Henry Schein Signs Agreement to Invest in BioHorizons
Posted Nov 26, 2013
Henry Schein, Inc., the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, announced today plans to make a strategic investment in dental implant manufacturer BioHorizons, Inc., advancing the Company's goal of expanding its position in the dental specialty market.
Henry Schein reached an agreement to acquire a 60% interest in BioHorizons, a U.S.-based manufacturer of advanced dental implants sold internationally. Under the agreement, BioHorizons, with revenue of approximately $115 million, will continue to operate as an independent company. Financial terms of the proposed transaction were not disclosed. The transaction with BioHorizons involves a two-step process: A recapitalization through which Henry Schein will lend approximately $145 million to BioHorizons to fund, among other uses, a distribution to shareholders, which will occur prior to closing, followed by the equity investment. Pending regulatory approval, Henry Schein expects to complete the transaction by the end of the year.
The agreement with BioHorizons strengthens Henry Schein's position in a critical and growing market that also includes the company's investment in CAMLOG Biotechnologies AG, a leading manufacturer of implants in Europe. With these two investments, Henry Schein will have important positions in two of the largest implant markets—the U.S. and Germany—as well as a growing presence in the rest of the world. BioHorizons and CAMLOG, which will each operate independently, are strong brands with unique features and benefits that offer customers a broad range of treatment options. The investment in BioHorizons also strengthens Henry Schein's position and product portfolio in the biologics market, a critical adjunct to the implant market. Henry Schein offers customers a wide array of the products and services associated with implant dentistry, thereby providing a complete solution for the benefit of the dental practice.
"Henry Schein's strategy includes advancing our position in dental specialty markets, an integral part of which is to support those practitioners who perform oral surgery involving implants," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. "Implant dentistry is a critical element of the profession's transition to digital dentistry. More and more abutments for implants are being digitally designed and fabricated, which increase patient comfort and esthetics and reduce patient visits. Customer demand for implants and the associated materials are expected to increase as digital processes are adopted and the dental experience for the patient is enhanced."
The value of the global implant market is expected to reach approximately $4.2 billion in 2016, up from approximately $3 billion in 2012. In the U.S. and Canada, the market is expected to reach $1.5 billion in 2016, up from approximately $1 billion in 2012.
Based in Birmingham, Alabama, BioHorizons employs approximately 325 people and markets its products in 85 markets. Its revenue has been growing on average by more than 10 percent annually, and more than half of that revenue is derived in the U.S. Founded in 1995, the company offers a broad spectrum of innovative products, including implants featuring its proprietary Laser-Lok® microchannel surface technology, designed to minimize bone loss and maximize esthetics.
"On behalf of the shareholders and management of BioHorizons, we are delighted with this partnership, which combines BioHorizons' record of global growth and clinical excellence in the implant dentistry field with Henry Schein's strengths worldwide," said Mortimer Berkowitz III, Chairman of BioHorizons. "Having known the Henry Schein management team for some years, we look forward to working closely with them to build the business into a global leadership position by delivering outstanding patient results through differentiated products."
BioHorizons benefits from a long-serving management team. The company will continue to be led by its President and CEO, Steve Boggan, who has held that position since 1999; Todd Strong, Executive Vice President and Chief Operating Officer, who joined BioHorizons at its founding in 1995; and David Wall, Executive Vice President and Chief Financial Officer. BioHorizons will be a part of Henry Schein's Global Dental Surgical Group, and its revenue will be reported as part of the Company's Global Dental Group.
"We believe our partnership with Henry Schein will further enhance our growth prospects in the implant and biologics market," said Mr. Boggan. "The strength of Henry Schein and its deep relationships in the marketplace create an ideal combination. We are looking forward to advancing the goals of both organizations, and are very pleased to be part of Team Schein."
Henry Schein expects the BioHorizons transaction to be dilutive to earnings per share in 2014 by $0.03 to $0.05, and accretive to earnings per share in 2015 by $0.03 to $0.04. The 2014 dilution is primarily due to a one-time inventory revaluation as required under U.S. GAAP accounting rules for business combinations. Together with the previously announced definitive agreement to acquire 80% of Poland's Medivet S.A., the Company has revised its 2014 financial guidance, as follows:
• For 2014, the Company now expects diluted EPS attributable to Henry Schein, Inc. to be $5.32 to $5.42, which represents growth of 9% to 11% compared with the midpoint of the 2013 guidance range.
• Guidance for 2014 diluted EPS attributable to Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any.
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