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Globus Medical to acquire NuVasive for $3.1bn

Updated: Oct 30, 2023




Acquisition Overview


Globus Medical, a prominent provider of solutions for musculoskeletal problems listed on the New York Stock Exchange, and NuVasive, a top innovator in spine technology listed on the NASDAQ, have reached a definitive agreement to merge in an all-stock transaction. With the announcement made on 8th February 2023, the all-stock transaction is valued at approximately $3.1bn. This deal brings together two highly respected technology companies in the musculoskeletal sector that share a common vision centred around innovation in their relentless drive to meet unfulfilled clinical requirements and enhance patient care.


Deal Structure


According to the agreement made in 2021, Globus' shareholders will own 72% of the combined company, while NuVasive's shareholders will own the remaining 28%. In exchange for their shares, NuVasive shareholders will receive 0.75 shares of Globus' stock for each share of NuVasive's stock. Based on this exchange ratio, this translates to an implied share price of $57.72 for NuVasive, which has a total equity value of $3.1 billion based on Globus' closing share price on 8th February 2023.

The current senior management of Globus, including Chairman David Paul, Scavilla, and CFO Keith Pfeil, will continue to lead the company.


Once the deal concludes, the combined firm will consist of an 11-member board, including eight directors from Globus Medical’s board and three directors from NuVasive’s board. The CEO of NuVasive, Chris Barry, helped with integration planning. Following the merger, three directors from NuVasive's board will join Globus's board.

The deal is expected to help boost both of the firm’s globalization strategies and target the $50bn musculoskeletal market.


Goldman Sachs Group Inc. advised Globus Medical on the deal, while Bank of America Corp. worked with NuVasive.


NuVasive Overview


Based in San Diego California, NuVasive is at the forefront of innovation in spine technology, aiming to revolutionize surgery, enhance patient care, and make a positive impact on people's lives. Its surgical solutions are less invasive, integrated into procedures, and geared towards producing consistent and clinically tested results. The company has a net sales figure of over $1 billion and a presence in more than 50 nations with more than 2800 employees, serving patients, hospitals, and surgeons.


Founded date: 1997

Number of employees: approximately 2800

Enterprise value: $3.457 billion

LTM Revenue: $305.4 million

LTM EBITDA: $219.28 million

Market Cap: $2.15 billion


Industry insight


Musculoskeletal care is a major issue for the global healthcare system, with disorders being both common and costly to treat. However, care that could reduce these high costs is not always accessible to those who need it. This has led to a surge in funding for digital health companies that specialize in musculoskeletal care, with investors pouring hundreds of millions of dollars into this space over the past year. Musculoskeletal is an extremely large total addressable market that deserves special mention within the macro boom in digital health. By helping employers and plans avoid surgery, digital MSK companies can save them significant amounts of money.


Musculoskeletal disorders are pricey to treat in the U.S. Low back and neck pain led to 154 conditions in healthcare spending in 2016, costing an estimated $134.5 billion, while other musculoskeletal disorders came in second at $129.8 billion. Just over 57% of the low back and neck pain spending came from private insurers and was associated with working-age adults. Spending for that condition increased nearly 7% between 1996 and 2016, though the number of prevalent cases only increased by just over 1% annually. The goal for digital musculoskeletal care should be more than just moving a physical therapy appointment to a virtual environment. The end-to-end journey is what companies are trying to innovate, with the aim of improving the cost and quality of that journey from ouch to all better.


The COVID-19 pandemic has also played a significant role in accelerating the adoption of remote care and telehealth in general. The Department of Health and Human Services reported a 63-fold increase in telehealth utilization during the pandemic, with 840,000 Medicare visits conducted via telehealth in 2019 to 52.7 million in 2020.


Virtual MSK care not only reduces the burden on providers but also creates more access points to care. Digital MSK companies argue that there were barriers to physical therapy access even before the pandemic. For patients to get an in-person appointment, particularly in rural residences, the cost can also be prohibitive, especially for hourly workers who may need to take time off for physical therapy.

Overall, digital MSK companies are revolutionizing the healthcare industry by providing patients with more accessible, convenient, and cost-effective care. As the industry continues to evolve, it will be interesting to see how these companies innovate and improve the end-to-end journey of musculoskeletal care.


Strategic rationale


The merger offers a complementary worldwide scope and a broader commercial footprint. By combining forces, both companies can expedite their efforts towards global expansion and better position themselves to capture a share of the $50 billion musculoskeletal industry that encompasses various segments such as the spine, orthopaedics, enabling technology, power tools, biologics, and others. With a presence in over 50 countries and a workforce of over 5,000 employees, Globus Medical and NuVasive will be able to penetrate existing and emerging markets more effectively, reaching a wider pool of surgeons and patients worldwide through a larger commercial sales organization.


The merger, additionally, presents a robust financial standing and an opportunity to create value. Both companies have a proven history of achieving net sales growth above the industry average, driven by their innovative solutions and effective commercial channels. The new entity will capitalize on Globus Medical's financial expertise to achieve a mid-30-percent EBITDA profile in the next three years. This ambitious goal includes leveraging approximately $170 million in cost synergies that have already been identified.


Signals of profit and losses are to be predicted. In the third quarter, Globus reported a net income of $47.4 million, a marginal change from the previous year's $47.2 million. Meanwhile, NuVasive was able to narrow its net loss to $1.98 million from a loss of $21.6 million in the same period last year. According to preliminary results, Globus anticipates a 6.8% increase in net sales growth for the full year compared to its 2021 revenue of $958.1 million. Similarly, NuVasive projects a preliminary 5.5% increase in net sales growth for 2022, compared to its 2021 net sales of $1.14 billion.

Looking ahead to 2023, Globus forecasts net sales growth of 7% to 8%, while NuVasive expects a net sales growth rate of 6% to 8% at a constant currency rate.


Long term prospect


The companies remain dedicated to product innovation and educating surgeons. Both Globus Medical and NuVasive have a track record of creating technologies that address unmet clinical needs in the realm of musculoskeletal disorders. Going forward, Globus Medical will maintain its focus on partnering with healthcare professionals to design pioneering products and solutions that cover the entire patient care journey, including planning, execution, and postoperative data analysis.


The merger enhances operational capabilities. By leveraging its collective operational excellence, the new company will maximize manufacturing capacity and asset utilization to bolster its commercial organization. This will allow both Globus Medical and NuVasive to benefit from their respective operational strengths, such as Globus Medical's robust in-house manufacturing capacity and NuVasive's extensive global distribution networks, which include their Memphis-based global distribution centre.


Written by Pui Yi Chan (University College, Durham University)



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