SCA makes play for broader, elevated presence

STOCKHOLM - SCA plans to buy BSN Medical from private equity group EQT Partners AB for $2.9 billion, giving the company a toehold in the higher growth and higher margin advanced wound care market and setting the stage for the spinoff of its hygiene business.

SCA, best known in the HME industry for its TENA brand of incontinence supplies, expects BSN, which makes Leukoplast and Cutimed advanced wound care products, to broaden and elevate the company's position in what it calls the “medical solutions” market.

“It's higher growth and higher margin, but it's not moving too far away—it's still disposables,” said Magnus Groth, president and CEO of SCA, during a conference call on Dec. 19 to discuss the deal with investors and analysts. “These are still products that we understand and products that are sold the same way, to the same buyers, in the same channels. It complements us in an excellent way.”

BSN, which reported net sales of 627 million euros for the first nine months of 2016, is also known for its JOBST line of compression therapy products, and its Delta and Actimove lines of orthopedic products. It breaks down its business as 36% wound care, 26% compression therapy and 34% orthopedics.

Among the accolades Groth had for BSN were the company's go-to-market strategy, powered by a larges sales force of about 1,600 reps; and its strong R&D capabilities and attractive product pipeline, particularly in skin care and absorption.

Groth also highlighted BSN's strength in selling to hospitals, versus SCA's strength in selling retail.

“There's an overlap there that will strengthen both businesses,” he said.

Groth believes the deal perfectly positions SCA to leverage a “significantly under-penetrated” market that is benefiting from an aging population and increasing rates of chronic conditions.

“(These factors) are transforming many parts of the healthcare market,” he said. “(We will see) an increasing move of what used to be healthcare products to retail products.”

When asked whether SCA would make BSN a new division at the company or slide it into its Personal Care Division, officials said they couldn't answer that question due to the forthcoming separation of the hygiene and forest products businesses, which is pending shareholder approval.

“We will come back during the early part of next year to actually disclose how we intend to do this, and (the spin-off) is part of the equation, so we'll wait with that answer,” said Fredrik Rystedt, CFO and executive vice president of SCA. “But of course we're eager to secure a good transparency for you to be able to analyze the company.”

SCA expects to close on the deal, which it says will be accretive to its earnings per share from year one, during the second quarter of 2017.