Medical devices maker, Integra LifeScience Holdings (IART) recently announced a private offering of senior notes worth $200 million bearing semi-annual interest rate of 1.625%.
The notes are expected to have an initial conversion rate of 17.4092 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $57.44 per share), subject to adjustments. Integra will also provide a 30-day allotment option of purchasing up to an additional $30 million of aggregate principal amount to its initial buyers. Integra plans to close the offering on June 15, 2011 and expects the notes to mature in December 15, 2016.
Integra estimates that the net proceeds from the issuance of the senior notes to be approximately $194 million. The company intends to use $35 million of the net proceeds to repurchase shares and the balance to repay a portion of its debt under the company’s senior credit facility and for other corporate purposes.
Integra develops and markets surgical implants and medical instruments for Orthopedics (spine, orthobiologics and reconstructive surgery), Neurosurgery (including neurotrauma) and instruments (general surgery). During the first quarter of 2011, the company witnessed balanced sales growth across all its segments – Orthopedic ($72.2 million, up 3% year over year), Neurosurgery ($68.4 million, up 6%) and Instruments ($40.4 million, up 7%).
Moreover, the company exited the quarter with $104.3 million in cash and cash equivalents compared with $128.7 million at the end of December 2010. The company also generated $21.3 million of cash flow and incurred capital expenditures of $5.9 million in the quarter. Additionally, in order to pay down its revolving line of credit, Integra used $40 million of cash during the first quarter.
Presently, Integra is splurging all resources to support the new product development and sales distribution. During the quarter, the company reported a 7.5% rise in research and development cost and a 10.4% hike in selling, general and administrative expenses. Additionally, in May 2011, the company acquired California-based spine fusion product provider SeaSpine for $89 million in cash. The deal is expected to double its distribution footprint and customer base.
However, tighter capital spending continues to challenge the surgical instruments market. Moreover, Integra faces direct competition in the medical instruments & supplies industry from major players like Medtronic (MDT) and Stryker Corp. (SYK).
INTEGRA LIFESCI (IART): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
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