Elos Medtech to Acquire Klingel in $409M Deal

Elos Medtech AB, a development and manufacturing partner for medical devices, has agreed to acquire Klingel Holding GmbH from IK Partners and management.
 
Klingel, a leading contract development and manufacturing organization (CDMO) headquartered in Germany, will strengthen Elos Medtech’s position with R&D capabilities and new technology expertise. Further, the acquisition will broaden the product offering and add new high profile global customers, contributing to a strong footprint in the DACH region.
 
The purchase price corresponds to an enterprise value of EUR 370 million ($409 million). The completion of the transaction is subject to customary regulatory approvals, acceptance at the extraordinary general meeting and successful completion of a rights issue to finance the acquisition.
 
The rights issue will be guaranteed through the subscription and guarantee undertaking of TA Associates, through EM Intressenter AB, ElosMedtech’s principal shareholder. Closing is expected to take place during the fourth quarter of 2023.
 
The acquisition marks a significant milestone for both companies and demonstrates their continued commitment to key customers and markets. With this acquisition, Elos Medtech will gain eight production facilities in Germany and Switzerland, along with R&D capabilities, technological expertise, and an extensive global customer base. Klingel has approximately 900 employees with similar beliefs and culture to the Elos Medtech team. These characteristics make Klingel and Elos Medtech an ideal fit for each other. Together, they will form one of the market-leading MedTech CDMOs, with strategically located sites across the U.S., Europe, and Asia, providing reach and support to its global customers.
 
The acquisition shows Elos Medtech’s strong commitment to enhancing its share in its core markets and the ambition to expand in U.S.A., unlocking opportunities to drive future growth. With Klingel’s expertise, Elos Medtech will also be equipped to leverage R&D capabilities across various business units and proprietary products, enabling it to better cater to the unique needs of international OEM customers.
 
“We firmly believe that this acquisition strengthens our position in the CDMO landscape. It marks a significant step forward in our commitment to offering an extensive array of services to our customers through the hard work of a talented combined workforce. The acquisition will reinforce our well-established reputation for excellence and our ability to cultivate enduring partnerships, aligning seamlessly with Klingel’s similar ethos,” says Stefano Alfonsi CEO and President of Elos Medtech.
 
“We are thrilled about this strategic move as we see a remarkable alignment of values and culture between our two companies, paving the way for a highly-advantageous and successful collaboration. We are excited at the prospect of having increased visibility in the U.S. as part of this agreement,” adds, Ralf Petrawitz Co-CEO of Klingel.
 
“This acquisition is an opportunity for our existing customers, who will benefit from an expanded offering, as well as for our dedicated employees, who will be part of a global longstanding organization. It will allow us to showcase our technologies and expertise to the US market far more efficiently than before,” remarks Christoph Ruetschi Co-CEO of Klingel.
 
As of June 2023, Klingel^[1] reported net sales of EUR 141 million ($153.5 million)^[2] and EBITDA of EUR 27 million^[3] for the last 12 months. The preliminary combined pro forma^[4] net sales for the same period for Elos Medtech and Klingel amounts to SEK 2,583 million^[5] and SEK 500 million^[6] pro forma EBITDA. Pro forma financials will be included in the prospectus to be prepared in connection with the rights issue to finance the acquisition, please refer to the section “Financing through rights issue” below.
 
In relation to the acquisition, Elos Medtech sees opportunities to realize synergies in terms of accelerated growth through the cross-selling of Klingel products and Elos Medtech products/services, in addition to leveraging a combined global footprint of the group to make operational improvements.
 
Closing of the acquisition is expected to take place during Q4 2023 and is conditional on merger clearance and FDI approval required under applicable merger control and trade laws, and the approval by the extraordinary general meeting and successful completion of the rights issue.

Transaction Costs

Transaction costs amount to approximately SEK 55.5 million of which approximately SEK 7 million was recognized as an item affecting comparability during Q2 2023 and SEK 4.5 million will be recognized as an item affecting comparability during Q3 2023. The remaining costs will be recognized as an item affecting comparability during Q4 2023. Costs in relation to coming rights issue are not included in the above-mentioned transaction costs.

Financing Through Rights Issue

The acquisition will be financed through a rights issue in the amount of approximately EUR 370 million. The rights issue will be fully guaranteed through a subscription and guarantee undertaking from Elos Medtech’s principal shareholder TA Associates through EM Intressenter AB.
 
The terms and conditions of the rights issue as well as a notice convening an extraordinary general meeting to resolve on the rights issue will be announced at a later date.
 
References:
^[1] Preliminary IFRS numbers based on Klingel’s adjusted EBITDA pursuant to German GAAP. These figures have not been subjected to review by the auditors.
^[2] Amounting to approximately SEK 1,621.1 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.
^[3] Amounting to approximately SEK 311.6 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.
^[4] Preliminary IFRS proforma numbers based on the combination of Elos’ reported numbers pursuant to IFRS and Klingel’s adjusted EBITDA pursuant to German GAAP and adjusted to treatment of leasing costs. These figures have not been subjected to review by the auditors.
^[5] Amounting to approximately EUR 224.7 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.
^[6] Amounting to approximately EUR 43.5 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.