DJO to sell for $1.6 Billion
BY JOHN MCCORMICK, JULY 16, 2007
This morning DJO Incorporated (formerly known as DJ Orthopedics), the largest bracing company in the land, announced that it has agreed to be sold for $1.6 billion to Austin, Texas-based ReAble Theraputics, Inc. (formerly known as Encore Medical). As opposed to a strategic acquisition in the rehab industry, this is an extension of private equity firm Blackstone Group's strategic objective to grow a presence in rehab and bracing. The Blackstone group (not to be confused with the Orthofix spinal implant division) announced that it was buying Encore exactly one year ago for $870 million and this acquisition adds an earnings rich asset with plenty of brand equity (such as Aircast) to the equation. This combination creates a critical mass - if not THE critical mass - business in bracing.
The $1.6 billion offer is comprised of $1.2 billion in cash to shareholders ($50.25 per share in cash which represents a 19.4 percent premium to the stock's closing price Friday) plus debt assumption. To be perfectly clear... the deal was announced today, but will take several months to actually close which is typical with a public company sale process.
If we take the long view, and reflect on what has really happened here to DJO over the last several years, we are talking about the creation of $1 billion of wealth for shareholders and the credit goes to the management team, notably CEO Les Cross who saw this challenge through. So far are we from the dark days in 2003 when DJO was a punished over-leveraged $3-a-share fallen IPO that we have to remind ourselves of the magnitude of this wealth creation event. How did this company go from the $3 to $50 level? In short, management and employee excellence. The longer version is a patient accumulation of successes of a fine leadership team such as Chief Operating Officer Luke Faulstick's manufacturing miracle in Mexico that gave the company critical operating leverage to get out of debt; CFO Vickie Capp's capable and credible command of the numbers and above all Les Cross' combined strategic vision, turnaround capabilities and salesmanship to the entire DJO stakeholder community.
You just don't get many successes like this - in any industry. Savor the moment and realize this is a rare occasion in the annals of true value creation.
