Dentsply International Inc. agreed to acquire Sirona Dental Systems Inc. for $5.5 billion in stock, creating a giant in dental supplies and equipment.
The transaction forms a company with annual net sales of about $3.8 billion and earnings of more than $900 million, excluding interest, tax, depreciation and amortization, according to a statement Tuesday. Sirona investors will get 1.8142 shares of Dentsply for each share they own.
There also have been a handful of dental supply deals in the middle-market in 2015. For example, there is Gryphon Investors investing in One Smile LLC; Harvest Partners LP's purchase of DCA Investment Holding LLC; and Shore Capital Partners recapitalizing Chicagoland Smile Group.
For more on M&A activity in the dental space, see Dentists Will Unite, Just Like Doctors Did.
The combined company, to be called Dentsply Sirona, will have a wider array of products for dental offices, from fluoride rinses to dental chairs. The combination will yield savings from overlapping costs of $125 million or more by the third year after the deal closes, the companies said.
The companies billed the deal as a "merger of equals," with Dentsply shareholders owning 58 percent of the new company and Sirona investors the rest. Dentsply Chief Executive Officer Bret Wise will be executive chairman of the combined company, while Sirona CEO Jeffrey Slovin will retain the same title. The deal, which requires shareholder and antitrust approval, is expected to close in the first quarter of next year.
The transaction values Sirona at about $98.60 a share based on Dentsply’s closing share price Tuesday, before the deal was announced. Sirona closed at $99.31, up 1.2 percent. The deal value is based on average trading prices for each company over the past month, the companies said. Dentsply’s shares fell 5.8 percent in late trading, while Sirona was down 1.3 percent.
Sirona chose to agree to the Dentsply deal rather than hold out for a higher offer because the transaction provided unique benefits, Slovin said on a conference call Tuesday.
"There’s so much upside that we’re creating," he said. "When you have the opportunity of a lifetime, you have to seize it in the life of the opportunity."
Moelis & Co. was Dentsply’s financial adviser, and Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel. Jefferies was financial adviser to Sirona, with Latham & Watkins LLP as legal adviser.
Demitri Diakantonis contributed to this report