Could leverage buyouts be ready for a comeback?
Investors speculate Kinetic Concepts may take US$5 billion offer from Blackstone
Rumours over the fate of Kinetic Concepts (KCI) have reached fever pitch after Bloomberg went public with the possible takeover of the company by the US private equity group Blackstone.
Both companies have understandably remained tight-lipped over any discussions, but that hasn’t stopped market speculators driving up the share price by over 13 per cent in just a days trading, a pattern that’s likely to continue still further over the remainder of the week. Talk has now shifted towards placing a guess on what price will encourage KCI to accept a takeover, with most observers agreeing a consensus that Blackstone or any rival suitor would have to pay at least US$5 billion for the business. Any such deal would also represent a big deal for the medical industry, with its potential to being one of the largest leveraged buyouts since the financial downturn.
Based in San Antonio, TX, KCI’s main business comprise negative pressure wound therapy, regenerative medicine and therapeutic support systems such as specialty hospital beds. The tissue-based regenerative medicine business scans the reconstructive, orthopaedic and urogynaecologic surgical markets. Last year, the company’s sales hit the US$2 billion mark.
Here at Medical Industry Week, we’re not going to get completely excited yet and suggest this means the green light has been lit for a resurgence in private equity activities to the extent of the last decade or so. However, a US$5 billion offer, it it does materialise, will no doubt provide welcome encouragement to long-depressed investors. It might also send alarm bells over some companies that might have thought they were safe for a little longer. M&A activity has recently been on the increase, amplified in part by J&J’s recent US$21 billion offer for Synthes that looks to have awoken the medical technology sector to the possibility of consolidation.
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