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An Illinois federal judge has handed GTCR BC Holdings LLC a major win, ruling Monday that the private equity firm may move forward with its $627 million acquisition of Surmodics Inc., the nation’s top medical coatings supplier, even as the Federal Trade Commission (FTC) continues to challenge the deal on antitrust grounds.

In a ruling that could reshape the medical coatings industry, U.S. District Judge Jeffrey Cummings rejected the FTC’s request for a preliminary injunction, saying GTCR and Surmodics had adequately rebutted claims that their merger would illegally stifle competition in the outsourced hydrophilic coatings market.

GTCR’s Strategic Play: A Contested Merger

GTCR plans to merge Surmodics with Biocoat Inc., the nation’s second-largest medical coatings supplier, in which GTCR already holds a controlling stake. To offset potential antitrust concerns, the companies agreed to divest part of Biocoat’s business—including coatings, staff, brands, and equipment—to Integer Holdings Corp., a company that has twice attempted, unsuccessfully, to enter the coatings market.

A Biocoat representative celebrated the court’s decision, saying,

“This transaction will improve patient outcomes for those who rely on a wide array of medical devices. Today’s ruling is an important step toward closing the acquisition.”

Representatives for Surmodics and the FTC did not immediately respond to requests for comment.

The FTC’s Battle: Alleged Monopoly in the Making

The FTC sued to block the deal in March, later joined by Illinois and Minnesota, home states of the merging companies. Regulators argued that the merger would give GTCR near-total control of a market already dominated by two players, undermining innovation and raising costs for medical device manufacturers.

The FTC also dismissed GTCR’s divestiture plan as a “smokescreen”, claiming it was designed to give the illusion of competition while effectively maintaining market dominance.

But Judge Cummings saw it differently. During a two-week evidentiary hearing this summer, an expert witness described Integer as an “exceptionally well-qualified divestiture buyer.” The judge agreed, noting that Integer already applies coatings to roughly $2 million worth of medical devices each year and appears determined to reenter the market.

“Whether it will succeed or not remains to be seen,” Judge Cummings said. “But I am persuaded that Integer will vigorously attempt to compete in this space.”

The Price of Entry and the Path Forward

The proposed divestiture’s $8 million price tag—a fraction of the $210 million Biocoat paid for the same assets in 2022—raised eyebrows, but Judge Cummings said the figure reflects the small portion of Biocoat’s business being sold, representing just 10% of its total revenue.

The remaining 90%, he noted, would stay with Biocoat to fund critical research and development, helping Integer gain a foothold and maintain innovation in the coatings market.

FTC Temporarily Extends Block on the Deal

Although the court allowed GTCR’s acquisition to proceed, Judge Cummings granted the FTC’s request for a brief extension of a temporary restraining order through November 17, giving the agency time to consider appeal options. The extension came over company objections, which the judge dismissed as unreasonable in light of the federal government’s ongoing shutdown.

The FTC’s motion for a preliminary injunction, filed in July, aimed to delay the merger until the agency’s in-house review could play out. However, with the injunction now denied, GTCR and Surmodics are poised to close the transaction soon.

Legal Teams Behind the Showdown

The FTC’s legal team includes Maia Perez, Jordan S. Andrew, James Weiss, Brian O'Dea, Megan McKinley, Keith Holleran, Varnitha Sivaprasad, Wade Lippard, Matthew E. Joseph, William Segal, and Le'Ora P. Tyree.

Illinois is represented by John R. Milligan of the Illinois Attorney General’s Office, and Minnesota by Elizabeth R. Odette of the Minnesota Attorney General’s Office.

GTCR is represented by Lawrence Buterman, Sean M. Berkowitz, and others from Latham & Watkins LLP, alongside a team from Cleary Gottlieb Steen & Hamilton LLP.

Surmodics is represented by Paul Saint-Antoine and colleagues at Faegre Drinker Biddle & Reath LLP.