Health care products and services provider Henry Schein, Inc. (HSIC) has recently bought a majority stake in a Canada-based privately-held dental software company, The Exan Group. This latest buy coincides with the company’s plan to expand via acquisitions and partnerships. Financial terms of the deal were not revealed.
This venture remains consistent with the company’s advanced strategic plan to expand its domestic and international footprints. The acquisition has enabled Henry Schein to further expand its business with dental schools in the U.S. and Canada, along with general practice dental offices in Canada.
Henry Schein believes that this acquisition will have no impact on the company's financial results till fiscal 2013. However, the company expects the transaction to be accretive thereafter.
Port Coquitlam, British Columbia-headquartered Exan currently has annual sales of $11.7 million, 75% of which is made up by the company’s dental management software – axiUm. This product has been distributed to 65 dental schools in the U.S. and Canada. The company’s Power Practice software solution is sold to 750 practices in the U.S. and Canada and represents 23% of total revenues.
The firstborn segment of the baby boom generation, initiated in 2011, marked the beginning of an important demographic shift for worldwide dentistry. This trend is expected to gain further momentum over the next 20 years with increasing demand from senior baby boomers. Henry Schein estimates that the population aged 45 or more will grow 14% and 27% within the periods 2011−2021 and 2011−2031, respectively. According to the World Dental Forum held in 2012, this also led to the international integration of the dental industry.
As a result, Henry Schein is currently focusing on global expansion through strategic partnerships and acquisitions. In July, the company made three successive acquisitions namely U.S. based Ortho Technology and Modern Laboratory Services and Thailand based full-service dental distributor Accord. In the same month, it entered into a global distribution agreement with Israel-based dental technology company ReDent Nova. The latest addition of Exan is in pursuance of this strategy.
Henry Schein’s portfolio consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.
The company continues to experience strong top-line growth and has established a robust foothold in both domestic and international markets in dental, veterinary and medical supply distribution. We are also encouraged by the company’s focus on improving its cost structure to drive profitability.
Henry Schein’s performance should improve further with the gradual recovery in the economic outlook. However, the company faces stiff competition from the likes of McKesson Corporation (MCK) and Patterson Companies Inc. (PDCO). The stock retains a short-term Zacks #3 Rank (Hold).
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