meeting of stockholders, which was filed with the SEC on
March 31, 2014. Information regarding Torniers directors and executive officers is
contained in Torniers annual report on Form 10-K for the fiscal year ended December
29, 2013, which was filed with the SEC on February 21, 2014, and its proxy statement
for its 2014 annual general meeting of shareholders, which was filed with the SEC on May
16, 2014. These documents can be obtained free of charge from the sources indicated
above. Certain directors, executive officers and employees of Wright and Tornier
may have direct or indirect interest in the transaction due to securities holdings, vesting of equity
awards and rights to severance payments. Additional information regarding the participants in
the solicitation of Wright and Tornier shareholders will be included in the joint proxy
statement/prospectus. Important Additional Information and Where To Find It
4 |
Wright and
Tornier Agree to Merge Creating Premier High-Growth Extremities-Biologics
Company Combination Will Offer Comprehensive Upper and Lower Extremity Product Portfolio
and Broad Global Reach
Further
Accelerates
Growth
Opportunities
in
Three
of
the
Fastest
Growing
Areas
in
Orthopaedics
Adds Significant Scale and Scope to Provide Accelerated Path to Profitability and Stronger
Financial Profile
Wright
Receives
Approvable
Letter
from
FDA
for
Augment®
Bone
Graft
Todays Announcement
5 |
Products
Recent Strategic Initiatives
Extremities-Biologics company with leadership position
in in Lower Extremities --
foot & ankle
NASDAQ: WMGI www.wmt.com
HQ in Memphis, TN; operations run out of U.S.
2013 revenue: $242M
Products sold in over 60 countries
1,000 employees globally
INBONE
®
and
INFINITY
®
Total
Ankle Systems
ORTHOLOC
®
Reconstructive
Plates
PRO-TOE
®
Hammertoe
Implants
Biologics
Business Mix
Company Summary
Completed transformation to high growth Extremities-
Biologics pure play through successful divestiture of
OrthoRecon business (Jan 2014)
Integration of Solana and OrthoPro (acquired in 1Q14)
Commercial launch of INFINITY
®
total ankle replacement
system (June 2014)
Approvable letter received from FDA for Augment®
Bone
Graft
Wright at a Glance
*2013 revenue
6
73%
27%
3%
10%
25%
62%
US
International
Other
Upper Extremities
Biologics
Foot & Ankle |
Leverages direct
sales force, training capabilities
Further accelerate
growth
Bone repair, soft tissue
indications
Unique solution for
ankle and/or hindfoot fusion
Breakthrough biologic
Platform for future
growth opportunities
First clinically proven, cost-effective alternative to autograft for ankle and/or hindfoot
fusion indications
Roughly a $300M U.S. Market Opportunity
Final approval subject to customary preapproval inspections
Augment
®
Bone Graft is Approvable for Ankle and/or Hindfoot
Fusion Indications
7 |
Augment
Accelerates Wrights Growth Opportunities 8
Demonstrated results
Eliminates harvest site
complications
Patients avoid any
donor site pain
Ankle
Fusions
Hindfoot
Fusions |
Extremities company with leadership position in Upper
Extremities --
shoulder
NASDAQ: TRNX www.tornier.com
HQ in Netherlands; operations run out of U.S., France
and Ireland
2013 revenue: $311M
Products sold in 45 countries
1,076 employees globally
Aequalis Ascend Flex
Shoulder System
Latitude EV Elbow
Prosthesis
Salto Talaris Total
Ankle Prosthesis
CannuLink
Intraosseous
Fixation System
Transitioned US Sales organization into separate
dedicated Upper and dedicated Lower Extremity reps,
including a significant portion from Distributor to Direct
Global commercial launch of Aequalis Ascend Flex
convertible shoulder system (July 2013)
First and only Japanese Reversed Shoulder approval
received and commercial launch underway
Integration of OrthoHelix (acquired in 4Q12)
Tornier at a Glance
9
*2013 revenue
41%
US
International
59%
Business Mix
Products
Company Summary
Recent Strategic Initiatives
59%
19%
17%
5%
Upper Extremity
Lower Extremity
Large Joint
Sports Med &
Biologics |
All stock transaction resulting in a combined equity value of approx.
