Symmetry Medical Divests OEM, Surgical Goes Public

Symmetry Medical Inc. (until recently SMA) recently completed the divestiture of its OEM solutions business unit to Tecomet Inc. The deal, announced in Aug 2014, was valued at $450 million in cash after fees and elimination of outstanding debt.

Symmetry Medical also completed the transfer of the remaining surgical business to a new company called Symmetry Surgical Inc, which started trading on Nasdaq from Dec 5, 2014, under the symbol “SSRG”.

Shareholders of Symmetry Medical will receive $7.50 per share in cash and a share of Symmetry Surgical for every four Symmetry Medical shares held.

The OEM business sale is expected to enhance the growth potential of Symmetry Surgical, apart from providing liquidity to shareholders. Much like the sale of U.K.-based subsidiary, Clamonta, the OEM divestiture will help the company focus on its high-margin surgical business.

Meanwhile, lower manufacturing footprint will drive profits. According to management, the stand-alone company will be able to target a broader surgical instrument market, which will drive sales.

Symmetry Surgical is estimated to have an approximate 8–9% share of the re-usable surgical instruments market, which is currently worth almost $1 billion. However, this is only a minuscule part of the general surgery devices segment, which is estimated to value $18 billion.

Hence, we believe that the new stand-alone entity has immense potential to penetrate this growing market banking on its strong product portfolio and nimble structure over the long term.

However, the new Symmetry Surgical business will face significant challenges due to persistently sluggish hospital spending. The company is also expected to face intense competition from the likes of Asculap, CareFusion (CFN – Analyst Report), Integra Life Sciences (IART – Analyst Report), Medtronic (MDT – Analyst Report) and numerous product divisions of capital equipment companies, which is a major headwind.

Nevertheless, we believe that Symmetry Surgical’s expanding product pipeline will drive overall growth, going forward.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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