Edited at 9:30 am, February 28, 2022
Intricon Corp (NASDAQ: IIN), Arden Hills, Minn, a manufacturer of miniature electronic equipment for implantable and body-worn medical devices including hearing aids and personal sound amplification products, announced that it has entered into a definitive agreement to be acquired by Altaris Capital Partners, LLC for $24.25 per share. The transaction places Intricon at an equity value of approximately $241 million, representing a meaningful premium of approximately 39% to Intricon’s closing stock price on February 25.
Altaris, which will acquire all outstanding shares of Intricon, is reportedly an investment firm focused exclusively on the healthcare industry. Altaris, which was established in 2003, reports that it has invested in more than 45 healthcare companies that have contributed to advancements in the industry and generated significant value appreciation for investors. Headquartered in New York City, Altaris reportedly manages $6.0 billion of equity capital. Among its holdings are Kindeva and Minnetronics Medical, both based in St Paul, Minn, with close proximity to Intricon.
“We are excited to enter into this transaction with Altaris, which will deliver a compelling valuation to our shareholders and enable us to accelerate the advancement of our joint development manufacturing capabilities in micromedical technology across a broad range of high growth markets,” said Intricon President and CEO Scott Longval. “Our team has done an outstanding job of establishing Intricon as the partner of choice for companies that are bringing truly advanced technology to medical devices. As we enter the next chapter for our company, we believe that Altaris is the ideal partner to help us further advance our mission.”
Intricon supplies many branded hearing aids and still owns the online distributor Hearing Help Express; however, much of its business is devoted to supplying microelectronics to key customers like Medtronics. Until late 2019, the company had also supplied UnitedHealthcare’s Hi HealthInnovations hearing aid until the insurance giant decided to pivot towards a more traditional “brick-and-mortar” approach in the second half of 2019. Intricon also partnered with the Academy of Doctors of Audiology in 2015 to manufacture EarVenture hearing aids, generating controversy in the industry.
Under the terms of the agreement, Intricon shareholders will receive $24.25 in cash for each share of Intricon common stock they own. The transaction has fully committed financing from funds affiliated with Altaris.
According to the company, Intricon’s Board of Directors has unanimously approved the merger agreement with Altaris and recommends that Intricon shareholders approve the proposed merger and merger agreement. Intricon expects to hold a Special Meeting of Shareholders to consider and vote on the proposed merger and the merger agreement as soon as practicable after the mailing of the proxy statement to its shareholders. The transaction is expected to close in the second quarter of 2022, subject to customary closing conditions, including approval by Intricon shareholders and receipt of regulatory approvals.
Upon completion of the transaction, Intricon will become a private company and Intricon shares will no longer be listed on any public market.
Under the terms of the merger agreement, Intricon may solicit superior proposals from third parties for a period of 35 days continuing through April 3, 2022, and in certain cases for a period of 45 days continuing through April 13, 2022. In accordance with the merger agreement, Intricon’s Board of Directors, with the assistance of its advisors, intends to solicit superior proposals during this period. In addition, Intricon may, at any time, subject to the provisions of the merger agreement, respond to unsolicited proposals that are reasonably likely to result in a superior proposal. Intricon will have the right to terminate the merger agreement with Altaris to enter into a superior proposal subject to the terms and conditions of such agreement. There can be no assurance that the solicitation process will result in a superior proposal or that any other transaction will be approved or completed. Intricon does not intend to disclose developments with respect to this solicitation process unless and until its Board of Directors determines such disclosure is appropriate or is otherwise required.
Intricon reports full-year/Q4 2021 results. Concurrent with the acquisition announcement, Intricon also announced financial results for the fourth quarter of 2021 and full-year financial highlights.
For Q4 2021, the company had revenues of $32.2 million compared to $30.3 million in Q4 2020, with revenues increasing by 2% for its diabetes-related components and 36.1% for its other medical revenue which includes interventional catheters and amplification devices. The company reported a gross profit margin of 25.2%, compared to 25.7% in Q4 for the prior year.
Hearing Health revenue was $5.6 million in the fourth quarter of 2021 compared to $5.1 million during the same period in 2020. The revenue increase was largely attributed to the expansion of the company’s OTC hearing aid pilot program, offset by the planned transition from the direct-to-end-consumer business, Hearing Help Express, says the company.
For the complete year ending December 31, 2021, the company had revenues of $125.2 million compared to $102.8 million in the prior year. Diabetes revenue increased 17.6% year-over-year and interventional catheters revenue increased 98.0%, which included a full year contribution from the acquisition of EMS in May 2020. Other medical revenue, which includes amplification products, increased 13.9% year-over-year.
Hearing Health revenue was $22.4 million in 2021 compared to $19.0 million in 2020. According to Intricon, the revenue increase year-over-year was largely attributed to the launch of a new customer OTC hearing aid pilot program and stronger legacy OEM sales reflecting pent-up demand that emerged as a result of the COVID-19 pandemic.
In total, Intricon reported a gross profit margin in 2021 of 25.1%, compared to 25.5% in 2020, reflecting supply chain and labor market inefficiencies throughout 2021, partially offset by higher revenue volumes. Operating expenses for 2021 were $30.9 million, compared to $29.3 million in 2020. The change in operating expenses year-over-year was primarily due to continued expansion of the company’s business development function, an increase in incentive compensation expense and headcount additions.
Piper Sandler & Co is serving as exclusive financial advisor to Intricon and Blank Rome is acting as legal counsel. Schiff Hardin LLP and Linklaters LLP are acting as legal counsel to Altaris.