– Colfax Corporation (NYSE: CFX), a leading diversified
technology company, today announced its intention to separate its
fabrication technology and specialty medical technology businesses
into two differentiated, independent, and publicly-traded
companies. The separation is intended to be structured in a
tax-free manner and is targeted to be completed in the first
quarter of 2022.
“This is an exciting day for Colfax and an
important step to unlock the full value inherent in our MedTech and
FabTech businesses,” said Matt Trerotola, Colfax President and CEO.
“Now is the right time to build on the momentum in both businesses
and enable each to better capitalize on its distinct opportunities.
Our abilities to successfully develop talent, drive innovation,
leverage our Colfax Business System for continuous improvement and
acquire attractive businesses are core to both MedTech and FabTech.
We believe a separation will better position each business to
execute tailored strategies to deliver above-market growth, margin
expansion and strong, consistent free cash flow.”
“This decision is the result of a thorough
strategic review undertaken by the Board with management,
reflecting an ongoing commitment to drive long-term value for all
stakeholders,” said Mitch Rales, Colfax co-founder and Chairman of
the Board. “We have now successfully put in place a proven
operating model to compound value and have effectively transformed
our Company. With two strong management teams, and focused business
and capital allocation strategies in place, FabTech and MedTech are
poised to accelerate growth and drive increased shareholder value.
I look forward to continuing to support and guide each of the
management teams as a member of both businesses’ Boards of
Directors.”
The specialty medical technology company will be
led by Colfax CEO Matt Trerotola and Colfax EVP Brady Shirley will
serve as Chief Operating Officer. Mr. Shirley will join Mr.
Trerotola on the MedTech Board. Colfax CFO Chris Hix will serve as
CFO. Headquartered in Wilmington, Delaware with a significant
presence in Dallas, Texas, the company will be renamed before the
separation is completed to reflect its strategic focus.
The fabrication technology company will be led
by current Colfax EVP Shyam Kambeyanda, who will join the FabTech
Board. Long-time Colfax financial executive and current ESAB
business CFO Kevin Johnson will serve as FabTech’s CFO. The
company will remain headquartered in Maryland and continue to
operate under its well-known brand name ESAB.
Compelling Strategic Rationale for a
Separation
The businesses operate in distinct markets, with
unique business opportunities and investment requirements. The
Colfax Board, with management, believes the separation will result
in material benefits to the standalone companies, including:
- Sharpened strategic focus for independent specialty medical
technology and fabrication technology companies.
- Increased operating flexibility and resources to capitalize on
growth opportunities in their respective markets.
- Capital structures and capital allocation strategies that are
tailored to each company’s growth strategy.
- Improved investor alignment with each company’s clear value
proposition, and ability for investors to value the two companies
based on their distinct strategic, operational and financial
characteristics.
Two Highly Focused Market-Leading
Companies
Medical Technology Company The
MedTech company is a leading, specialty medical technology growth
company. It has top-tier positions in attractive orthopedic
segments across the continuum of care, including surgical implants
as well as injury prevention and recovery devices, with clear paths
to further accelerate growth. The company recently completed
several strategic bolt-on acquisitions, strengthening and expanding
its position in attractive market segments including extremities
reconstruction and therapeutic laser technology for recovery. The
company will be comprised of Colfax’s current Medical Technology
operating segment, which is expected to generate revenue of
approximately $1.4 billion in 2021.
The separation is expected to enable MedTechCo
to continue to expand its share in high-growth, high-margin served
and adjacent markets through strategic M&A and R&D
investments. This will position the company with significant
opportunities to deliver above-market growth, margin improvement
and increased cash flow. Capital deployment is expected to be
focused on supporting the company’s strategic growth program.
ESABESAB is a fabrication
technology leader with an unparalleled global footprint, track
record of industry-leading product innovation and strong positions
in attractive emerging markets. The company has successfully
executed its operational improvement strategy to out-grow peers in
recent years and significantly increase margins and cash flow.
Through strategic bolt-on acquisitions, ESAB has broadened its
product and technology offering, extended its geographic reach and
expanded into attractive new segments, including gas control for
medical and life sciences. ESAB will be comprised of Colfax’
Fabrication Technology operating segment, which is expected to
generate revenue of approximately $2.2 billion in 2021.
The separation is expected to support ESAB’s
leadership in global industrial markets and position it to further
increase market share through innovation and commercial excellence.
ESAB will focus on complementing its growth with operating
improvements to further enhance margins and cash flow. It expects
to maintain a balanced capital allocation policy focused on growth
investments, bolt-on acquisitions, and return of capital to
shareholders.
