Not so fast, Wright and Tornier. U.S. regulatory agencies want a few matters cleared up before deciding whether to approve the proposed $3.3 billion merger of U.S. bone-implant maker Wright Medical Group Inc. with Dutch orthopedic device-manufacturer Tornier N.V. The inquiries will likely postpone the merger until the second quarter of 2015, Wright said in a statement.
The Federal Trade Commission—the U.S. antitrust watchdog—has asked Wright and Tornier for more information, a “second request” that will postpone any FTC action until 30 days after the companies “have substantially complied” with the request. The FTC has the option to shorten the waiting period.
Also, following a pre-approval inspection of Wright’s Augment bone graft production facility, the FDA issued a Form 483 “containing certain observations to which the vendor has already responded,” the company said in a statement filed with the SEC.
Wright believes FDA will issue final approval for Augment, but probably not until the second quarter of 2015.
The FTC’s second request concerns lower extremity products, according to Wright. Tornier has indicated that, for the period ended September 30, 2014, its lower extremity product lines identified in the request accounted for global revenue of approximately $21 million, and U.S. revenue of approximately $14.9 million, which is less than the $15 million U.S. revenue threshold identified in the merger agreement. Tornier specializes in upper-extremity products.
On Dec. 30, Tornier voluntarily withdrew and refiled its Hart-Scott-Rodino notification and report regarding the proposed merger to give the FTC more time to review the material, according to Wright’s fourth-quarter earnings announcement.
Tornier continues to believe that the second request will not materially affect the economics and strategic rationale of the transaction. A second-quarter 2015 closing now“a best-case scenario,” Tornier said. Both companies’ shareholders must also approve the merger.
If it goes through, some executives will have new titles, according to an SEC filing by Tornier.
Bob Palmisano, president and CEO of Wright, will assume the same role in the merged company. Tornier’s president and CEO, David Mowry, will be senior vice president and chief operating officer.
Wright chief financial officer Lance Berry will also be a senior VP and be CFO for the merged organization. JamesLightman, a senior VP, general counsel and secretary of Wright, will keep those roles.
If the merger is completed, Wright’s existing shareholders will own 52% of the combined company, Wright Medical Group N.V., to be based in Amsterdam. Wright’s U.S. headquarters, its lower extremities and biologics businesses will remain in Memphis, TN.
Wright would follow in the footsteps of Medtronic, whose recently closed acquisition of Ireland-based Covidien has moved its headquarters to Dublin. Medtronic’s tax-inversion plan spurred the U.S. Treasury Department to clamp down on such arrangements. In a tax inversion, a company moves to a country with a lower tax rate.