City round-up: ConvatTec; Character Group; Surface Transforms; Freeway Insurance Services

Deeside medical produtcs business, ConvaTec Group, has agreed a deal worth a potential £130.7m to buy Triad Life Sciences Inc, a US-focused medical device company that develops biologically-derived innovative products to treat surgical wounds, chronic wounds and burns.

The deal is subject to regulatory approvals and other conditions and is expected to close during the first quarter of 2022.

ConvaTec said this represents an entry into the large and rapidly growing wound biologics segment. This segment is currently estimated to be worth around £1.34bn per annum globally with a projected growth of high single digit percentage per annum.

Regenerative medicine and biologically-derived therapies are frequently used to treat hard-to-heal wounds which, in the US alone, affect 3.7 million patients each year.

Founded in 2017, Triad Life Sciences is based in Memphis, Tennessee and currently has more than 50 staff. The company develops, manufactures and commercialises their product portfolio. These products are highly complementary to ConvaTec’s existing portfolio and will enable the group to meet a wider range of needs of both patients and health care practitioners.

The initial consideration is £93.35m with two potential additional payments of £18.67m each relating to short-term milestones.

Karim Bitar, CEO, ConvaTec Group, said: “Today’s announcement marks another successful step in our strategic intent of pivoting to sustainable and profitable growth. This transaction will strengthen our wound care business and enable ConvaTec to enter the rapidly growing wound biologics segment.
“Triad Life Sciences has innovative and differentiated products and an exciting pipeline which is consistent with our vision – pioneering trusted medical solutions to improve the lives we touch. We are delighted that Russ and the team have decided to join ConvaTec.”

Russell Olsen, president and CEO, Triad Life Sciences Inc, said: “ConvaTec has an impressive reputation and unique capabilities in advanced wound care, based on decades of innovation. We look forward to accelerating the growth of our innovative technology platform.”

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Character Group

Oldham toys company, Character Group, is returning £13.5m to qualifying shareholders as part of a tender offer that would result in the purchase of approximately 10% of the company’s current issued share capital.

The company has pursued an active buyback strategy to return surplus cash to shareholders since 2004 and, since that time has acquired a total of approximately 39.6 million ordinary shares, representing approximately 185% of the current issued ordinary share capital.

Last week the company issued an update for the quarter to December 31, 2021, saying the group had maintained a steady performance in the lead up to and through the Christmas 2021 period, notwithstanding global logistical challenges which continue to impact the export of product from the Far East to UK and its global markets.

It said sales levels are a reflection of the strong portfolio of brands and products that it has at this time: “In the UK, retailers have reported good sell through of our products and this bodes well for the rest of the financial year.

“Assuming no further worsening of the trading conditions, including adverse COVID developments impacting normal commercial activity, the board believes that the group will achieve current market expectations of an underlying profit before tax averaging 311.275m for the year ending August 31, 2022.

The ongoing cash-generative nature of the group’s business model has resulted in its cash balances, as at January 26, 2022, standing at approximately £27m.

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Surface Transforms

Knowsley-based high performance brakes manufacturer, Surface Transforms, said revenues for the year to December 31, 2021, grew 20% to £2.4m, compared with £2m the previous year, in a trading update today.

Cash at December 31, 2021 was £13m; however, this includes a £3.1m irrevocable letter of credit in the name of a furnace manufacturer which will be progressively drawn down, by the supplier, as furnace manufacturing milestones are met.

Other interest-bearing loans and asset finance totalled £1.8m (2020: £0.7m), the increase primarily reflecting the company’s acceptance of a local government loan on attractive terms.

The company’s final results for 2021 will be reported in April 2022.

Chairman, David Bundred, said: “This year will be transformational for the company as we move into profitability.

“We are delighted with the progress made in January, and by the success the team had in its response to the problematic furnace. Given our order position, the priority is now production, and the board is confident in the company’s ability to deliver on the excellent opportunity ahead.”

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Freeway Insurance Services, a distributor of taxi insurance in the UK based at Preston Brook, Runcorn, has signed an agreement for Sabre Insurance Group to become the exclusive underwriter for policies issued by Freeway’s managing general agent, effective for five years from March 1, 2022.

Freeway has more than 20 years of experience and has delivered consistently profitable taxi insurance results.

Under the terms of the deal, Dorking-based Sabre will work with Freeway to exploit combined expertise in pricing, underwriting and claims handling.

Sabre said it is not paying a financial consideration to Freeway.

Taxi insurance currently accounts for approximately £1m of Sabre’s total annual premium. It is expected that the agreement with Freeway will generate an additional annual gross written premium of circa £20m, generating an additional £2-4m of additional annual profit.

Sabre CEO, Geoff Carter, said: “This is a fantastic opportunity to turbocharge growth in our small taxi book, which will contribute to the group’s profits while establishing a further degree of diversification, following our entry into the motorcycle insurance market earlier this year. The partnership builds on our core capabilities and allows us to retain our underwriting discipline whilst providing incremental earnings growth.”