Project Description

Colfax Corp Spin-off (Med Devices) Notes

March 12, 2021 Notes

  • Colfax Corp. (CFX) announced its plans to split its industrial and medical device businesses into two publicly traded companies. ESAB, Colfax’s welding equipment segment, is an industry leader with $2.2BN in sales. DJO, Colfax’s medical devices segment, generates revenue of ~$1.2BN. It focuses on the orthopedic market (shoulder implants, knee braces, etc.). The announcement makes a lot of sense as the businesses have nothing to do with one another and because they are already run independently. I need to spend more time on the sum-of-the-parts valuation to understand if the transaction will unlock value, but the stock is not cheap on an absolute basis. Current Colfax trades at 23x forward earnings and 13.3x forward EBITDA. 
  • “Now is the right time to build on the momentum in both businesses and enable each to better capitalize on its distinct opportunities,” Matt Trerotola, Colfax president and CEO said in a March 4 news release. “We believe a separation will better position each business to execute tailored strategies to deliver above-market growth, margin expansion and strong, consistent free cash flow.”
  • The separation is expected to be completed in Q1 2022 as a tax-free distribution to shareholders.