ICU Medical, Inc. (ICUI) CEO Vivek Jain on ICU Medical's Smiths Medical Division Acquisition (Transcript)

Summary of ICU Medical, Inc. Conference Call on Acquisition of Smiths Medical Division Company and Industry - Company: ICU Medical, Inc. (NASDAQ: ICUI) - Acquisition Target: Smiths Medical division from Smiths Group plc - Industry: Medical Devices, specifically focusing on infusion therapy and related products Core Points and Arguments 1. Strategic Rationale for Acquisition: - The acquisition will create a combined company with approximately $2.5 billion in revenue, enhancing focus and scale in infusion therapy [6][19] - It aims to diversify and strengthen the U.S. medical supply chain [6][19] 2. **Transaction Overview**: - ICU Medical will pay$1.85 billion in cash and issue 2.5 million shares, totaling an upfront value of $2.35 billion [7][12] - An additional$100 million in contingent considerations is tied to equity returns [7][12] - The transaction is expected to close in the first half of 2022, pending customary conditions [7][12] 3. Financial Implications: - A $2 billion senior credit facility has been secured to finance the acquisition [12][13] - Pro forma net leverage is expected to be approximately 3.1x at closing, with a goal to deleverage to 1.5 to 2x within three years [13][14] - Expected adjusted EBITDA run rate for Smiths Medical before synergies is around$190 million [15][16] 4. Earnings Accretion: - Adjusted diluted earnings per share (EPS) is projected to be nearly $11 in the first year post-acquisition, representing over 40$50 million to be fully realized by the end of the third year [16][17] 5. Market Position and Growth Drivers: - The acquisition fills gaps in ICU Medical's product offerings, particularly in syringe and ambulatory pumps, enhancing competitiveness against larger players [9][10] - The combined company will focus on high-value clinical niches, such as oncology and pediatric care [22][23] 6. Integration Strategy: - The integration is expected to be smoother than previous acquisitions due to existing infrastructure and fewer transitional service agreements [25][26] - The management team has significant experience in integrating similar businesses, which is expected to facilitate a successful merger [26][27] Other Important Content 1. Geographical Expansion: - The acquisition will enhance ICU Medical's presence in international markets, particularly in Europe and Latin America [34][35] 2. Cash Flow Expectations: - ICU Medical expects strong free cash flow generation post-acquisition, with a commitment to maintain at least $250 million in cash on hand [14][19] 3. Future Outlook: - The management anticipates that the acquisition will create significant value for shareholders and customers, with a focus on operational improvements and cash flow generation [28][29] 4. Market Dynamics: - The competitive landscape has evolved, and the acquisition is seen as a strategic move to adapt to these changes and enhance market positioning [21][22] 5. Potential for Cross-Selling: - While no specific revenue synergies have been built into the model, there are opportunities for cross-selling products, particularly in vascular access and infusion systems [50][51] This summary encapsulates the key points discussed during the conference call regarding ICU Medical's acquisition of Smiths Medical, highlighting the strategic, financial, and operational implications of the transaction.