VOL. 115 | NO. 105 | Monday, June 4, 2001
By SUE PEASE
Wright Medical prepares for public offering
By SUE PEASE
The Daily News
A medical firm in Arlington, Tenn., is planning to go big-time with an initial public offering.
Wright Medical Group Inc. registered with the Securities and Exchange Commission in April proposing an IPO of common stock.
Its a big step for the 51-year-old company based in a town with a population of 1,541.
In the weeks after a company starts the bid to go public, rapid changes occur. How a company deals with those events can determine how successful the IPO is.
But how fast and how many changes occur depends on the companys specific situation, said Kelly Crowe, health care services analyst with Morgan Keegan.
Much of the craziness of a deal actually happens before the SEC filing, Crowe said, when auditors, attorneys and investment bankers visit and conduct due diligence on the company.
And, after a company files its registration statement, it enters a quiet period, which limits what can be said.
That is where Wright Medical stands now.
Once a timeline is scheduled, a company often goes on what Crowe called a "road show." Officials, along with their investment bankers, meet with prospective investors, especially institutional investors in many of the big markets such as Boston, Chicago, New York and overseas.
Officials get the feel for who is interested in buying shares and how many they might want.
Underwriting the deal is J.P. Morgan Securities Inc., Credit Suisse First Boston Corp. and U.S. Bancorp Piper Jaffray Inc.
According to SEC documents, the company is currently owned by a group of investors led by Warburg, Pincus Equity Partners who acquired control of the company in December 1999. Shortly afterward, it acquired Cremascoli Ortho Group based in Toulon, France.
Being in its quiet period, John Bakewell, executive vice president and chief financial officer, said he could not comment on the IPO status.
Officials could not say how many shares the company plans to offer or at what price.
Wright Medical employs about 475 people in Arlington and makes large joint orthopedic implants and biologic products, including bone graft substitutes.
Reports said the company plans to raise $132.25 million and the SEC registration statement states the net proceeds will be used primarily to pay off debt and then used for other business purposes.
In the filing documents, it states the company had net sales last year of $157.6 million and in 1999 net sales were $109.2 million.
It stated an outstanding principal debt of $45.6 million plus accrued interest of about $5.6 million.
It also plans to pay a debt of about $34.9 million to its senior credit facilities, according to the SEC documents.
Investing in a health care company can be thought of at best as multifaceted.
"In general, with health care on the service side, reimbursement has always been a little dubious to the average investor," Crowe said.
It can be a difficult investment because the dynamics are often complex.
Many players are involved in the health care field including the government, managed care, Medicaid and Medicare.
On the other hand, money being funneled into the health care sector is constant and not dependent on a season or whims of the economy.
"Health care spending for the most part is not discretionary. You get sick and you go to the hospital. You are sick regardless of what the economy is doing," Crowe said.
Some of Wrights top competitors are Biomet Inc. based in Warsaw, Ind.; Stryker Corp., based in Kalamazoo, Mich.; and Sulzer Medica Ltd. headquartered in Zurich, Switzerland.
All are public companies.
Biomet trades on the Nasdaq stock exchange and ended trading Thursday at $44.67 per share.
Stryker Corp. is listed on the New York Stock Exchange and trading ended Thursday at $57.44 a share.
Sulzer Medica trades on the NYSE and also the Zurich exchange. Trading on the NYSE ended Thursday at $10.31 a share.
Price talk on what Wrights shares may be is uncertain at this time.
When the company files its preliminary prospectus with the SEC, it will outline an estimate range for the stock price.
There is no scientific formula to the initial stock price a company offers, Crowe said.
"It all depends on the specifics of each individual company," she said.
Its a function of demand, too. If its a hot stock, many will want a piece of it and more will be offered.
Because of the technology markets recent fall, health care stocks are attractive.
Another facet of the health care market that makes investing in it appealing is the current state of demographics.
"The fact that the United States is aging so rapidly combined with amazing discoveries, both on the technology side and the pharmaceutical side, the trend in health care is that we are spending a lot, lot more. That bodes very well for health care stocks," Crowe said.