DEFA14A: Surmodics to be Acquired by GTCR for $627 Million, Offering Shareholders $43.00 Per Share

Surmodics has entered into a definitive agreement to be acquired by GTCR, a private equity firm, for $43.00 per share in cash, valuing the company at approximately $627 million.

Summary

• Surmodics has agreed to be acquired by GTCR, a private equity firm.
• The acquisition price is $43.00 per share in cash, representing a 41% premium to Surmodics' 30-day volume-weighted average closing price through May 24, 2024.
• The total equity valuation of the deal is approximately $627 million.
• The transaction is expected to close in the second half of calendar year 2024, pending shareholder and regulatory approvals.
• Upon completion, Surmodics will become a privately held company, and its stock will be delisted from the Nasdaq Stock Exchange.
• GTCR intends to finance the acquisition through a combination of committed equity and debt financing.

Sentiment

Score: 8

Explanation: The sentiment is positive due to the significant premium offered to shareholders and the expectation of enhanced growth under GTCR's ownership. However, there are some negatives such as the delisting and termination of certain employee benefits.

Positives

• Shareholders will receive a 41% premium on the 30-day volume-weighted average closing price.
• GTCR's acquisition shows confidence in Surmodics' business potential.
• Surmodics will have greater ability to invest in the business under private ownership.
• Employee wages, cash bonus opportunity and some benefits will be no less favorable than those currently provided for at least one year after closing.

Negatives

• Surmodics will be delisted from the Nasdaq Stock Exchange.
• The Employee Stock Purchase Plan (ESPP) has been frozen during the pendency of the merger.
• Equity incentive plans will terminate upon completion of the merger.

Risks

• The acquisition is subject to customary closing conditions and regulatory approvals, which may delay or prevent the transaction.
• Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially.
• Unvested equity awards are still subject to forfeiture if employees resign prior to closing.

Future Outlook

The acquisition is expected to close in the second half of calendar year 2024, subject to customary closing conditions and required regulatory approvals; Surmodics will become a privately held company upon completion.

Management Comments

• The acquisition of Surmodics by GTCR at a premium shows a sign of interest and confidence in the potential of our business.
• We have grown our business significantly in recent years and with GTCR that growth has the potential to be enhanced with greater ability to invest in the business under different ownership.
• GTCR is very interested in the future growth of the Surmodics business and will look to the employees of Surmodics to continue to drive that growth.

Industry Context

Private equity firms are increasingly investing in healthcare and life sciences companies, seeking opportunities driven by long-term healthcare utilization trends and cost-containment; GTCR's acquisition of Surmodics aligns with this trend.

Comparison to Industry Standards

• It is difficult to compare this acquisition to industry standards without knowing the specific financial metrics of Surmodics (revenue, profit, etc.).
• However, private equity acquisitions in the medical device space often involve a premium over the current market price, reflecting the potential for future growth and profitability.
• Comparable companies in the medical device or biomaterials space that have been acquired by private equity firms include [hypothetical company 1] and [hypothetical company 2], although the specific terms and valuations would vary based on their individual circumstances.

Stakeholder Impact

• Shareholders will receive a cash payment for their shares.
• Employees are assured that their wages, cash bonus opportunity and some benefits will be no less favorable than those currently provided for at least one year after closing.
• Customers are assured that the terms and obligations of existing contracts will be honored.
• The company will transition from public to private ownership.

Next Steps

• Surmodics will file relevant materials with the SEC, including a proxy statement on Schedule 14A.
• Surmodics will mail the definitive proxy statement and a proxy card to each shareholder.
• A special meeting of shareholders will be held to vote on the proposed transaction.
• The transaction is subject to customary closing conditions and required regulatory approvals.
• The Surmodics senior leadership team will closely monitor the progress and will provide updates as appropriate.

Key Dates

Keywords

acquisition, GTCR, Surmodics, private equity, merger, shareholders, Nasdaq, equity valuation