Derma Sciences Inc (NASDAQ:DSCI) is on track to swallow privately-held BioD in a deal that will see it part with $21.3 million upfront and about $77.8 million in total. The boards of both companies have assessed the deal and given it the green light, a move that is expected to speed up the closing of the transaction.
This transaction is going to impact Derma Sciences Inc (NASDAQ:DSCI) in serious ways, the management of the company hinted in a press release. But the impact will be largely positive because you see the management talking about economies of scale, new talents and a product portfolio that is already generating revenue.
What’s the deal?
Owners of BioD have decided to sell the company to Derma Sciences for an upfront cash consideration of $21.3 million. But owners of BioD are eligible for additional payments in the future with some of the payments being attached to certain regulatory success.
If you look at the details of the agreement, you notice that on top of the $21.3 million upfront payment, Derma Sciences will make another payment of $30 million to BioD if the company’s pipeline products attain some regulatory milestones. But the payments for BioD owners do not end there because they will be eligible for another $26.5 million in incremental sales related targets.
If you work out the different payouts agreed under the buyout deal, you find that BioD owners stand to walk away with about $77.8 million.
What about of disruption is expected?
Derma Sciences Inc (NASDAQ:DSCI) doesn’t expect any serious disruption of its normal operations because of the acquisition of BioD. For instance, BioD will operate as a 100% owned subsidiary of Derma Sciences and Russell Olsen, who has been running the business as CEO, will be retained in that position.
What’s DSCI getting?
The acquisition of BioD is going to boost Derma Sciences Inc (NASDAQ:DSCI)’s revenue immediately. The products being acquired generated sales totaling $18.6 million in 2015 and for the 12 months to the end of June 2016, their annualized sales are greater than $22 million.
Derma Sciences Inc (NASDAQ:DSCI) also said the acquisition will enhance its scale and provide a much-needed avenue to diversify operations. The company will also be harvesting BioD’s sales organization and R&D scientists in additional to several pipeline products.