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Consortium led by PE firm Apax to buy Kinetic Concepts for $4.98 bn news
13 July 2011

A consortium of private equity firm Apax Partners and two Canadian pension firms, today agreed to buy advanced healing technologies company Kinetic Concepts Inc (KCI), for $4.98 billion in cash.

KCI, best known for its negative-pressure wound-therapy products, including its VAC Therapy System, to treat chronic and large wounds, went private in 1997, when it was acquired by company founder Dr. James Leininger and California investment firms Fremont Partners and Blum Capital Partners in a deal that was valued at $850 million, but was again listed in 2004.

San Antonio, US-based KCI is a medical device company that designs, manufactures, markets and services therapies and products for the wound care, tissue regeneration and therapeutic support system markets. Its products are sold in more than 20 countries.

The company operates in three business segments, Negative Pressure Technology Platform, which includes the KCI Vacuum Assisted Closure, or V.A.C. Therapy System, for healing of complex wounds. This business generates 70 per cent of the company's $2 billion annual sales.

Regenerative Medicine for tissue-based treatments used to repair soft tissue defects in reconstructive, orthopedic and urogynecologic surgical procedures and Therapeutic Support Systems which deals in specialty hospital beds, mattress replacement systems and overlays designed for a variety of uses including the prevention of pulmonary complications associated with immobility, the reduction of skin breakdown and the safe and dignified care of patients.

The consortium plans to work actively in partnership with the management of KCI to further invest in the global medical products sector to expand the company's core business, develop innovative products and extend into new geographies where significant opportunities exist.

A consortium comprising of Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board will offer $68.50 per common share in cash.

The deal that is valued at approximately $6.3 billion, including KCI's outstanding debt, follows last week various media reports that a number of private equity firms, including Blackstone Group, were evaluating the company for a potential bid.

Leininger, who is KCI's largest individual shareholder holding about 8.1 million shares, or an 11.2 per cent stake, has agreed to tender his shares to deal.

Buddy Gumina, partner and co-head of the Apax Healthcare team, said, "Over the years, we have reviewed multiple investments in the medical devices and products industry, having originally identified it as a key growth sector within our overall healthcare investment practice.  Based on this experience, we possess a deep understanding of KCI's business and the markets in which the company operates."

Andre Bourbonnais, senior vice-president, private investments for CPPIB, said, "KCI is the market leader in its businesses with strong growth potential particularly outside of the core US market.  KCI's business is well positioned for growth based on global trends such as demographics, including longevity and an aging population."

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Consortium led by PE firm Apax to buy Kinetic Concepts for $4.98 bn