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Cynosure Signs Definitive Agreement to Acquire Palomar Medical Technologies

Mon, 03/18/2013 - 7:24am
The Associated Press

WESTFORD, Mass. and BURLINGTON, Mass., March 18, 2013 /PRNewswire/ -- In a transaction that creates one of the world's premier aesthetic laser and light-based companies, Cynosure, Inc. (NASDAQ: CYNO) and Palomar Medical Technologies, Inc. (NASDAQ: PMTI) today announced that they have signed a definitive agreement, pursuant to which Cynosure will acquire Palomar in a cash and stock transaction valued at approximately $294 million.

"We believe the acquisition of Palomar creates a substantial opportunity to generate profitable, long-term growth for our Company and drive value for our stockholders," said Michael Davin, Cynosure's Chairman and Chief Executive Officer.  "Combining with Palomar complements our product portfolio and customer base, adding new product and service revenues, strengthening our global distribution network, creating new cross-selling opportunities and enhancing our intellectual property position with the addition of more than 40 patents." "Beyond our strategic rationale for acquiring Palomar, we also are excited about the benefits of bringing together two organizations built on a commitment to meaningful innovation," Davin said.  "Palomar products such as the Icon and Starlux Laser and Intense Pulsed Light (IPL) Platforms and the recently introduced Vectus Diode Laser for permanent hair reduction have established Palomar's reputation for excellence around the world. This commitment is also reflected in proprietary technology that enables physicians to ensure patient safety and comfort through advances in intelligent energy delivery, skin cooling, and temperature control." Cynosure and Palomar, both based in Massachusetts, have a total combined installed base of more than 20,000 aesthetic laser systems worldwide, with a distribution network that spans over 100 countries.

The combined revenue of the two companies in calendar year 2012 was more than $234 million with 52% of product revenue coming from North America and 48% originating from the international markets.

"Our board of directors and management team believe that this transaction makes strategic sense for our company, offers an attractive premium to our shareholders and creates exciting opportunities for our employees," said Joseph Caruso, Chairman, President and Chief Executive Officer of Palomar. "Both companies share the same passion for innovation, and this combination creates a single, unified organization that is positioned for continued success." Transaction Terms Palomar shareholders will receive $13.65 per share of Palomar common stock: $6.825 per share in cash and $6.825 per share in Cynosure common stock (subject to adjustment and collar provisions described in the definitive agreement).  Cynosure will issue approximately 5.2 million shares in the transaction and fund the approximately $147 million in cash consideration through existing cash balances.

The acquisition price of $13.65 represents a premium of approximately 23% above Palomar's average closing price and a premium of approximately 34% over Palomar's average enterprise value (excluding cash) since the announcement of Palomar's 2012 year-end results on February 7, 2013.

The acquisition is expected to be accretive to Cynosure in calendar 2014 with the implementation of $8 million to $10 million in projected synergies.  The combined company will have approximately $87 million in cash and no debt on a pro forma basis for the transaction as of December 31, 2012. The transaction has been unanimously approved by the board of directors of each company and is expected to close in the third quarter of 2013.

The transaction is subject to customary closing conditions, including Cynosure and Palomar shareholder approval and regulatory approvals.

It is anticipated that the transaction will be tax free to Palomar shareholders with respect to the stock component of the deal consideration.  Upon completion of the transaction, Cynosure shareholders will own approximately 77% and Palomar shareholders will own approximately 23% of the combined company.

Upon completion of the transaction, Davin will serve as Chairman and Chief Executive Officer; Caruso will join Cynosure's Board of Directors as Vice Chairman and will serve as President; and Timothy Baker will serve as EVP, Chief Operating Officer and Chief Financial Officer. Cynosure ultimately plans to relocate its headquarters from Westford, Massachusetts to Palomar's owned facility 15 miles away in Burlington, Massachusetts.

"We look forward to welcoming the Palomar team to Cynosure," Davin said.  "We envision a smooth transition and integration that will achieve the full operational and financial benefits of this combination for our customers, employees and shareholders." Leerink Swann served as Cynosure's financial advisor on the transaction and Hinckley, Allen & Snyder served as legal counsel.

Canaccord Genuity served as Palomar's financial advisor and WilmerHale served as legal counsel.

Conference Call / Webcast In conjunction with this announcement, management will host a conference call for financial analysts and investors at 9:00 a.m. ET today. Those who wish to listen to the conference call webcast should visit the "Investor Relations" section of Cynosure's website at www.cynosure.com or the "Investors" section of the Palomar website at www.palomarmedical.com. The live call also can be accessed by dialing (877) 709-8155 or (201) 689-8881. If you are unable to listen to the live call, the webcast will be archived on the companies' websites.

About Cynosure
Cynosure develops and markets aesthetic treatment systems that are used by physicians and other practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and pigmented lesions, remove multi-colored tattoos, rejuvenate the skin, liquefy and remove unwanted fat through laser lipolysis, reduce cellulite and treat onychomycosis. Cynosure's products include a broad range of laser and other light-based energy sources, including Alexandrite, pulse dye, Q-switched, Nd:YAG and diode lasers, as well as intense pulsed light. Cynosure was founded in 1991. For corporate or product information, visit Cynosure's website at www.cynosure.com.

About Palomar
Palomar designs, produces and sells the most advanced cosmetic lasers and intense pulsed light (IPL) systems to dramatically improve the appearance of women's and men's skin. For over 15 years, Palomar has pioneered the science of using lasers and light to improve appearances. As the industry's technology leader, Palomar has invested in creating cosmetic laser and IPL systems that put real value in the hands of physicians and other professionals to benefit consumers.

Thousands of physicians worldwide trust and depend on Palomar technology to not only introduce new aesthetic treatments such as advanced laser hair removal, laser liposuction, skin resurfacing, acne, laser treatments for scars, wrinkle treatment, stretch marks (striae), and photofacials for pigmented and vascular lesions, but to also make them robust, faster, more powerful, and more comfortable for those being treated. In June 2009, Palomar became the first company to receive a 510(k) over-the-counter ("OTC") clearance from the FDA for a new, patented, home-use, laser device for the treatment of fine lines and wrinkles around the eyes (periorbital wrinkles). This OTC clearance allows the PaloVia@ Skin Renewing Laser@ to be marketed and sold directly to consumers without a prescription.  For more information on Palomar and its products, visit Palomar's website at www.palomarmedical.com for professional products or palovia.com for consumer products.

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