Stryker Snaps Up Memometal - Analyst Blog

Orthopedic devices major Stryker Corp (SYK) has agreed to buy France-based privately-held extremity devices maker Memometal Technologies S.A. for $150 million in cash. The deal also involves an additional payment of $12 million contingent upon meeting specific milestones.

Memometal makes products for extremity indications with annual sales of roughly $30 million. The entity is strengthening its foothold in the rapidly growing global extremity devices market with a broad range of foot, ankle, hand and wrist implant products.

The acquisition 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 transaction, which is subject to customary closing conditions, is expected to consummate in third-quarter 2011. Upon fruition, the deal is expected to be neutral to the company’s adjusted earnings per share for 2011.

Stryker, which has annual sales of $7.3 billion, is on an acquisition binge to incite growth as it 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 Michigan-based devices maker struck a deal in May 2011 to buy Pennsylvania-based orthobiologic and biosurgery products maker Orthovita (VITA) for $316 million in cash. Per the agreement, shareholders of Orthovita will receive $3.85 for every share they hold. Stryker recently launched a tender offer for the acquisition, which is slated to expire at midnight June 24.

Earlier, the company bought Boston Scientific’s (BSX) Neurovascular assets in January 2011 for $1.5 billion, providing it a presence in the fast-growing therapy markets. Moreover, Stryker acquired privately-held medical products maker Gaymar Industries which boosted its acute-care product offerings.

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/volume pressure on its hip, knee and spine products. Our long-term Neutral recommendation on Stryker is supported by a short-term Zacks #3 Rank (Hold).

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