Orthopedic sports medicine DJO said Monday it agreed to be acquired by medical device maker ReAble Therapeutics for $1.18 billion in cash.
Austin, Texas-based ReAble offered to pay $50.25 per share in cash for Vista, Calif.-based DJO , representing a 19.4% premium to the stock's closing price Friday. Based on DJO's 23.56 million common shares outstanding at May 8, the deal is worth $1.18 billion.
Including assumed debt, the transaction is valued at about $1.6 billion.
An affiliate of Blackstone Group is the controlling shareholder of ReAble and has committed to provide the equity financing needed by ReAble to complete the transaction.
DJO's board as well as a committee of independent directors have unanimously approved the transaction and recommend that DJO stockholders approve the merger.
"DJO and ReAble have established strong positions in the orthopedic and rehabilitation markets," said Ken Davidson, CEO of ReAble. "The strategic fit, both in the U.S. and overseas, is absolutely compelling."
The deal is expected to close in the fourth quarter, subject to regulatory and DJO shareholder approvals. There is no financing condition to close the transaction.
DJO expects to hold a special meeting for shareholders to consider and vote on the proposed takeover. The company said that terms of the merger agreement allow DJO to solicit superior proposals from third parties during the next 50 calendar days.
However, if a rival bid is accepted, DJO must pay a break-up fee to ReAble of $18.7 million.
In fiscal 2006, DJO reported profit of $12.6 million on revenue of $413.1 million. The company, which has about 3,000 employees, makes rigid knee braces, osteoarthritic braces and pain management products, among other items.
DJO sells its products through agents, distributors, and direct sales force to orthopedic and spine surgeons, podiatrists, orthopedic and prosthetic centers, as well as hospitals, physical therapists and other healthcare professionals. It markets its products under the DonJoy, ProCare and Aircast brands.
Wachovia Securities is acting as financial adviser and Latham & Watkins acting as legal counsel to the DJO board in this transaction.
Credit Suisse is acting as financial adviser and Simpson Thatcher & Bartlett is acting as legal adviser to ReAble and Blackstone in this transaction. Financing commitments have been provided by Credit Suisse and Bank of America.
Shares of DJO closed Friday at $42.10, having ranged between $31.07 and $45.50 over the past year.