Orthopedic devices giant Stryker Corp. (SYK) has struck a definitive agreement to acquire privately held medical product maker Gaymar Industries for $150 million in cash. The boards of both companies have approved the deal and pending customary closing conditions, the transaction is expected to close on October 1, 2010. Stryker’s shares were down 18 cents (or 0.42%) to $42.94 in after-hours trading on August 25.
Orchard Park, New York based Gaymar (found in 1956) specializes in design, manufacture and marketing pressure ulcer and temperature management solutions. The entity was acquired by private equity firms Nautic Partners and Norwest Equity Partners in 2003.
The deal represents the latest development in the long-standing bond between Stryker and Gaymar. The companies have been in an original equipment manufacturing (OEM) pact over the last ten years, under which, Gaymar is providing support surface and pressure ulcer management products to Stryker’s Medical division for sell to acute-care customers in North America. Gaymar had revenues of $77 million in 2009 with the OEM deal with Stryker accounting for roughly $14 million.
Gaymar boasts a comprehensive portfolio of high-performance surface and pressure ulcer management products that addresses a roughly $1.8 billion market globally. The acquisition will broaden Stryker’s acute-care product offerings targeted at this lucrative market.
Stryker is one of the world’s largest medical devices companies with annual sales of $6.7 billion. The company remains well positioned for growth across its Orthopedic and MedSurg divisions leveraging new product launches and acquisitions. Stryker’s MedSurg unit benefits from the synergies from the acquisition of Ascent Healthcare (purchased in late 2009 for $525 million), a market leader in the reprocessing and remanufacturing of medical devices.
The Gaymar deal represents Stryker’s first acquisition in 2010 after the Ascent transaction. The company is reportedly negotiating with Boston Scientific (BSX) to buy the latter’s pain management devices business (neuromodulation unit) for roughly $1.5 billion. Stryker expects the Gaymar acquisition, which bodes well for its strategy of expanding product range, to be neutral to its 2010 and 2011 earnings and accretive thereafter. Currently, we are Neutral on Stryker.
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