Is ConMed Up for Grab?

Is ConMed Corp. on the block? That’s a question industry watchers and many investors are asking.

The Utica, N.Y.-based firm makes medical devices for the orthopedic, sports medicine, general surgery, gynecology, gastroenterology, pulmonology and anesthesiology markets. The company has been that has been fighting off “activist investors” that have been concerned with the company’s financial and management performance, and is exploring a sale.

Activist investors are people or groups with large numbers of a public company’s shares. They often try to obtain seats on company boards with the goal of effecting a major change. A company can become a target for activist investors if it is mismanaged, has excessive costs, could be run more profitably as a private company or has another problem that the activist investor believes it can fix to make the company more valuable.

Large medical device companies have been contacted to gauge their buyout interest, Reuters reported.

ConMed’s orthopedic and sports medicine businesses could appeal to companies such as Zimmer Holdings Inc., Johnson & Johnson, Stryker Corp, Covidien plc or Medtronic Inc., unnamed sources shared with Reuters. Other product lines could represent more of a challenge for finding buyers, sources said.

ConMed has a market capitalization of a little more than $1.2 billion and 2013 sales totaled $762.7 million, which were roughly flat compared to 2012.

In recent weeks, ConMed has asked its financial advisers—Bank of America Merrill Lynch and Greenhill & Co Inc.—to test the waters with larger orthopedic device makers about a potential sale of the company, anonymous sources confirmed to Reuters. The process is at an early stage and there is no guarantee that a buyer will emerge, cautioned the sources, who asked not to be named because the matter has not been publicly addressed by the company.

ConMed officials attempted to tamp down speculation with an emailed statement that said “as a matter of policy,” they would not comment on “rumors or speculation” because management and the board of directors “remain focused on creating value for shareholders.”

The decision to explore a sale comes as the company anticipates a tough proxy battle at its annual shareholder meeting expected to occur by the end of July last year. Voce Capital Management LLC, which sent a letter to ConMed’s board in November urging it to consider a sale, nominated four candidates to the board. In February, ConMed settled with another activist investor, Coppersmith Capital, by adding two of its nominees to the board and replacing the chairman.

In November, Voce Capital officials released a letter noting that, in their opinion: “ConMed suffers from a culture of nepotism, patronage and dystopian corporate governance that would be corrosive in a closely held corporation but which is utterly corrupting in a public company. And therein lies the wellspring for so many of ConMed’s failures. ConMed is unquestionably family run—the Corasanti clan members pull all the strings and pamper themselves royally—yet it’s not family owned, as they hold very little of its stock.”

Voce noted the Corasanti family collectively owns approximately 2.3 percent of ConMed’s equity.

ConMed CEO Joseph Corasanti serves on the company’s board with his father, Eugene Corasanti, who founded the company in 1970. The elder Corasanti stepped down as chairman of the board in February and was replaced by independent board member Mark Tryniski.

The sports medicine market is an attractive growth market for orthopedic companies. In February, Smith & Nephew agreed to acquire ArthroCare Corp for $1.7 billion in the first major medical device deal of the year.