RTI Surgical and Paradigm Spine have entered into a definitive agreement whereby RTI will acquire all outstanding equity interest of Paradigm Spine in a cash and stock transaction valued at up to US$300 million, consisting of US$150 million at closing plus potential future milestone payments. RTI believes this transaction underscores its significant progress executing against its strategic transformation to reduce complexity, drive operational excellence and accelerate growth.
Under the terms of the agreement, RTI shall pay US$100 million in cash and 10,729,614 shares of RTI common stock at closing. The potential milestone payments are payable in a combination of cash and RTI common stock. The shares of RTI stock to be issued at closing were valued based on the volume weighted average closing trading price of RTI common stock on the NASDAQ for the five business trading days prior to the date of execution of the definitive agreement, representing US$50 million of value. The transaction has been approved by the Board of Directors of RTI and the Board of Managers of Paradigm Spine, and is expected to close in the first quarter of 2019.
Established in 2005, Paradigm Spine’s primary product is the coflex Interlaminar Stabilisation device, a differentiated and minimally invasive motion preserving stabilisation implant that is FDA PMA approved for the treatment of moderate to severe lumbar spinal stenosis (LSS) in conjunction with decompression. LSS is the most prevalent diagnosed spine condition amongst the elderly in North America today, affecting approximately 1.6 million patients annually. Coflex introduces a solution that pairs minimally invasive surgery (MIS) with motion preservation, which is a combined market estimated to be worth nearly US$3.3 billion. Paradigm Spine is based in New York with international operations in Wurmlingen, Germany.
Supported by 12 years of clinical data and endorsed by major spinal societies, including The North American Spine Society (NASS) and The International Society for the Advancement of Spine Surgery (ISASS), coflex leads to faster recovery times with improved patient outcomes compared to the current standard of care. Coflex is covered nationally by Medicare and is making coverage progress toward regional and national private payor decisions.
The transaction is subject to the satisfaction of customary closing conditions and applicable regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act as well as approval by RTI shareholders and Paradigm Spine equity holders. Certain shareholders of RTI and certain equity holders of Paradigm Spine have each executed support agreements in favour of the transaction. The transaction is expected to be accretive to RTI EBITDA within 12 months of closing. RTI intends to fund the cash portion of the consideration with approximately US$100 million in new, fully-committed debt financing, to be provided by Ares Capital Corporation.