Contract electronics manufacturer Nortech Systems Inc. in Wayzata is hoping to capitalize on high demand for health care gadgets by acquiring an Eden Prairie company that does outsourced design work for large and small medical-device makers.
Nortech has agreed to pay $5.3 million plus sales milestones to acquire Devicix, which has 30 employees who will remain in their Eden Prairie location after the deal closes in the next few weeks. The price includes $3 million in cash and $2.3 million in promissory notes, plus up to $2.5 million in payments based on hitting four-year sales goals.
Devicix is an 11-year-old privately held company that contracts to design devices, for cardiovascular to telemedicine uses, that will eventually need approval from the Food and Drug Administration. The company declined to name clients.
“For start-up companies, we are always teaching them and they’re leveraging what we have. And for the large multinationals and established companies, when they outsource with us, they are looking to partner with somebody that has the same level of rigor that they have in their systems,” said Andreas Pfahnl, general manager of Devicix.
Devicix recently launched a division called ioMedx, which specializes in the hot field of mobile health devices that can wirelessly sense and transmit medical data, sometimes displaying the information on smartphones or wearable technology.
“Adding Devicix’s extensive technical capabilities will support our current medical device customers and help attract new ones,” Nortech Systems CEO Rich Wasielewski said in a news release.
Nortech reported a first-quarter loss of $192,787 on revenue of $26.5 million, compared with net income of $86,157 on revenue of $26.1 million for the same period a year ago. The company blamed product mix, ramp-up costs for new programs and global economic conditions for the quarterly loss.
In 2014, Nortech’s medical and life sciences manufacturing division accounted for nearly 40 percent of its $112 million in net sales. Nortech’s largest customer is General Electric, according to securities filings.
Nortech shares closed at $4.55 Thursday, up 32 cents, or 7.5 percent. Shares have traded between $4.03 and $6.80 over the past year.