Separation Details
Colfax intends the separation to be tax-free to
Colfax’ shareholders. Colfax is targeting completion of the
separation in the first quarter of 2022. Completion of the
separation is subject to, among other things, completion of
financing and other transactions on satisfactory terms, other steps
necessary to qualify the separation as a tax-free transaction,
receipt of other regulatory approvals and final approval from the
Colfax Board of Directors. Details of the separation will be
included in future filings with the SEC. There can be no assurance
regarding the form and timing of the separation or its
completion.
Conference Call and Investor
Presentation Today
Colfax will hold a conference call to discuss
this announcement beginning at 8:30 a.m. Eastern today, which will
be open to the public by calling 1-877-303-7908 (U.S. callers) and
+1-678-373-0875 (International callers) and referencing the
conference ID number 9319529 and through webcast via Colfax’
website www.Colfax.com under the “Investors” section. Access to a
supplemental slide presentation can also be found at the Colfax
website under the same heading. Both the audio of this call and the
slide presentation will be archived on the website later today.
Investor Day Scheduled for March
11
As previously announced, Colfax will host an
investor day on March 11, 2021, which will include a detailed
discussion of each business. Participation details can be found in
the Investor Relations section of the Company’s website at
https://ir.colfaxcorp.com/events-presentations.
Advisors
Goldman, Sachs & Co. LLC and Evercore are
serving as financial advisors, and Latham & Watkins, LLP is
serving as legal advisor, to Colfax.
About Colfax Corporation
Colfax Corporation is a leading diversified
technology company that provides specialty medical technologies and
fabrication technology products and services to customers around
the world, principally under the DJO and ESAB brands. Colfax
believes that its brands are among the most highly recognized in
each of the markets that it serves. The Company uses its Colfax
Business System (“CBS”), a comprehensive set of tools, processes
and values, to create superior value for customers, shareholders
and associates. Colfax’s common stock is traded on the NYSE under
the ticker “CFX.”
Cautionary Note Concerning Forward
Looking Statements
This press release includes “forward-looking”
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements may be characterized
by terms such as “believe,” “anticipate,” “should,” “would,”
“intend,” “plan,” “will,” “expect,” “estimate,” “project,”
“positioned,” “strategy,” “targets,” “aims,” “seeks,” “sees” and
similar expressions. All statements other than statements of
historical fact could be deemed forward-looking statements,
including, but not limited to, statements regarding: the intended
separation of the ESAB and MedTech businesses; expected 2021
revenue for ESAB and MedTech; the timing and method of the
separation; the anticipated benefits of the separation; the
expected financial and operating performance of, and future
opportunities for, each company following the separation; the tax
treatment of the transaction; and the leadership of each company
following the separation. These statements are based on assumptions
and assessments made by our management as of the date of this press
release in light of their experience and perception of historical
trends, current conditions, expected future developments and other
factors believed to be appropriate. Forward-looking statements are
subject to a number of risks, uncertainties and assumptions that
might cause actual results, developments and business decisions to
differ materially from those expressed or implied thereby, and are
not guarantees of future performance or actual results. These
factors include, among other things: the final approval of the
separation by our board of directors; the uncertainty of obtaining
regulatory approvals in connection with the separation, including
rulings from the Internal Revenue Service; the ability to satisfy
the necessary closing conditions to complete the separation on a
timely basis, or at all; our ability to successfully separate the
two companies and realize the anticipated benefits of the
separation; developments related to the impact of the COVID-19
pandemic on the separation and the financial and operating
performance of each company following the separation, including
actions by governments, businesses and individuals in response to
the pandemic, and other impacts on our business and ability to
execute business continuity plans; and our ability to manage and
grow our business and to execute our business and growth
strategies. The effects of the COVID-19 pandemic, including actions
by governments, businesses and individuals in response to the
pandemic, may also give rise or contribute to or amplify the risks
associated with many of these factors.
The factors identified above are not exhaustive.
We operate in a dynamic business environment in which new risks may
emerge frequently. Other unknown or unpredictable factors could
also cause actual results, developments and business decisions to
differ materially from those expressed or implied by the
forward-looking statements. Forward-looking statements should be
construed in the light of such factors. Readers are cautioned not
to place undue reliance on any forward-looking statements, which
speak only as of the date made. Additional information regarding
these and other factors that may cause actual results to differ
materially from those expressed or implied by the forward-looking
statements is set forth in our public filings with the Securities
Exchange Commission (the “SEC”), including our Annual Report on
Form 10-K for the year ended December 31, 2020 and our subsequent
filings with the SEC. We do not undertake, and hereby disclaim, any
obligation to update any forward-looking statements, whether as a
result of new information, future developments or otherwise.
Investor Contact
Mike MacekVice President, FinanceColfax
Corporation+1-302-252-9129investorrelations@colfaxcorp.com
Media Contact
Jenny Gore or Mike DeGraffSard Verbinnen &
Co. Colfax-SVC@SARDVERB.com
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