Tecomet Buys Symmetry’s Contract Manufacturing Business

The orthopedic contract manufacturing market is experiencing a little more consolidation.

Tecomet Inc., a contract manufacturer supporting the medical device and aerospace industries, is buying Symmetry Medical Inc.’s OEM Solutions business for $450 million, or $7.50 per share after fees and elimination of outstanding debt. Symmetry Surgical will become a newly traded public company, with Symmetry Medical shareholders receiving one share in the public company for every four shares of Symmetry Medical stock.

“This morning (Monday, August 4) we announced a proposed transaction to sell our OEM Solutions business and concurrently transfer to Symmetry Medical Inc.’s shareholders ownership in a new company holding our Symmetry Surgical business,” said Symmetry’s President and CEO Thomas Sullivan in a release about the company’s quarterly performance.”We believe it will maximize shareholder value by providing a premium valuation for the OEM Solutions business along with the upside potential of Symmetry Surgical in the large global market for surgical instruments.”

Headquartered in Warsaw, Indiana, OEM Solutions manufactures high-precision surgical instruments, orthopedic implants, and plastic and metal sterilization cases and trays, for medical device OEMs. Symmetry’s OEM business has more than 450 customers, nearly 2,300 employees and 13 facilities in the United States, the United Kingdom, Ireland, France and Malaysia.

Among the reasons Sullivan cited for the decision to spin off Symmetry’s OEM division were recent transactions that “imply a risk of consolidation in OEM Solutions’ competitive market, increasing the need for Symmetry Medical to explore acquisitions—in orthopedic implants and adjacent medical device categories—to maintain a leadership position,” he said.

Sullivan also noted that OEM Solutions customer consolidation could result in “customer conflicts” with Symmetry Surgical as a reusable general surgical instrument company.

“The OEM Solutions business would no longer be at a competitive disadvantage due to the fact that Symmetry Medical is the only public, substantially orthopedic OEM supplier in an industry with high customer concentration,” according to Symmetry leadership.

Symmetry Surgical would be able to pursue a broader surgical instrument market to optimize sales channels and cost structure without the financial limitations associated with the current capital structure or potential conflicts with OEM customers, and the performance of the new independent public company will no longer be impacted by the volatility associated with capital spending by OEM customers, officials said.

“The proposed transaction has significant benefits for Symmetry Medical’s OEM Solutions customers and Symmetry Surgical customers,” Sullivan added. “The merger with Tecomet will create an OEM business that can provide better service based on broader and more comprehensive capabilities. As a standalone company, Symmetry Surgical will be uniquely attentive to the needs of its customers across the breadth of the surgical instrument market with a distinct clinical and health economic focus without the distraction of implant or other more regulatory demanding product lines.”

Bill Dow, CEO of Tecomet, said: “The combination of Tecomet and OEM Solutions creates a contract manufacturing enterprise that is capable of meeting the growing needs of our customers. OEM Solutions will not only extend the capabilities we offer but also our global reach. Our experienced and successful Tecomet team looks forward to working with OEM Solutions’ strong management crew and workforce to offer exceptional products, services and capabilities to the industries we serve.”

The transaction is expected to be close in the fourth quarter and is subject to customary closing and regulatory approvals.

Founded in 1964 and based in Wilmington, Mass., Tecomet manufactures orthopedic implants, precision surgical instruments, trauma plates and photochemical etched products for medical device customers. The company also makes precision components for the aerospace & defense industry, producing products used in missile and satellite propulsion systems, vision systems, and infrared applications.

Tecomet is owned by private equity firm, Genstar Capital LLC.

The OEM Solutions portion of Symmetry’s business was responsible for 79.9 percent of the company’s second-quarter (ended June 28) revenue at $80.9 million. The OEM business grew 5.5 percent year over year compared to Symmetry Surgical, which dropped by 8.7 percent compared to the same period last year. Overall, for the quarter, the company reported revenue of $101.3 million, up 2.3 percent. Loss from continuing operations was $2.6 million.