Wright Medical Snatches Up Tornier in $3.3B Inversion Deal

U.S. bone-implant maker Wright Medical Group Inc. will merge with orthopedic device-manufacturer Tornier N.V. in a $3.3 billion, all-stock transaction to create a new company based in the Netherlands.

Wright's existing shareholders will own 52% of the combined company, Wright Medical Group N.V. Wright's U.S. headquarters, its lower extremities and biologics businesses will remain in Memphis, TN. Its president and CEO, Robert Palmisano, will assume the same titles in the combined company.

Tornier, which has had its main office in Amsterdam for eight years, will house the new company's upper extremity business at its U.S. headquarters in Bloomington, MN. David Mowry, Tornier's president and CEO, will become executive vice president and chief operating officer of the combined company.

"This combination will create the premier extremities-biologics company with a broad global reach," Palmisano said in a joint statement announcing the deal. "Together, we will have one of the most comprehensive upper and lower extremity product portfolios in the market."

Following in the footsteps of much larger Medtronic Inc., Wright is the latest U.S. company to announce it will move its headquarters overseas as part of a merger or acquisition. Medtronic's plan to acquire Ireland-based Covidien was among the so-called tax inversion deals that spurred the U.S. Treasury Department to clamp down on such arrangements. In a tax inversion, a company moves to a country with a lower tax rate.

Medtronic said this week that it plans to raise $16 billion domestically to complete the $43 billion, as the new federal rules prohibit it from using its own foreign cash reserves, Qmed has reported.

In their combined statement, Wright and Tornier predicted the combined company would provide "more accessible cash flow, enhancing its ability to innovate and grow, creating long-term shareholder value."

A congressional committee estimated in May that future inversions might cost the federal government $19.5 billion in tax revenue over the next 10 years, according to a report on Bloomberg.com.

A little more than a year ago, a Piper Jaffray analyst told Qmed that Wright's earnings potential would make it an acquisition target.

On Monday, Wright reported third-quarter net sales of $71.3 million, a 24% increase compared to Q3 2013. The company plans to announce its Q3 earnings on Nov. 5.

The companies expect the deal to close in the first half of 2015.