Aug 24 2004
The Boards of Sybron Dental Specialties, Inc., and Innova LifeSciences Corporation announced today that they have reached an agreement whereby Sybron will make an all-cash offer to purchase all of the issued and outstanding common shares of Innova at a price of CDN $1.4106 per share for an aggregate consideration of approximately CDN $57.1 million (approximately US $43.7 million). The acquisition will be financed with a combination of Sybron's existing cash resources and the use of its revolving credit facility.
The proposed offer has the unanimous support of Innova's Board of Directors, which is recommending that Innova's shareholders accept the offer. Shareholders holding approximately 61.8% of Innova's issued and outstanding common shares have agreed to tender their shares to the offer, including Innova's three largest shareholders, The VenGrowth Investment Fund Inc., The VenGrowth II Investment Fund Inc. and The Manufacturers Life Insurance Company, which together hold approximately 58% of Innova's common shares. In addition, Mike Kehoe, Innova's President and Chief Executive Officer and Keith Carter, Innova's Vice-President and Secretary, who together hold approximately 4% of the common shares, have also agreed to tender their shares to the offer.
The offer represents a 33 per cent premium over Innova's closing share price of CDN $1.06 on the Toronto Stock Exchange on August 23, 2004 and a 37 per cent premium over Innova's 20-day volume weighted average share price of CDN $1.03. The offer is expected to be mailed to Innova's shareholders during the next two weeks and will remain open for 35 days. It will be subject to customary conditions including that at least two thirds of Innova's shares are tendered.
Innova, which is headquartered in Toronto, Canada, has a well-established presence in the global dental implant industry, generating sales of CDN $20.3 million in 2003. Its primary product, the Endopore dental implant, which was developed in conjunction with the University of Toronto Faculty of Dentistry, was the recipient of the highest rating awarded for quality in a recent independent study of implants that was published in the International Dental Journal. Over the past five years, Innova has grown its total unit sales by a compound annual rate in excess of 30%. Sybron intends to retain Innova's sales force, including 22 representatives in North America and Australia, as well as its manufacturing facilities in Toronto, Canada and San Mateo, California.
The acquisition is expected to be earnings neutral to modestly accretive in the first year of operations, as Sybron plans to reinvest the profits generated by Innova to significantly expand the North American sales force over the next several years. In fiscal 2006, the acquisition is expected to be accretive to earnings and generate approximately CDN $5 to $6.0 million in operating income. In ensuing years, Sybron believes the operating income of Innova will grow by more than 30% annually.
"This acquisition marks our formal entrance into the rapidly growing market of dental implants," said Floyd W. Pickrell, Jr., Chief Executive Officer of Sybron. "While the number of implants placed annually has increased dramatically over the past several years, it remains a market with vast potential and represents one of the most exciting growth opportunities in the dental industry. According to the U.S. Bureau of the Census, by 2005 approximately 40% of the entire U.S. population will be 45 years in age and over -- the primary age market for dental implants. As the number of consumers entering the primary age market increases and awareness grows about the success of this treatment option, we believe the rate of growth will remain robust for many years to come."
"The addition of Innova provides Sybron with a premier vehicle for participating in the dental implant market, and we are pleased to make this acquisition in a manner that will enable it to be accretive in a short timeframe. Innova has a premium, highly differentiated product line that offers significant advantages to the clinician. We intend to manage this product line in a manner similar to our endodontic business, with a dedicated direct sales force and aggressive investment in new product development. This strategy has enabled us to generate strong double-digit growth in our direct sale endodontic product line over the past two years, and we believe Innova will deliver similar results for Sybron as we add more sales reps and they become fully productive."
Expected benefits from this acquisition include the following:
- A strong presence in one of the fastest growing areas of dentistry. The worldwide dental implant market is estimated at US $1.2 billion and growing at a compound annual rate of more than 15%.
- Entree to two new specialty markets that are the largest users of dental implants -- oral surgeons and periodontists -- that will provide cross-sell opportunities for Sybron's other product lines, such as the recently acquired Bioplant synthetic bone regeneration product line used in dental implant procedures.
- The addition of a robust new product pipeline that will allow Sybron to remain at the forefront of emerging trends in the dental implant industry. Innova plans to launch the Endopore Hybrid implant in September, which provides dentists with a product that combines the unique biomechanical properties of the Endopore implant with the immediate stabilizing feature of threaded implants. An esthetic implant is also in development for introduction in 2005.
- Sybron's financial resources will enable Innova to increase its marketing and distribution network allowing it to capitalize on more opportunities in the worldwide dental implant market.
Michael Kehoe, the current CEO of Innova, will continue to manage the dental implant business. "We are very pleased to join forces with Sybron Dental Specialties," said Mr. Kehoe. "For the past several years, Innova has built a strong reputation for quality and innovation in the dental implant market and attracted a growing number of practitioners to our products. With the resources provided by Sybron, we believe we can significantly broaden our reach over the next few years and capture additional market share both domestically and internationally."
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