Stryker Corp (SYK) has completed its $316 million acquisition of Pennsylvania-based orthobiologic and biosurgery products maker Orthovita Inc. This follows the recent competition of its all-cash tender offer for the buyout. Shareholders holding roughly 87.6% of Orthovita’s outstanding shares tendered their shares in the offer.
Stryker completed the acquisition through the merger of its indirect wholly owned subsidiary Owl Acquisition Corporation with Orthovita. With the deal closure, Orthovita has now become an indirect wholly owned subsidiary of Stryker. Per the agreement terms, shareholders of Orthovita received $3.85 for each share they hold.
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 revenues of $95 million in 2010.
Stryker, with annual sales of $7.3 billion, is on acquisition spree to spur growth as its faces sustained pricing and procedure volume pressure in its core replacement hips and knees businesses. The company 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 Stryker an opportunity to diversify into fast-growing therapy markets. Earlier, Stryker bought privately-held medical products maker Gaymar Industries which broadened its acute-care product portfolio.
More recently, the company inked a deal to buy France-based privately-held extremity devices maker Memometal Technologies. The acquisition, if it eventually consummates, will broaden Stryker’s exposure in the extremities market and reinforce its position as a major player in the fast-growing foot and hand segments of this market.
The Orthovita acquisition is highly complementary to Stryker’s existing orthobiologics offering. It will strengthen its competitive position in key markets. The acquisition is expected to be neutral to the company’s adjusted earnings per share for 2011. We are currently Neutral on Stryker, which is in tandem with a short-term Zacks #3 Rank (Hold).
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