SCA to Acquire BSN Medical

SCA, Sweden, has agreed to acquire BSN medical, Luxembourg, a leading medical solutions company, from the private equity group EQT. BSN medical develops, manufactures, markets and sells products within wound care, compression therapy, and orthopedics. The purchase price amounts to EUR 2,740 million on a debt- and cash-free basis. The completion of the transaction is subject to customary regulatory approvals. Closing is expected to take place during the second quarter 2017.

BSN medical is an innovative medical solutions company with well-known brands such as Leukoplast, Cutimed, JOBST, Delta Cast, Delta Lite, and Actimove, which are long established brand leaders in their key markets. BSN medical has a strong go-to-market and supply chain with sales in more than 140 countries and production in 11 countries. BSN medical has approximately 6,000 employees.

"The BSN medical acquisition is an excellent strategic fit for SCA, supporting our vision to improve well-being through leading hygiene and health solutions, two closely interlinked areas. BSN medical has leading market positions in several attractive medical product categories and provides a new growth platform with future industry consolidation opportunities. Our incontinence business, with the global leading TENA brand, shares similar positive market characteristics and customer and sales channels, which provide opportunities for accelerated growth through cross-selling," said Magnus Groth, president and CEO, SCA.

BSN medical’s reported net sales for 2015 amounted to EUR 861 million (SEK 8,050 million) and adjusted EBITDA of EUR 201million (SEK 1,879 million), adjusted operating profit of EUR 137 million (SEK 1,281 million), an adjusted operating margin of 15.9% and adjusted return on capital employed of 7.7%. The reported net sales for BSN medical for the first nine months of 2016 amounted to EUR 627 million (SEK 5,872 million), adjusted EBITDA of EUR 151 million (SEK 1,414 million), adjusted operating profit of EUR 103 million (SEK 965 million) and an adjusted operating margin of 16.4%.

On a pro forma basis, giving effect to the acquisition, SCA’s net sales for the full year 2015 would have increased from SEK 115.3 billion to SEK 123.4 billion. Pro forma adjusted EBITDA for the full year 2015 would have increased from SEK 19.0 billion to SEK 20.9 billion, adjusted EBITDA margin would have increased from16.5% to 16.9%, pro forma adjusted operating profit for the full year 2015 would have increased from SEK 13.0 billion to approximately SEK 14.0 billion, adjusted operating margin would have remained at 11.3%, and adjusted return on capital employed would have decreased from 12.0% to 10.7%.

The acquisition is expected to be accretive to SCA’s earnings per share from year one. BSN medical has high cash conversion and an asset light business model.

BSN medical’s global addressable market size 2015 is estimated to amount to EUR 11.6 billion, with an estimated market growth (CAGR 2015-2020) of approximately 4%, mainly driven by an aging population, increased prevalence of chronic conditions, and increased access to health care.

"BSN medical provides an opportunity for SCA to expand our market presence through adding adjacent medical product categories with shared underlying market and customer characteristics of our incontinence business. This acquisition will significantly strengthen SCA’s customer offering, channel presence, and market access. This will further strengthen and develop SCA’s global market leading position within incontinence products under the TENA brand. At the same time, the BSN medical business will benefit from SCA’s strong presence in healthcare and retail sales channels as well as SCA’s extensive knowledge in brand building and focus on digitalization," said Groth.

In relation to the acquisition, SCA expects to realize annual synergies of at least EUR 30 million with full effect three years after closing. These include sales synergies from accelerated growth from cross-selling of BSN medical products and SCA incontinence products as well as cost synergies primarily in supply chain and administration. Restructuring costs are expected to amount to approximately EUR 10 million and are expected to be incurred in the first three years following completion.

Transaction costs amount to approximately EUR 25 million of which approximately EUR 15 million will be recognized as an item affecting comparability during Q4 2016. The remaining costs will be recognized as an item affecting comparability during Q2 2017. Intangibles related to the acquisition are expected to amount to approximately EUR 2.7 billion.

The acquisition will be fully debt funded and SCA has committed credit facilities in place. SCA remains fully committed to retaining solid investment grade rating.