RNS Number:0469G
Gyrus Group PLC
23 February 2000
GYRUS GROUP PLC
("Gyrus" or the "Company")
GYRUS GROUP PLC ANNOUNCES AGREEMENT TO ACQUIRE EVEREST MEDICAL CORPORATION AND
ASSOCIATED PLACING AND OPEN OFFER
* The Boards of Directors of Gyrus Group PLC ("Gyrus") and Everest
Medical Corporation ("Everest") announce today that they have signed a
definitive agreement for Gyrus to acquire Everest in a transaction that values
Everest (on a fully diluted basis) at approximately $51.6 million (#32.3
million) or $4.85 per share of common stock of Everest (the "Transaction").
The Transaction is subject, inter alia, to financing and the approval of both
companies' shareholders.
* To fund the cost of the Transaction and the associated expenses and to
accelerate technology development for the combined companies, Gyrus intends to
raise approximately #40 million by way of a placing and open offer of Gyrus
shares.
* Everest is a leader in design, development, manufacture and marketing
of advanced bipolar radio frequency ("RF") instrumentation in sectors of the
minimal access surgery market currently not addressed by Gyrus. It operates a
105 strong US sales force of independent medical professionals from its
headquarters in Minneapolis, Minnesota, a major global centre of medical
excellence.
* A combined US and European sales force for Gyrus/Everest branded
products provides a strong base for higher margin growth of direct sales in a
global market for minimal access surgery products estimated to reach $5
billion by 2001.
* The affinity of Gyrus' and Everest's products, their value-added
positioning in the market, the underlying technologies, customer base and
geographical distribution are naturally synergistic, with virtually no
overlap.
* Both companies have an expertise in developing new market
opportunities for their technologies. This expertise will be key to the
combined business strategy as these developments are accelerated to enhance
the product portfolio sold through direct sales channels.
* The two companies both have well-established and complementary
corporate relationships. These include Ethicon, Inc., Guidant Corporation,
C.R. Bard and Ethicon Endo-Surgery (Ethicon, Inc. and Ethicon Endo-Surgery are
subsidiaries of Johnson & Johnson).
* The experienced and proven management team at Everest will remain in
place.
Mark Goble, Managing Director of Gyrus, commented on the Transaction:
"Structured as an acquisition, this transaction feels more like a merger. We
share the same goals, we both know where the opportunities are to build
significant value and we know how to achieve that value. The combination of a
technology-led business with a well established, growing and profitable sales
operation that understands technology positioning in the key US market is a
powerful formula for success."
John Shannon, Chairman, President and Chief Executive Officer of Everest
added:
"The benefits of this merger are compelling and profound. Gyrus and Everest
are both acknowledged leaders in RF surgical solutions for minimal access
surgical markets. This transaction represents an unusually strong fit, with
outstanding technology and distribution synergistic potential and virtually no
overlap. This is a unique opportunity for our employees and the Everest
distribution network to enhance our product portfolio with additional
innovative, proprietary products to meet the needs of both established and new
markets."
Enquiries:
Gyrus Group PLC
Dr Mark Goble, Managing Director
John Bradshaw, Finance Director
(Analyst, broker and shareholder enquiries)
Tel: 01222 300100
Fax: 01222 300101
Email: john.bradshaw@Gyrus.co.uk
Everest Medical Corporation
John Shannon, Chairman, President and Chief Executive Officer
Tel: 001 612 473 6262
Fax: 001 612 473 6465
Email: johns@everestmedical.com
Nomura International plc
David Porter, Head of Healthcare Corporate Finance
Charles Spicer, Director, Healthcare Corporate Finance
Tel: 0171 521 2000
Fax: 0171 521 3699
Email: charles.spicer@nomura.co.uk
Jean Garon PR
Press enquiries
Tel: 01628 483040
Mobile: 0836 227446
Fax: 01628 486796
Email: jean@garonpr.demon.co.uk
An analysts' meeting will be held today at 10.30 am at the offices of Ashurst
Morris Crisp, 5 Appold Street, London EC2
BACKGROUND NOTES:
GYRUS GROUP PLC ANNOUNCES AGREEMENT TO ACQUIRE EVEREST MEDICAL CORPORATION AND
ASSOCIATED PLACING AND OPEN OFFER
The Boards of Directors of Gyrus Group PLC ("Gyrus") and Everest Medical
Corporation ("Everest") announce today that they have signed a definitive
agreement for Gyrus to acquire Everest in a transaction that values Everest at
approximately $51.6 million (#32.3 million) or $4.85 per share of common stock
of Everest on a fully diluted basis (the "Transaction"). The Transaction is
subject, inter alia, to financing and the approval of both companies'
shareholders.
