Stryker Buys Orthovita with Cash - Analyst Blog
May 17 2011 - 12:56PM
Zacks
Medical technology giant Stryker Corp (SYK) has
struck a definitive agreement to acquire orthobiologic and
biosurgery products maker Orthovita
Inc (VITA) for $316 million in cash. The
transaction has been cleared by the Boards of both companies.
Under the deal, shareholders of Orthovita will receive $3.85 for
each share they hold. This represents roughly 41% premium over
Orthovita’s closing price of $2.73 on May 13. The deal value (of
$316 million) includes the assumption of $12 million in Orthovita
debt. Shares of Orthovita gained $1.09 (or 39.9%) touching $3.82 in
early trading on May 16.
Orthovita’s Board has recommended the company’s shareholders to
tender their shares. Shareholders holding roughly 14.5% of
Orthovita’s outstanding shares have already committed to tender
their shares. The tender offer is slated to commence within 10
business days and is expected to close in second-quarter 2011.
The deal is subject to customary closing conditions including
the tender of a majority of the outstanding shares of Orthovita and
antitrust clearance. Citigroup (C) acted as the
financial advisors to Stryker on the deal.
Pennsylvania-based Orthovita is a leader in synthetic bone
grafts and competes in the $5 billion orthobiologics (substances
that help heal injuries) market. The company’s orthobiologic
product range includes the Vitoss bone graft substitute and the
Cortoss bone augmentation material.
Moreover, Orthovita’s Biosurgery business offers hemostasis
products including the Vitagel surgical hemostat. The company
booked sales of $95 million in 2010.
Consolidation has become a norm in medical devices industry as
top-tier devices makers continue their merger/acquisition binge to
enter new markets and strengthen/diversify their product portfolio,
pressed by sustained procedure volume and pricing headwinds.
Stryker, which has annual sales of $7.3 billion, is expanding
its product portfolio by acquiring complementary businesses
leveraging a solid balance sheet. The $1.5 billion acquisition of
Boston Scientific’s (BSX) Neurovascular assets in
January 2011 has provided the company a leeway to diversify
into the
fast-growing therapy markets. Earlier, Stryker bought
privately-held medical products maker Gaymar Industries which
boosted its acute-care product offerings.
The Orthovita acquisition is a strategic fit for Stryker, highly
complementing its existing orthobiologics offering while
strengthening its competitive position. Upon fruition, the deal is
expected to be neutral to the company’s adjusted earnings per share
for 2011.
We believe that Stryker is well placed for growth driven by new
product launches, acquisitions and an improving hospital capital
spending backdrop. However, the company remains exposed to stiff
competition and pricing and procedure volume pressure on its hip,
knee and spine products. Our long-term Neutral recommendation on
Stryker is backed by a short-term Zacks #3 Rank (Hold).
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
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STRYKER CORP (SYK): Free Stock Analysis Report
ORTHOVITA INC (VITA): Free Stock Analysis Report
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