Medical manufacturer UTI Corp. plans to buy rival MedSource Technologies Inc. for $230 million, creating one of the larger medical-device contract manufacturers and one with significant plastics processing operations.
The April 28 deal, if approved by MedSource shareholders and regulators, would create a contract device manufacturer with more than $300 million in sales, and a range of plastics operations, including injection and compression molding, extrusion, machining and mold making.
The companies portrayed the move as a way to improve their position with medical device firms that increasingly want to outsource production, and said it gives them a full range of capabilities to make components or finished products, including metal and plastic fabrication, design and engineering.
But the deal also represents something of an about-face for Minneapolis-based MedSource, which grew rapidly into a large medical outsourcing firm, acquiring several small plastics processors, before running into financial trouble and launching a round of cost cutting and plant closings last year.
Officials at privately held UTI, based in Collegeville, Pa., did not respond to requests for comment.
But MedSource Chairman and Chief Executive Officer Richard Effress told analysts that no decisions had been made on how the two companies would integrate their facilities or whether he would have a role with the new company.
Effress said April 28 that details will come out in Securities and Exchange Commission filings in the next 10 days.
Effress said the two competitors have some complementary assets: MedSource brings a stronger footprint in electro-medical and orthopedic products, while UTI has a stronger low-cost manufacturing platform in Mexico, where MedSource has also been attempting to beef up production.
UTI said in a news release that the new company would focus on cardiology, endoscopy and orthopedics.
UTI is paying about $7.10 a share, or about a 20 percent premium, for MedSource Technologies stock.
MedSource's board unanimously approved the deal, and the company's largest shareholders, representing about 25 percent of its stock, have said they will vote to be acquired, MedSource said.
The companies hope to complete the deal by summer.
UTI has injection molding and mold-making operations in Upland, Calif., while MedSource has injection molding, extrusion, machining and compression molding in several locations in the United States.
MedSource Technologies has 1,500 employees at 14 plants in the United States and Mexico. UTI employs 2000 at 13 facilities in five countries.