Based in Minneapolis, Minnesota, Everest is a leader in bipolar radio
frequency ("RF") technology for minimal access surgery and is listed on
NASDAQ. Everest operates a 105 strong independent US sales force from its
headquarters in Minneapolis, a major global centre of medical excellence,
where it also develops and manufactures its proprietary bipolar instruments.
In the financial year ended 31st December 1999, Everest had sales of $12.6
million (1998: $10.7 million), gross profits of $6.4 million (1998: $5.2
million) and net pre-tax income of $1.4 million (1998: $0.67 million). At
31st December 1999, Everest had net assets of $3.9 million. Everest sales
increased by 18% in 1999 and this growth has continued in the first part of
the current year.
Reasons for the acquisition
Both companies are acknowledged leaders in bipolar RF technologies for the
minimal access surgery markets. Gyrus has to date concentrated on the
arthroscopic, hysteroscopic and urology markets. Everest has developed a
strong reputation in the laparoscopic, minimal access cardiac surgery and
gastroenterology markets. Both companies commercialise their products using a
mix of licence agreements, corporate partnerships and direct sales. Gyrus has
direct European sales of own-branded products in urology while Everest has
direct US sales of own-branded products, primarily in the laparoscopic market.
Complementary markets
The affinity of Gyrus' and Everest's products, their value-added positioning
in the market, the underlying technologies, customer base and geographical
distribution are naturally synergistic, with virtually no overlap. These
synergies provide a strong base for higher margin growth in a global market
for minimal access products estimated to reach $5 billion by 2001. The
transaction provides Gyrus with a route to market in the US for business
opportunities it intends to pursue through direct sales and marketing
operations. The Directors believe that the strengths of the two companies are
very complementary and not only broaden the geographical distribution of
own-brand products but also the portfolio of corporate partners to include
Ethicon Endo-Surgery, Guidant and C.R. Bard.
Complementary technology
The Directors of Gyrus believe that Gyrus and Everest have very complementary
technology competencies. Gyrus has expertise in RF generator development and
procedure specific instrument design as a system solution to market needs.
Everest has an in-depth understanding and expertise in intricate bipolar
instrument design providing multiple functions from a single instrument. Both
technologies are positioned in the minimal access surgical markets as
improving both clinical and economic outcomes.
Complementary sales and marketing
Everest uses a network of 105 independent medical sales professionals in the
US to sell its own-brand products into the general and gynaecological
laparoscopy markets. The principal end customer is the surgeon, as it is with
Gyrus' products. This network can form the basis for establishing
distribution in other speciality sectors, by a combination of re-direction and
addition of resource. Gyrus is building a similar network in Europe,
currently selling its own-brand product to the urology market. Everest is
clearly focused on the US market with limited sales in Europe. Gyrus can, by
a similar process of re-direction and addition of resource, broaden the
speciality coverage in Europe.
Corporate partners
Gyrus has a well-established relationship with Ethicon, Inc., in the
arthroscopy and hysteroscopy markets, to which Everest adds relationships with
Guidant Corporation in cardiac surgery, a non-exclusive supply agreement with
Ethicon Endo-Surgery in laparoscopy and one with C.R. Bard for
gastroenterology.
