83.9 F
San Diego
Wednesday, Jul 24, 2024
-Advertisement-

ReAble Therapeutics Says It Has No Plans to Reduce DJO’s Work Force

DJO Inc. wasn’t looking to be acquired, but the $1.6 billion offer from ReAble Therapeutics Inc. fell into its hands last week.

The acquisition terms give DJO, a Vista-based maker of products for musculoskeletal and vascular health, such as knee braces, 50 days to entertain better offers.

Mark Francois, DJO’s director of investor relations, said the two companies haven’t discussed where the new headquarters would be located, and said that DJO has no plans to reduce its presence in the San Diego region.

DJO has 2,600 employees , 1,500 in a Tijuana manufacturing plant and most of the rest in Vista. A handful of workers are located in Europe.

If shareholders approve the acquisition, Austin, Texas-based ReAble is expected to pay $50.25 in cash per share, 25 percent more per share than the recent average closing price for DJO shares. The sale is expected to close in the fourth quarter, barring a better offer approved by DJO’s board of directors. DJO has said it won’t discuss potential offers publicly until its board approves any such offer.

According to terms of the agreement, DJO would have to pay ReAble $18.7 million if DJO selects a different buyer.


A Good Fit

“We’re making sure we get the best deal for our stockholders,” said Francois. “The product lines and channels seem to be complementary.”

DJO, called DJ Orthopedics until last year, makes and sells knee braces, bone growth stimulation devices, pain management products and those that prevent injury or help recovery post-surgery. Its 700 products include the Aircast, DonJoy and ProCare brands.

ReAble’s products have some overlap, but the firm’s focus also includes surgical implants and physical therapy goods. Some of its brands are 3DKnee, Revelation and Reverse.

The Blackstone Group, which has a controlling interest in ReAble, called Encore Medical Corp. until 2005, also acquired Hilton Hotels Corp. early this month. Blackstone is the world’s largest publicly traded buyout company.

Encore Medical saw sales of $294 million in 2005, the last full year for which the company reported financial results before going private through the Blackstone transaction. The company also reported having 1,300 employees.

More than twice the average number of DJO shares traded exchanged hands the day after the merger announcement. The stock, listed as DJO on the New York Stock Exchange, traded at $51.25 on July 17, up $1.15 or 2.3 percent.

Francois said DJO executives were unavailable for comment, as they were traveling.

Bud Leedom, a San Diego-based former Wall Street analyst who publishes the California Stock Report, said Blackstone’s interest in DJO “shows how private equity deals are becoming a greater part of the market.”

“(The planned merger) is great for shareholders because it sounds like DJO has the opportunity to entertain other offers,” Leedom said. “We could see the stock put into play here with other offers.”


It Was Only A Matter Of Time

Joe Panetta, chief executive officer of Biocom, a regional life sciences trade group representing more than 500 firms, said that like other successful life sciences firms, DJO wasn’t going to stay under the radar.

“DJO is a key company for the region because they have so many product lines, like Aircast and DonJoy, that a lot of active consumers are familiar with,” Panetta said. “Clearly, they’ve built a very strong organization there, and I’m not surprised that they have received so much attention.”

DJO sells its products in more than 60 countries through networks of agents, distributors and its own sales force. Customers include orthopedic, podiatric and spine surgeons, prosthetic centers, third-party distributors, hospitals, surgery centers, physical therapists, athletic trainers, other health care professionals, and athletes.

The U.S. Olympic ski and snowboard teams and others designate DJO as their official knee brace provider.

Like many startups, DJO was founded by a few friends in a garage, in 1978. The name back then was DonJoy.

The company’s current chief executive officer, Leslie Cross, along with two other executives and JP Morgan Chase Capital Partners bought the company from England-based Smith & Nephew in 1999.

Francois said the firm covers a wide array of markets.

“We don’t have any large single competitor that competes with every line of our business,” Francois said.

Yahoo Finance lists Warsaw, Ind.-based Biomet Inc., Smith & Nephew and Kalamazoo, Mich.-based Stryker as DJO’s direct competitors.

While the companies mentioned have much higher revenues, DJO is catching up. DJO’s quarterly revenue growth year over year was listed on Yahoo Finance as more than 39 percent, while its competitors’ growth ranged from under 2 percent to 15 percent.

Francois said he didn’t know what DJO’s market share was and said it would be difficult to classify considering the variations of each company’s lines of business.

In 2006, DJO reported $12.6 million in net income and revenue of $413 million.

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-