$3.3B
Combined company ownership: 52% Wright / 48% Tornier existing
shareholders
For Tornier shareholders, exchange ratio implies a per share value for
Tornier that represents a 28% premium to Torniers closing share price
on October 24, 2014
Transaction is subject to customary closing conditions, including the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as
well as Wright and Tornier shareholder approval
Close expected in the first half of 2015
Transaction Overview
10 |
Creates the
Premier High-Growth Extremities-Biologics Company with Comprehensive Upper and
Lower Extremity Product Portfolio and Broad Global Reach 10% of revenue
59% of revenue
*2013 revenue
UPPER EXTREMITIES
LOWER EXTREMITIES
62% of revenue
19% of revenue
EVOLVE®
Radial Head
INFINITY®
Total Ankle System
Aequalis
Ascend Flex
Convertible Shoulder System
CannuLink
Intraosseous
Fixation System
Compelling Strategic Rationale
11
Natural, highly complementary fit of both businesses that retains pure-play extremities
strategy
Combined
business
will
be
better
positioned
to
increase
focus
on
the
needs
of
surgeon
specialists
and
combined
research
and
development
teams
will
power
innovation
to
enhance
patient
outcomes
Larger
combined
presence
and
product
portfolio
creates
scale
to
better
leverage
time
and
capabilities
of
sales force in the hospital contracting process |
Further
Accelerates
Growth
Opportunities
in
Three
of
the
Fastest
Growing
Areas
in
Orthopaedics
Compelling Strategic Rationale
12
UPPER
EXTREMITIES
$1.7B
$2.8B
8-10%
CAGR
LOWER
EXTREMITIES
$1.1B
$1.4B
BIOLOGICS
5-6%
CAGR
$2.7B
$3.7B
8-9%
CAGR
Goal is to leverage sales force and strong product portfolio to drive accelerated growth in
upper and lower extremities
Combination provides Wright with access to large, upper extremities market with leadership
position in shoulder
Opportunities for selling biologics across expanded upper and lower extremities product
portfolio
Adds diversity and scale across various geographies and product categories
Available Market ~$7.9B |
Adds Significant
Scale and Scope to Provide Accelerated Path to Profitability and Stronger Financial
Profile Compelling Strategic Rationale
13
Provides needed scale for both
businesses without diluting focus
Anticipate revenue for combined
business growing in mid-teens and
adjusted EBITDA margins approaching
20% in three to four years
Cost synergies expected in the range of
$40 million to $45 million realized by
year three
Anticipate transaction will be accretive
to
the
combined
companies
adjusted
EBITDA in second full-year after
completion of the transaction
59%
19%
5%
17%
Tornier Sales ~$330M
Upper
Extremity
Lower
Extremity
Sports Med
& Biologics
Large Joint
10%
62%
25%
3%
Wright Sales ~$300M
Upper
Extremity
Lower
Extremity
Biologics
Other
40%
41%
12%
9%
Combined Sales
$600+M
Upper Extremity
Lower Extremity
Sports Med & Biologics
Large Joints |
Employees
Customers
Shareholders
Benefits to Key Stakeholders
14
Significantly expands the breadth and depth of extremity products we offer surgical
specialists
Combined products, sales and distribution talent, medical education and relationships
will allow us to increase our focus on the needs of the surgeon specialists
Dedicated research and development teams will power enhanced innovation across the
combined product portfolio to enhance patient outcomes
Benefit from being part of a larger, dynamic organization that brings together two
leading companies and offers enhanced opportunities for career growth
Blend and maximize the best of our combined talents, capabilities, technologies and
cultures to bring to life a great new company
Further expand sales in three of the fastest growing areas in orthopaedics to accelerate
the path to profitability and a stronger financial profile
Opportunity to participate in the significant upside and future growth prospects
expected from a larger, stronger, combined organization |
Combined
company
to
be
called
Wright
Medical
Group
N.V.
and
anticipate
stock
will
continue
to be NASDAQ listed and will continue to trade under ticker WMGI
Incorporated in the Netherlands
Tornier headquartered here for approximately 8 years
Best supports the growth strategy driving the merger
Over the long-term, it is anticipated that this structure will provide company with more
accessible cash flow, enhancing ability to grow, creating long-term shareholder
value
U.S. headquarters to remain in Memphis, Tennessee:
U.S. headquarters for Lower Extremity and Biologics business will be based in
Wrights existing facility in Memphis, TN and Augment team will continue to be
based at its facility in Franklin
U.S. headquarters for Upper Extremity business will be based within Torniers existing
facility in Bloomington, MN and its U.S. engineering center in Warsaw, IN
Leadership:
Robert Palmisano to become President and Chief Executive Officer
David Mowry to become Executive Vice President and Chief Operating Officer
Board of Directors: 5 representatives from Wrights existing board, 5 representatives
from Torniers existing board
Corporate Structure
15 |
Timing
Expected to close in the first half of 2015
Regulatory approvals
Subject to customary closing conditions, including HSR
Subject to Wright and Tornier shareholder approval
Upcoming milestones
Wright third quarter 2014 earnings call scheduled for November 5, 2014
Tornier third quarter 2014 earnings call scheduled for November 6, 2014
Conclusion and Next Steps
16 |
Creating Premier
High-Growth Extremities-Biologics Company Comprehensive Upper and Lower Extremity
Product Portfolio and Broad Global Reach
Accelerated Growth Opportunities in Three of the Fastest
Growing Areas in Orthopaedics
Significant Scale & Scope to Provide Accelerated Path to
Profitability and Stronger Financial Profile
17 |
For additional
information, please contact: Julie Tracy
Shawn McCormick
Chief Communications Officer
Chief Financial Officer
julie.tracy@wmt.com
shawn.mccormick@tornier.com
(901) 290-5817
(952) 426-7646
www.wmt.com
www.tornier.com
NASDAQ: WMGI
NASDAQ: TRNX
18 |