Kensey Nash advised to focus business, raise debt, tender for stock by Admiral

New York, July 2 - Kensey Nash Corp. was requested to focus on its "core" biomaterials business, increase its debt and carry out a Dutch auction tender offer for its stock by Admiral Advisors, LLC.

Admiral, which owns 1,180,634 Kensey Nash shares or 9.9% of the total, believes the company's shares are "significantly undervalued" but believes there are "several opportunities" to increase the price, according to an SC 13D/A filing with the Securities and Exchange Commission.

In a letter to the company, Jeffrey Smith, a partner at Ramius Capital Group, the sole member of Admiral Advisors, said he believes Kensey Nash's success will "be driven by the biomaterials business."

He noted that the company, along with partner St. Jude Medical, "has the pre-eminent name in the vascular closure market with greater than 65% market share for the Angio-Seal product line" and "generates a strong royalty stream and associated product sales for the company's proprietary collagen plug and plastic anchors.

"This represents a strong growth opportunity for Kensey Nash without the risks and challenges of supporting a direct sales force," Smith added.

Meanwhile, Kensey Nash's endovascular business faces "intense competition from large, well-funded corporations who have integrated sales forces with portfolios of well-branded products that are recognized by doctors worldwide," Smith wrote.

Meanwhile, he said Kensey Nash's "inefficient" capital structure should be addressed.

He recommended that the company:

• Save up to $20 million per year by discontinuing the direct sales model and significantly curtailing the research and development expenses associated with the endovascular product line;

• Look for partnerships for its approved endovascular products and adopt a similar approach to that used for the biomaterials business;

• Take on an additional $60 million to $100 million of debt, bringing debt to 1.5 to 2.5 times EBITDA. That borrowing would be on top of $35 million of mortgage debt that has to be draw by Nov. 25;

• Use the $120 million to $160 million of cash that would be available for share repurchases or dividends. A Dutch auction tender offer would allow the company to buy back 31% to 42% of its shares.

Kensey Nash is an Exton, Pa., medical technology company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.