Teleflex Incorporated and NeoTract, Inc. announced that the companies have entered into a definitive agreement under which Teleflex will acquire NeoTract in a transaction valued up to $1.1 billion. Under the terms of the agreement, Teleflex will acquire NeoTract for an upfront cash payment of $725 million at closing, and up to an additional $375 million upon the achievement of certain commercial milestones related to sales through the end of 2020. The Boards of Directors of both Teleflex and NeoTract have unanimously approved the transaction. This transaction is subject to the satisfaction of customary closing conditions and is expected to close within the next 30 days.

Teleflex plans to finance the acquisition at closing through borrowings under its revolving credit facility, which according to a regulatory filing includes JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., and PNC Bank, National Association, as co-syndication agents.

The transaction is structured as a merger in which Teleflex will acquire NeoTract for an upfront cash payment of $725 million at closing, and up to an additional $375 million upon the achievement of certain commercial milestones related to sales through the end of 2020. The transaction is expected to close within the next 30 days and is subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. The acquisition is expected to be slightly dilutive to adjusted earnings per share1 in 2017, however, the Company does not expect to adjust its previously provided adjusted earnings per share range as a result of the acquisition. During 2018, the acquisition is expected to be breakeven to adjusted earnings per share1, with significant accretion thereafter, including $0.35 to $0.40 of adjusted earnings per share1 accretion in 2019. The acquisition is expected to generate a return on invested capital that meets Teleflex’s cost of capital in the third year after closing and exceeds Teleflex’s cost of capital in the fourth year after closing.

Founded in 2004, NeoTract is a privately-held medical device company that has developed and commercialized the FDA-cleared UroLift® System, a novel, minimally invasive technology for treating lower urinary tract symptoms due to benign prostatic hyperplasia, or BPH. Performed primarily through a transurethral outpatient procedure, the UroLift® System delivers permanent implants that hold open the urethra, reducing the prostate obstruction without cutting, heating, or removing prostate tissue. NeoTract had revenues of approximately $51 million in 2016 compared to approximately $18 million in 2015, representing 178% year-over-year growth. During 2017, NeoTract’s revenues are expected to be between $115 million to $120 million, and we anticipate revenues to grow at least 40% in 2018.

“We are excited to announce this definitive agreement with NeoTract, as this combination is expected to solidify Teleflex’s ability to generate mid-single digit constant currency revenue growth for the next several years, as well as enhance Teleflex’s margin profile,” said Benson Smith, Chairman and Chief Executive Officer of Teleflex. “NeoTract is a truly unique company with a differentiated technology that targets a greater than $30 billion addressable market, and through their internally developed, patented UroLift® System, have achieved sequential quarterly revenue growth of 20% or greater in 13 of the past 14 quarters. Importantly, while we believe NeoTract has compelling growth opportunities as they continue to penetrate the market with their existing product, we look forward to potential longer-term benefits from their second generation UroLift® System, which is expected to launch in the second half of 2018, and being able to leverage our international distribution network moving forward.”

Following consummation of the transaction, Teleflex may look to opportunistically term-out revolving credit facility borrowings through a note offering. Over the long-term, Teleflex intends to maintain its debt to adjusted EBITDA at approximately 3.0x.

Guggenheim Securities is acting as financial advisor to Teleflex and Simpson Thacher & Bartlett LLP is serving as legal counsel. J.P. Morgan Securities LLC is acting as financial advisor to NeoTract, Inc. and Wilson Sonsini Goodrich & Rosati, is serving as legal counsel.