Madison Dearborn Partners, which is out fundraising for its seventh pool, is expected to quadruple its investment with the sale of Sage Products.
Stryker Corp said Monday it would buy Sage for $2.7 billion cash. The deal is expected to close in second quarter.
Cary, Illinois-based Sage makes disposable medical supplies that are used to prevent hospital acquired conditions like ventilator-associated pneumonia, surgical site infections, and catheter-associated urinary tract infections. The company produced $371 million in sales as of Sept. 30, 2014, Moody’s Investors Service said.
The PE firm closed its buy of Sage in December 2012. Madison Dearborn reportedly invested $350 million, according to a February 2013 report from Crain’s Chicago Business. The deal also included $640 million of debt, a Moody’s report from that time said. The acquisition gave Madison Dearborn a majority of Sage while company management also had a stake.
In December 2014, Sage used $380 million in loans to fund a shareholder dividend and pay off fees and expenses, Moody’s said in a December 2014 note. The dividend boosted Sage’s financial leverage to about 6.5x debt to EBITDA from about 4x as of Sept. 30, 2014, Moody’s said.
The sale to Stryker is expected to generate $2 billion in total distributions, including the dividend and cash at the closing, a source said. The deal will produce a return of 4x its money for Madison Dearborn and a 60 percent IRR, the source said.
MDP’s investment in Sage came from its sixth fund, an FTC notice said. Madison Dearborn Capital Partners VI LP raised $4.1 billion in 2010. Fund VI is producing a 22.21 percent net IRR and a total value multiple of 1.5x as of June 30, according to performance data from the Washington State Investment Board.
The firm is out fundraising for its seventh pool, which is targeting $3.75 billion, Buyouts has reported. MDP held a $3 billion interim close for Fund VI in November, Buyouts said.
Barclays advised Sage with Kirkland & Ellis LLP and Madden, Jiganti, Moore & Sinars LLP providing the company with legal counsel. JP Morgan is serving as Stryker’s exclusive financial advisor while Sullivan & Cromwell LLP was their lawyer.
Executives for Madison Dearborn declined comment. Sage could not be reached for comment.
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