Leading dental products maker DENTSPLY International (XRAY) has won regulatory clearance for its acquisition of Sweden-based Astra Tech, the dental implant division of multinational drug major AstraZeneca PLC (AZN).
DENTSPLY, in June 2011, agreed to take over Astra Tech for $1.8 billion in cash. The deal is now expected to complete on August 31, 2011. DENTSPLY is financing the acquisition with cash, commercial paper and long-term debt.
AstraZeneca is divesting the dental unit to renew focus on its core prescription drug business. Astra Tech, with annual sales of $535 million, is a leading provider of dental implants and consumable medical devices in the urology and surgery markets. The entity offers a comprehensive suite of dental implants and abutments through its Astra Tech Dental unit.
The deal will mark the union of two of the fastest growing dental implant businesses, creating the third-largest player in this market. Besides reinforcing its leadership in the global dental market and broadening its product range, the acquisition will unlock opportunities for DENTSPLY to tap new markets, such as surgical and urological consumable medical devices, for growth.
DENTSPLY envisions the acquisition to increase its revenues by 25% and to be accretive to its adjusted earnings by 12-17 cents a share in the first year following the deal closure.
Moreover, in the third year, the acquisition would add 30-40 cents to earnings and will also provide opportunities for sales and operational synergies. Further, the strong cash flows of the integrated entity will provide financial flexibility.
DENTSPLY is poised to grow its share in the dental implant market, driven by a strong product base and significant investment on product/technology innovation and sales/marketing infrastructure.
The company’s diverse product range, significant international presence and new product launches are expected to boost operating metrics over the forthcoming quarters. Moreover, its acquisitions and strategic collaborations will also support growth.
However, DENTSPLY’s domestic operations still remain challenged due to a slow economic recovery and competitive pressure. We also account for the unfavorable impact of the supply chain outage in Japan on the company’s bottom line. Our Neutral recommendation on the stock is in agreement with a short-term Zacks #3 Rank (Hold).
ASTRAZENECA PLC (AZN): Free Stock Analysis Report
DENTSPLY INTL (XRAY): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment