By: Gayle S. Putrich
April 28, 2014
Medical device maker Phillips-Medisize Corp. may be about to pass from the hands of one venture capital group to another in a potentially $800 million deal, according to a report from the Wall Street Journal.
The report says three unnamed sources familiar with the process have confirmed that private-equity firm Kohlberg & Co., which bought Phillips Plastics Corp. in 2010, has been shopping the firm around since January and may have a bidding war going between private-equity firms GTCR and Golden Gate Capital.
The report also says the $800 million price tag would value the company about 10 times its 2013 earnings before interest, taxes, depreciation and amortization of $80 million. Goldman Sachs Group Inc. is managing the sale process, according to the WSJ.
Phillips-Medisize representatives could not be reached for comment Monday morning.
Privately held, the company does not release detailed revenue figures but publicly estimates its 2013 sales as over $500 million with an estimated $275 million in North American injection molding sales, making them the 20th largest company in Plastics News injection molders rankings.
According to the WSJ, the ongoing private-equity interest in Phillips-Medisize is part of a trend of outsourcing among medical device companies to lower costs and speed new devices to market by getting help with product design, regulatory consulting, and testing and validation. Private equity is in purchase mode, with low interest rates and a more active selling environment than has been seen in recent years, though those firms typically seek to make a return on investment in four to seven years and then sell again, unlike strategic buyers looking for integration or market growth. With the global medical device market expected to pass $300 billion by 2017, Phillips-Medisize is an attractive grab.
Kohlberg combined Phillips with Medisize Inc., a Dutch processor of medical devices and pharmaceutical packaging, forming Phillips-Medisize in 2011. The Hudson, Wis.-based company is celebrating 50 years of continuous operations in 2014 and now counts 80 percent of its total revenue coming from drug delivery, medical device, pharmaceutical packaging and diagnostic products. The company says its core competency is the integration of design, molding, and automation to drive low-cost and high-quality manufacturing solutions.
Phillips-Medisize employs more than 3,100 people in 19 locations throughout the United States, Europe, Mexico and, most recently, China, where last week full-scale production of a finished injector pen for the Chinese and other Asian markets began.
“The start of production signifies the successful execution of our China-for-China strategy,” said company president and CEO, Matt Jennings, in an April 24 press release. “The global Phillips-Medisize team is very excited about the attainment of this milestone, as it validates our fully-integrated capabilities for customers that desire products designed specifically for the China/Asia market and manufactured in a Chinese facility, all with state-of-the-art western medical quality systems and procedures.“
Phillips-Medisize is also expected to open a design/development center in Suzhou, China, later this year.