Intellectual property
Everest has a broad patent portfolio covering the field of bipolar
electrosurgery primarily focused on instruments with mechanical features to
improve functionality and manipulation of tissues. Gyrus' intellectual
property is complementary to that of Everest; in particular it involves the
interaction of instrument design with control and performance features of the
RF generator. The Directors of Gyrus believe that this combined know-how
should result in a broadening and strengthening of this portfolio.
Manufacturing
Gyrus and Everest operate using similar manufacturing, quality systems and
regulatory approval strategies, both companies are ISO 9001 approved, both
have been successfully audited by the FDA and both are qualified suppliers to
J&J. The principal route to market for both companies in the USA is through
the FDA 510(k) approval process and, in Europe, both use the
self-certification route to approval and application of the CE mark.
Transaction structure
The Transaction is to be accomplished by a merger of Everest with a newly
incorporated US subsidiary of Gyrus. As a result of this merger, the separate
legal existence of Everest will cease. For each share of Everest common
stock, Gyrus will pay $4.85 on a fully diluted basis. This price represents a
premium of 24.0% on the closing price of Everest of $3.91 on 18th February
2000 and a premium of 150.0% on the closing price of Everest of $1.94 on 31st
December 1999.
To fund the cost of the Transaction and the associated expenses and to
accelerate technology development for the combined companies (the "Enlarged
Group"), Gyrus proposes to raise approximately #40 million by way of a placing
and open offer of Gyrus shares. Full details of the Transaction and the
placing and open offer will be set out in a circular to shareholders that is
expected to be published in March with completion of the placing and open
offer expected in April.
As an alternative to the merger, Gyrus may instead launch a cash tender offer,
fully underwritten by Nomura International plc, for Everest in March
immediately following the placing and simultaneous with the open offer at the
same price.
Following the merger, the Enlarged Group would have a market capitalisation of
approximately #149 million based on the closing price on the London Stock
Exchange of Gyrus shares on 22nd February 2000 (excluding any discount applied
at the placing and open offer).
The Transaction is subject, inter alia, to a minimal level of acceptance of
the cash tender offer by Everest's shareholders or approval by Everest's
shareholders, if Gyrus does not pursue a tender offer, the approval of the
Transaction by Gyrus' shareholders, the completion of the placing and open
offer and the admission of the new Gyrus shares to the Official List of the
London Stock Exchange.
Nomura International plc is advising Gyrus on the Transaction and the placing.
The placing will be arranged by Nomura in association with WestLB Panmure,
the Company's brokers.
Strategy of the Enlarged Group
The strategy of the Enlarged Group will be to sustain growth from a
consolidated leadership position in innovative bipolar electrosurgery systems
for minimal access surgery markets. To achieve this, the strategy will
continue to be based on a combination of licensing agreements, regional
distribution networks and a direct sales force in selected markets and
territories. The combined resources of the two companies will be prioritised
to expand the range of own-brand products and the global distribution of those
products in laparoscopy, urology and other selected speciality markets. The
markets of arthroscopy, hysteroscopy, cardiovascular surgery and
gastroenterology will be served using established corporate relationships and,
where appropriate, the scope of products sold through these relationships will
be expanded to include those developed using the combined know-how of the two
companies.
It is intended that the businesses of Gyrus and Everest will each retain the
scope of their current operations with subsequent expansion based on leveraging
the respective competencies of the two companies. It is anticipated that all
existing managers and employees of Gyrus and Everest will be retained and that
the number of employees at each site will increase as the integration and
combined business strategy are implemented.
On completion of the acquisition, the Enlarged Group will have approximately
296 employees.
Change of year-end
On conclusion of the Transaction, the Enlarged Group will adopt the fiscal
year of Everest. This will require Gyrus to change from year ending 30th June
to 31st December. The change will align the fiscal year of the Enlarged Group
with those of its corporate partners. This will considerably improve the
integration of strategic business planning and sales forecasting with
corporate customers who currently fix their annual targets in the third
calendar quarter, one quarter after the Directors of Gyrus currently close the
planning cycle.
