RTI enters medical device market with $164.5 million buy

(Reuters) - RTI International Metals (RTI.N) said it would enter the medical device market with its $164.5 million buy of Remmele Engineering, as the titanium products maker looks to offset long-term pressure from defense budget cuts.

The U.S. medical device contract manufacturing is projected to reach $20.3 billion in 2016, and this deal will help RTI tap into that demand, Chief Executive Dawne Hickton said on a conference call.

Hickton sees this demand balancing out long-term pressure on defense budgets.

Last August, President Barack Obama and Congress agreed to cut some $487 billion in defense spending over the next decade. Spending could be cut by another $600 billion unless Congress compromises on an alternative.

RTI shares shot up as much as 16 percent to $27.13 in Tuesday morning trade on the New York Stock Exchange. They were trading at $25.94 later in the day.

Privately held Remmele's medical device business, which made up just under half of its revenue, will be combined with RTI's fabrication segment, Hickton said.

The addition of Remmele's medical device unit will lift the fabrication segment's contribution to 40-50 percent of sales, from 31 percent, Hickton added.

The fabrication group was RTI's second-largest revenue generator for the three months ended September 30.

RTI said the addition of Remmele -- which was bought by private equity firm Goldner Hawn Johnson & Morrison in 2007 -- will also help the company build on its presence in the aerospace and defense sector.

Hickton said most of the company's manufacturing capability served Boeing (BA.N) contracts, and Tuesday's deal would help it add capacity to cater to customers like Airbus (EAD.PA).

Last October, RTI snapped up the titanium forming division of Aeromet International Plc for $34 million to strengthen its aerospace and defense offerings.

Pittsburgh-based RTI will assume $18 million in Remmele's debt in connection with Tuesday's deal, which is expected to immediately add to its earnings.

(Reporting by Divya Lad and Swetha Gopinath in Bangalore; Editing by Viraj Nair, Supriya Kurane)