Third quarter earnings season is off to a bad start for Cryolife, Inc. (NYSE:CRY), maker of medical devices and tissue processing systems focused on cardiac and vascular surgery. CRY stock slumped on Wednesday, October 11, when the company reported Q3 revenues of $45.1 million, well below its previously announced guidance of $46.5 million to $47.5 million. Not even an acquisition turned the stock northward, and it stayed down about 16% throughout the day.
On October 10, Cryolife announced the acquisition of German medical device developer JOTEC AG, which makes technologically differentiated endovascular stent grafts, and cardiac and vascular surgical grafts, focused on aortic repair.
JOTEC generated revenues of €43 million, or approximately $51 million at current currency exchange rates, for the 12 months ended June 30, 2017. The revenue multiple works out to 4.4x.
The combined company will have a broad and highly competitive product portfolio focused on aortic surgery, and will position CryoLife to compete in the endovascular surgical markets, specifically the $2.0 billion global stent graft market. In addition, the acquisition will leverage CryoLife’s global infrastructure and accelerate its direct sale capabilities in key European markets, and will foster cross-selling opportunities between the CryoLife and JOTEC product portfolios.
CryoLife expects to finance the transaction and related expenses, as well as refinance its existing $69 million term loan, with new $255 million senior secured credit facilities, consisting of a $225 million institutional term loan B and a $30 million undrawn revolving credit facility, $56.25 million in CryoLife common stock, and available cash on hand.
Cryolife made three acquisitions between 2014 and 2015, for a total of $136 million, according to our database. All three targets specialized in cardiac medical devices and were based in the United States.
