Florida-based RTI Biologics Inc. looks north for acquisition

Kalamazoo, Grand Rapids and Ann Arbor make it easy to overlook Marquette, sitting at the top of Michigan’s Upper Peninsula.

One company that didn’t overlook Marquette was RTI Biologics Inc. The Alachua, Fla.-based firm in July paid $130 million for a company based there, Pioneer Surgical Technology Inc., a maker of spinal implants, bone grafts and other products. The combined company is now called RTI Surgical Inc. and is based in Alachua.

Water Street Healthcare Partners LLC, an investment firm in Chicago, supplied $50 million of the sale price in exchange for convertible preferred equity.

The merger makes this a $250 million company, revenue-wise, with Pioneer bringing $83 million of that. Pioneer’s 300 employees bring the total employee count to 1,100.

Pioneer had raised $47 million in venture capital in two rounds from 2006 to 2008, said Michael Gross, managing director of Farmington Hills-based venture capital firm Beringea LLC, which brought $7 million to the $17 million Series B round.

Other investors were Highlander Partners LP, Hopewell Ventures LP, Pharos Capital Group LLC and River Cities Capital Funds.

Pioneer is a vertically integrated company, doing everything from design to manufacturing at its home base in Marquette, where it is the one of the largest employers. The new RTI Surgical plans to expand the presence there and continue doing R&D work on new implants.

Pioneer used its manufacturing assets to branch into contract manufacturing as well.

“The interesting thing about Pioneer is that they’re very good at both innovation and manufacturing,” Gross said. “Many medical device companies outsource their manufacturing. Pioneer not only manufacturers substantially all of its own products but also the products of other medical device companies.”

RTI sought the deal as part of its ongoing acquisition-based growth strategy. Pioneer, which has a sales office in the Netherlands, brings a broadened international reach and bigger product lineup to RTI, said Wendy Crites Wacker, head of global marketing.

Pioneer is the third-largest medical device OEM in the state by number of employees, according to MichBio, an Ann Arbor-based trade association.

Pioneer had been looking to expand, and management knew that meant a big change, whether it was going public, borrowing or a sale.

“We were open to that, and we had been preparing for that kind of change,” said Fred Taccolini, RTI chief compliance officer, who came over from Pioneer.

Matthew Songer started Pioneer in 1992 when the doctor became dissatisfied with single-strand spinal wires on the market and came up with a cabled design of several wrapped wires. The company then branched into several lines of spinal, cardiothoracic and bone grafting products.

Songer returned to medical practice in 2009 and went on to start another medical device company, Frontier Medical Devices Inc., based near Marquette in Gwinn.

Frontier is funded through a group of individual investors — no outside firms — and makes an FDA-cleared spinal fusion device for the treatment of degenerative lumbar disc disease, said CFO John Sonderegger.

The company also is a contract manufacturer for medical device companies.

Oct. 13, 2013 | Crain’s Detroit Business – New Michigan Deal Supplement