Currency conversion rate #1 = US$ 1.60
No offer or invitation to acquire securities in Gyrus or Everest is being made
now nor are offers being solicited. Any such offer or invitation will only be
made in offering documentation to be published in due course and any such
acquisitions should be made solely on the basis of the information contained
in such offering documentation.
Notes to Editors:
Everest Medical Corporation
Everest designs, develops, manufactures and markets advanced electrosurgical
instrumentation. Everest's bipolar electrosurgical instruments have been
developed specifically to cut, seal and manipulate tissues during minimal
access surgical procedures.
Everest was incorporated in Minnesota in 1983. Since then, Everest has
developed extensive expertise in the control and containment of bipolar RF
energy to affect both surgical cutting and coagulation of vascular tissues in
a variety of surgical and interventional procedures. These instruments are
now developed to be compatible with a range of RF generators sold by third
parties, thereby leveraging a large installed base.
Everest commercialises its products through a combination of corporate
marketing alliances, and a US network of 105 independent medical sales
professionals managed through regional sales managers. Everest's principal
corporate partners are Guidant Corporation, Ethicon Endo-Surgery and C.R.
Bard. Markets and customers served by products which broadly comprise the
older, single function, bipolar instruments have been defined by Everest as
mature businesses, including the gastroenterology business with C.R. Bard and
the laparoscopy products sold through Ethicon Endo-Surgery. Those served by
the new multi-functional instrument technologies have been defined as growth
businesses, including Everest's own brand products sold to the laparoscopic
markets and the minimal access cardiac surgery products sold through Guidant
Corporation.
Everest's common stock is traded on the NASDAQ Small-Cap Market under the
ticker symbol EVMD.
In the financial year ended 31st December 1999, Everest had sales of $12.6
million, gross profits of $6.4 million and net pre-tax income of $1.4 million.
Everest employs approximately 106 people at its headquarters and
manufacturing plant in Minneapolis, US.
Everest's website is http://www.everestmedical.com.
Gyrus Group plc
Gyrus has been at the forefront of an evolution in technologies developed for
the surgical treatment of diseases using minimal access techniques for the
last five years. PlasmaKinetic surgery - the name given by Gyrus to the
application of their new radio-frequency energy delivery technology - can be
uniquely controlled to remove and modify body tissues using minimal access
techniques. PlasmaKinetic surgery has been rapidly adopted over the two and a
half years since it was first introduced, having been used to perform over
300,000 procedures world-wide.
The first PlasmaKinetic I (PK I) system, the VAPR arthroscopy system, was
launched by Gyrus and Ethicon, Inc., a Johnson & Johnson company, in the
second quarter of 1997 since when approximately 3,000 systems have been
installed. Two new instrument forms were introduced during 1998 and a small
diameter form for treating knee cartilage in H2 1999. In September 1999,
Gyrus announced a $6M investment by J&J to accelerate the development of the
VAPR system. The first products developed under this investment were launched
in January this year.
The second PK I system, the VersaPoint hysteroscopic system, was launched
shortly afterwards by Gynecare, Inc. Gynecare was subsequently acquired by
Ethicon, Inc., which now promotes the system through its Women's Healthcare
division. Gyrus has subsequently announced the launch of additions to the
range to help accelerate the conversion from open surgery to the minimally
invasive hysteroscopic treatment for excessive menstrual bleeding. Further
developments of the VersaPoint system are anticipated during the second half
of the year.
The third PK I system, the Gyrus Endourology System for the treatment of
enlarged prostate glands was launched in the second quarter of 1998. Gyrus
sells the system under its own name in Europe. Results obtained from over 500
cases endorse the clinical and economic benefits of the system. Surgeons have
nonetheless been cautious about committing without substantial clinical data.
