Private Equity Firm to Buy Encore for $870mm
BY JOHN MCCORMICK, JULY 3, 2006
After the market close on Friday, a unit of the mega-sized private equity firm Blackstone Group (not to be confused with the spine company) offered Encore Medical Corporation shareholders a 36% premium to take the company private. The enterprise valuation (equity + debt) of the deal is $870 million or 2.8x trailing twelve months revenues of approximately $310 million. Assuming 71 million shares outstanding, the transaction will require approximately $300 million of debt financing which is within market given the Company's recent EBITDA statistics.
Under the terms of the recently signed definitive merger agreement, Encore's stockholders will receive $6.55 in cash for each share of common stock. The transaction will be financed through a combination of equity contributed by Blackstone and debt financing from Bank of America and Credit Suisse. It is expected that members of Encore's existing senior management team will retain their current equity positions after the transaction closes and will participate in the ownership of the ongoing entity.
It is not exactly clear when the transaction will close, however. The signing of a purchase agreement does not mean the deal has closed for the simple reason that Encore is a publicly traded company. Closing of the deal is subject to terms and conditions such as receipt of stockholder and regulatory approvals. In addition a tender offer and consent solicitation for all of an Encore subsidiary's outstanding 9.75% Senior Subordinated Notes has to be completed before the deal goes through. The parties currently anticipate consummating the transaction later this year.
