March 2, 2021

DealBook: ConvaTec Said to Bid for Kinetic Concepts

ConvaTec, a company owned by two private equity firms, has made a bid for Kinetic Concepts that is higher than the wound-healing technology company’s $4.9 billion deal with another group of investors, a person briefed on the matter told DealBook on Sunday.

ConvaTec, which is owned by Avista Capital Partners and Nordic Capital, has obtained “highly confident” financing letters from Goldman Sachs and the Jefferies Group. Such correspondence means that while ConvaTec has not secured formal lending commitments, its investment banks believe that they can arrange the necessary debt financing.

Kinetic Concepts agreed last month to sell itself to a group of investors led by Apax Partners in the largest leveraged buyout since the financial crisis. Apax, along with the pension funds Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, agreed to pay $68.50 a share in cash. Including Kinetic Concepts’ debt, the deal is valued at $6.3 billion.

Under the terms of Kinetic Concepts’ agreement with the Apax consortium, it could “initiate, solicit and encourage” higher bids until 11:59 p.m. on Sunday. Should the company strike a deal that its board determines is superior to the Apax offer, it will have to pay that group a $51.8 million breakup fee.

The bid by Convatec is unusual because private equity firms generally shun “jumping” bids once a deal is announced.

One possible complication for Convatec is unease about the financing markets, which have grown more volatile during the recent market turmoil. At least one potential transaction, Liberty Media’s proposed takeover of Barnes Noble, was scuttled because of rising financing costs. Liberty instead decided to buy a 16.6 percent stake in the bookseller for $204 million.

Kinetic Concepts has long been seen as an attractive takeover target because of its market-leading position in negative-pressure therapy, a technology that uses vacuum pumps to treat wounds. In recent years, however, lower-priced competitors have cut into the company’s market share.

Because of its relatively stable revenue, the wound-care industry has drawn the interest of private equity firms in recent years. Avista and Nordic bought ConvaTec from Bristol-Myers Squibb in 2008, in what was the largest leveraged buyout that year.

Shares in Kinetic Concepts closed on Friday at $65.37.

News of Convatec’s offer was reported earlier by Bloomberg News.

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