From the positive reaction to outcomes data presented at recent surgical
meetings, the Directors anticipate a steady increase in sales volumes during
the second half of the year. In June 1999 FDA 510(k) approval was received
and negotiations with two potential US partners are now at an advanced stage
following evaluations performed at six key centres in the US.
Gyrus is currently developing its PlasmaKinetic II (PK II) technology designed
for use in minimal access surgical procedures performed in air or under
gaseous distension. Systems based on PK II technology are being or will be
developed to address five major surgical speciality markets:
* Cosmetic Surgery;
* Laparoscopy;
* ENT/Head and Neck Surgery;
* Minimal Access Cardiovascular Surgery, and;
* Gastroenterology.
The PK II technology is in part derived from technological advances in the
telecommunications industry using high performance semiconductors. These
advances allow the delivery of electrosurgery wherein the circuit running from
the tip of the instrument to the tissue and back through the instrument to the
generator is completed by electromagnetic coupling, rather than by the
conductive fluid employed in the PK I technology. The Directors believe that
this preserves many of the performance advantages of the PK I technology
including the rapid removal, contouring and cutting of tissues during minimal
access surgical procedures.
Pre-clinical trials on two PK II technology system configurations, one for
cosmetic surgery and one for laparoscopic surgery, commenced in March 1999.
Further trials have subsequently been conducted to support a planned launch of
the first PK II system in Q4 2000.
In the last financial year to 30th June 1999, Gyrus was able to report a 65%
leap in turnover (#9.4 million from #5.7 million), along with a sharp drop in
pre-tax losses (#2.5 million from #4 million). In the six months to 31st
December 1999 turnover rose by 31% (#5.3 million from #4 million) with a 20%
fall in pre-tax losses (#0.9 million from #1.1 million).
Gyrus employs 190 people at its headquarters and manufacturing plant near
Cardiff, Wales. The plant includes a 3,000sq. ft. Class 10,000 clean room
where the single use disposables for use with PlasmaKinetic systems are
produced. A new 40,000sq.ft. headquarters has been developed on an adjacent
site and will be occupied in a phased programme to be completed towards the
end of 2000, once the new clean room is commissioned.
Gyrus Group PLC has its UK headquarters at Fortran Road, St. Mellons, Cardiff,
Wales CF3 0LT. Tel: (01222) 300100, fax: (01222) 300101. You can also visit
the company on the web at: www.Gyrus.co.uk
Jean Garon PR
Tel: (01628) 483040
Fax: (01628) 486796
E-Mail: jean@garonpr.demon.co.uk
GYRUS GROUP PLC
("Gyrus" or the "Company")
GYRUS INCREASES R&D EXPENDITURE TO DELIVER NEW PLASMAKINETIC SURGERY
OPPORTUNITIES
Gyrus demonstrates a strong commitment to developing new opportunities for
their PlasmaKinetic surgery systems as the company presents its Interim
Results.
* Group turnover to December 31st up 32% to #5.3 million (#4
million in l998)
* Operating loss 20% down to #0.9 million (#1.1 million in 1998)
* Enhanced performance of 2.3mm VAPR instruments for treating
knee cartilage developed under the Key Growth Project initiative.
* 55% increase in R&D expenditure to support the $6m Key Growth
Projects with Johnson & Johnson and development of PlasmaKinetic
II technology.
* Strong endorsement of Gyrus Endourology system from US surgeons.
* First phase of new 40,000 sq. ft facility to increase capacity now
completed.
* Gyrus also today announced their intention to acquire US medical
device company Eagle Medical Corporation funded by a placing an open
offer raising #40 million (see separate announcement).
Commenting on the results managing director, Dr Mark Goble, said:
"We have worked very hard to reduce the impact of the one-off inventory
reduction implemented by Johnson & Johnson using our R&D resource. Not only
have we gone a long way to achieving this but at the same time we are securing
the future growth of the company with a range of exciting new developments.
These developments have taken on an even greater level of significance with
the announcement today of our intention to acquire US surgical device company,
Everest Medical".
Full figures to follow shortly.
END
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