RTI Surgical, Inc. (Nasdaq:RTIX), a global surgical implant company, and Paradigm Spine, LLC, a leader in motion preservation and non-fusion spinal implant technology, today announced that they have entered into a definitive agreement whereby RTI will acquire all outstanding equity interest of Paradigm Spine in a cash and stock transaction valued at up to $300 million, consisting of $150 million at closing plus potential future milestone payments. RTI believes this transaction underscores its significant progress executing against its strategic transformation to reduce complexity, drive operational excellence and accelerate growth.

Under the terms of the agreement, RTI shall pay $100 million in cash and 10,729,614 shares of RTI common stock at closing. The potential milestone payments are payable in a combination of cash and RTI common stock. The shares of RTI stock to be issued at closing were valued based on the volume weighted average closing trading price of RTI common stock on the NASDAQ for the five business trading days prior to the date of execution of the definitive agreement, representing $50 million of value. The transaction has been approved by the Board of Directors of RTI and the Board of Managers of Paradigm Spine, and is expected to close in the first quarter of 2019.

Established in 2005, Paradigm Spine’s primary product is the coflex® Interlaminar Stabilization® device, a differentiated and minimally invasive motion preserving stabilization implant that is FDA PMA approved for the treatment of moderate to severe lumbar spinal stenosis (LSS) in conjunction with decompression. LSS is the most prevalent diagnosed spine condition amongst the elderly in North America today, affecting approximately 1.6 million patients annually. Coflex® introduces a cutting-edge solution that pairs minimally invasive surgery (MIS) with motion preservation, which is a combined market estimated to be worth nearly $3.3 billion. Paradigm Spine is based in New York with international operations in Wurmlingen, Germany.

Supported by 12 years of clinical data and endorsed by major spinal societies, including The North American Spine Society (NASS) and The International Society for the Advancement of Spine Surgery (ISASS), coflex® leads to faster recovery times with improved patient outcomes compared to the current standard of care. Coflex® is covered nationally by Medicare and is making coverage progress toward regional and national private payor decisions.

“With coflex®, the Paradigm Spine team has created a differentiated implant that has a demonstrated track record of improving patient outcomes and addresses a critical and growing need in the spine surgery space,” said Camille Farhat, President and CEO of RTI. “Coflex® is FDA PMA approved and an established treatment that we believe is poised for accelerated and sustainable long-term growth given its clinical efficacy and ongoing progress toward insurance coverage. We look forward to working with the Paradigm Spine team to complete this compelling addition to the RTI Surgical family.”

Mr. Farhat continued, “Our growth strategy in spine is to invest in differentiated products and build scale. Coflex® is a differentiated product that we anticipate will reinforce customer retention, support portfolio pull-through and enhance our overall spine offering. Following the successful acquisition of Zyga earlier this year, and the numerous successes in our ongoing strategic transformation, we believe this transaction demonstrates our commitment to improving outcomes for more patients, unlocking additional growth opportunities and ultimately driving value for all stakeholders.”

“We have spent the last several years building coflex® into a therapy of choice for orthopedic spine surgeons and neurosurgeons. We believe the treatment is on the verge of accelerating growth as coverage from private payors and patient access begin to expand,” said Marc Viscogliosi, Co-Founder, Chairman and CEO of Paradigm Spine. “We are confident RTI is the ideal partner to help achieve our considerable growth potential and address a vital patient need in the U.S. market.”

The transaction is subject to the satisfaction of customary closing conditions and applicable regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act as well as approval by RTI shareholders and Paradigm Spine equity holders. Certain shareholders of RTI and certain equity holders of Paradigm Spine have each executed support agreements in favor of the transaction. The transaction is expected to be accretive to RTI EBITDA within 12 months of closing. RTI intends to fund the cash portion of the consideration with approximately $100 million in new, fully-committed debt financing, to be provided by Ares Capital Corporation.

Piper Jaffray & Co. is serving as financial advisors to RTI, and Sidley Austin LLP and Holland & Knight LLP are serving as legal counsel on the transaction and financing, respectively. Dorsey & Whitney LLP is serving as legal counsel to Paradigm Spine.

Note: RTI will host a conference call and audio webcast to discuss the transaction on Friday, November 2, 2018 at 9:00 a.m. ET. The conference call can be accessed by dialing (877) 383-7419 (U.S.) or (760) 666-3754 (International). The webcast can be accessed through the investor section of RTI’s website at www.rtix.com/investors. A replay of the conference call will be available on RTI’s website for one month following the call.