Wallenbergs' Molnlycke Casts M&A Net Wider in Health Care Push

(Bloomberg) -- Molnlycke Health Care has its sights set on acquisition targets as the Swedish maker of health-care disposables broadens its search beyond existing product categories, Chief Executive Officer Richard Twomey said.

Since last year’s acquisition of Sundance Solutions, which makes fluidized supports to prevent pressure ulcers, Molnlycke hasn’t been able to clinch any more transactions and “there aren’t a great deal of targets out there,” Twomey said in a phone interview.

Molnlycke has “expanded the net” to look at categories “adjacent” to the company’s existing product lines, though it remains focused on single-use disposable medical devices and will continue to steer clear of capital equipment, Twomey said.

The largest unlisted investment of the Swedish Wallenberg family’s holding company Investor AB currently has two potential acquisitions in the pipeline, Twomey said. They would help Molnlycke, which this week opens a new surgical-tray factory in the Czech Republic in its biggest-ever investment, reach a target of boosting annual sales to 2 billion euros ($2.2 billion) by 2020 from 1.43 billion euros currently.

One of the two possible transactions the company has in the pipeline “may be at the higher end” of Molnlycke’s acquisition range of 50 million euros to 500 million euros, while the other would be at the “lower end,” Twomey said. If Molnlycke finds targets larger than that, it could call on its owner for help, he said.

Wallenbergs' Molnlycke Casts M&A Net Wider in Health Care Push

Molnlycke is owned by Patricia Industries, a company set up in 2015 to manage the unlisted holdings of Investor AB, which acquired Molnlycke from buyout firm Apax Partners in 2007. The Wallenberg family’s investment firm has in recent years increased its focus on wholly-owned subsidiaries and built a portfolio of health-care companies in which Molnlycke is by far the most valuable.

Molnlycke’s existing product offering includes dressings and negative pressure wound therapy, single-use laparoscopy and orthopaedic instruments and procedure-specific drapes. It also offers pressure-ulcer prevention, such as prophylactic dressings and skin-care products.

While the Gothenburg-based company has a reported value of 21.6 billion kronor ($2.5 billion) in Investor AB’s financial reports, the investment company estimates that Molnlycke’s market value is 56.2 billion kronor. That would make Molnlycke Investor AB’s second-most valuable holding, after its 17 percent stake in Atlas Copco AB, the world’s largest compressor maker.

Wallenbergs' Molnlycke Casts M&A Net Wider in Health Care Push

This week, Molnlycke is focusing on the opening of its new facility in the Czech city of Havirov, which will produce surgical procedure trays packaged with all the disposable products needed for a particular procedure. The 67 million-euro investment has the potential to boost Molnlycke’s share of the European tray market to closer to 40 percent, from the current 30 percent, Twomey said.

Molnlycke has expanded procedure tray sales at an average of about 8 percent over the last three years, said Twomey, who became the company’s CEO in 2014. “We want to accelerate that and the way to do that is to have the infrastructure to support it.”

The new plant makes it possible for Molnlycke to double the amount of trays produced from the current 6.5 million it manufactures annually. It will also enable the company to produce custom-made trays based on particular order specifications from European hospitals and operating rooms, the CEO said.

“Each hospital will have its own specification of components it requires for perhaps a hip replacement, for example,” Twomey said. “The facility we have will allow us to actually make to order and gives us a huge amount of flexibility. No one else has the scale and no one else has the capability that we’ve built into this facility.”