- Teleflex has struck a $260 million deal to buy IWG High Performance Conductors as it looks to build on a financial year in which it beat expectations.
- In fourth quarter results posted Thursday, Teleflex revealed the purchase to gain a portfolio of fine wires and tubing components used in devices including cerebral protection systems for transcatheter aortic valve replacement (TAVR) procedures.
- The acquisition follows a year in which Teleflex relied on a device gained in its 2017 takeover of NeoTract to achieve constant currency sales growth of 8.1%.
In October, Teleflex CEO Liam Kelly said he was spending more time on M&A than at any time in his two-year period leading the company. Teleflex revealed the first fruit of that intensified effort in conjunction with its fourth quarter results.
Kelly's hunt for a takeover target led him to IWG HPC, a manufacturer of wire and tubing components used in cerebral protection systems for TAVR procedures, intra-cardiac mapping catheters and other devices. Kelly pointed to IWG HPC's "above-company average revenue growth and operating margin profile" to explain his interest in the company.
"It gets us into a really nice space. It gets us into this thin-walled wire, reinforced catheter space. It was a gap within our OEM business," Kelly said on a fourth quarter conference call with investors.
Kelly expects the acquisition to be accretive to full-year adjusted earnings per share for 2020. That forecast is underpinned by the belief that IWG HPC's position in fast-expanding markets such as pain management and electrophysiology will accelerate growth at Teleflex.
The purchase will fold into Teleflex's OEM unit. The unit achieved revenue growth of 4.3% in the fourth quarter on a constant currency basis, resulting in an 8.2% rise in full-year sales. Full-year revenues for the entire company came in at 8.1%, above the 6% to 7% range Teleflex targeted going into 2019.
Teleflex's performance in 2019 was underpinned by UroLift, a prostate device acquired in the 2017 takeover of NeoTract. Fourth-quarter revenues at the interventional urology unit, which sells UroLift, grew 54.4%, resulting in a full-year increase of 47.8%. Teleflex expects UroLift growth to decelerate in 2020.
That slowdown is forecast to happen despite Teleflex planning to take actions to maintain sales momentum. Having trained 500 urologists in 2019, Teleflex plans to do the same again this year. Teleflex plans to pair the expansion of the pool of urologists trained to use UroLift to a marketing campaign intended to drum up interest in the device among men with enlarged prostates.
"We are going to do a nationwide direct-to-consumer pilot," Kelly said. "The onus is on Teleflex to inform men. We have to raise the knowledge of men."
Teleflex needs its growth drivers to fire to offset the headwinds it faces. The shutdown of the facility of a contract sterilizer is expected to continue to drag on performance over the first half of the year to the tune of up to $7 million. Teleflex also expects coronavirus to create a similar sized headwind.