US medical device maker Stryker will buy smaller rival Wright Medical in a deal worth $5.4bn including debt as it seeks to boost its exposure to the fast-growing orthopaedics market.
Michigan-headquartered Stryker said on Monday that it would pay $30.75 per share for Wright Medical, a near 40 per cent premium to Friday’s closing share price. The deal has an equity value of $4bn, with a total enterprise value of approximately $5.4bn.
Shares in Wright Medical soared 31 per cent to $28.78, while Stryker stock fell 2.9 per cent to $212.77 in pre-market trading in New York.
Stryker, which in 2018 denied reports linking it to Boston Scientific, said the acquisition would strengthen its trauma and extremities business “in among the fastest growing segments in orthopaedics”.
In particular, the deal should boost the company’s market share in shoulder devices, with Wright’s Simpliciti shoulder-replacement system, where Stryker said an organic path to becoming a category leader would have taken a “long time”.
Stryker said it would also benefit from acquiring Blueprint, Wright’s 3D software that helps surgeons plan for operations, which it described as “a unique and strong enabling technology” that gives it a “meaningful competitive advantage”.
Founded in 1950, Wright Medical manufactures implants to treat injuries to parts of the body including the shoulders, elbows and ankles, and has recorded global sales approaching $1bn.
The deal is the latest in the fast-consolidating medical device industry. Earlier this year 3M agreed to buy wound-care maker Acelity for $6.7bn including debt, while US-based Boston Scientific bought the UK’s BTG for £3.3bn in cash in a deal unveiled one year ago.
Stryker has made a string of acquisitions including buying Mobius, which makes an advanced imaging technology, and its sister company for up to $500m in September, and agreeing to spend up to $220m on OrthoSpace, maker of a rotator cuff implant, in March. The deal left Stryker with enough room to make additional “tuck-in” acquisitions if it desired, the company said.
“This acquisition enhances our global market position in trauma and extremities, providing significant opportunities to advance innovation, improve outcomes and reach more patients,” said Kevin Lobo, chairman and chief executive officer of Stryker.
The deal is expected to close in the second half of 2020 and would have little impact on adjusted earnings that year. Stryker said the acquisition would dilute earnings in 2021 by about 10 per cent before becoming accretive in 2022.
Stryker said there could be “meaningful” synergies, saving about $100m to $125m in the first three years after the deal closes. The two companies’ global salesforce had focused on different areas, making their work “complementary”, Stryker said.
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