Why Surmodics Stock Is Falling On Friday

Surmodics, Inc. (NASDAQ:SRDX) shares are trading lower in the premarket session on Friday.

The firm’s stock dipped following news that the U.S. Federal Trade Commission will challenge the proposed acquisition by funds affiliated with private equity firm GTCR LLC.

GTCR has an equity investment in Biocoat Inc., a medical coatings manufacturer, which raised concerns for the FTC.

“The FTC charges that private equity firm GTCR's proposed acquisition of Surmodics would create a combined company controlling more than 50% of the market for outsourced hydrophilic coatings. These coatings are often used by medical device manufacturers and are applied to lifesaving medical devices such as catheters and guidewires,” the regulatory body said in a release.

The FTC's complaint argues that making hydrophilic coatings requires specialized expertise and significant investment and many OEMs prefer outsourcing to established companies like Biocoat and Surmodics.

After the merger, it's unlikely a new competitor could challenge GTCR and Surmodics.

In response to the FTC’s announcement, Surmodics issued a statement expressing its disagreement with the agency’s decision.

The company emphasized its commitment to completing the merger and remains confident in the deal’s potential to benefit all stakeholders, including shareholders, customers and patients.

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The FTC’s complaint particularly states that GTCR's acquisition of Surmodics would raise market concentration in the hydrophilic coatings sector, which already has few competitors, violating the 2023 Merger Guidelines.

However, Surmodics said it has worked closely with the FTC for months to secure regulatory approval and voiced disappointment over the agency’s move to initiate litigation.

The company asserts that the merger is “pro-competitive” and says intends to vigorously defend the case in court.

Surmodics entered into a definitive merger agreement with GTCR on May 29, 2024.

Under the terms of the deal, GTCR will acquire all outstanding shares of Surmodics for $43.00 per share, resulting in an equity valuation of approximately $627 million.

The transaction is expected to be financed through a combination of equity and debt financing from GTCR.

If completed, Surmodics will become a privately held entity and its shares will no longer be listed on the Nasdaq Global Select Market. Shareholders approved the merger on August 13, 2024.

According to Benzinga Pro, SRDX stock has lost over 1.76% in the past year.

Price Action: SRDX shares are trading lower by 4.76% to $28.21 premarket at last check Friday.

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