Medical technology giant Stryker Corp (SYK) has struck a definitive agreement to acquire privately-held stroke intervention products maker Concentric Medical Inc. for $135 million in cash. Financial terms of the deal were not disclosed by the company.
California-based Concentric makes minimally-invasive products for treating acute ischemic stroke (“AIS”). Its products include devices for removing blood clot in patients with AIS. Concentric’s next-generation clot removal product (Trevo Retriever) is currently undergoing clinical evaluation in the U.S. The entity is expected to generate revenues in excess of $30 million in 2011.
The acquisition will provide Stryker access to the fast-growing acute ischemic stroke market across the U.S., Europe and Japan. The addition of Concentric’s offerings will enable the Michigan-based orthopedic major to offer complete interventional stroke care to patients globally.
The deal is subject to customary closing conditions and is expected to complete in fourth-quarter 2011. The transaction is expected to be neutral to the company’s earnings per share for 2011. Citigroup (C) acted as the financial advisors to Stryker on the deal.
Stryker, which has annual sales of $7.3 billion, is on an acquisition spree to ignite 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 neurovascular assets has enabled Stryker to diversify its portfolio. Moreover, the recent acquisitions of rival Orthovita and Memometal Technologies have reinforced the company’s position in key market segments.
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 implant pricing and elective procedure volume still remains headwinds. Our long-term Neutral recommendation on Stryker is backed by a short-term Zacks #3 Rank (Hold).
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