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Stryker Likely to Acquire Boston Scientific, Shares Down

Zacks

Per a recent report by the Reuters, Stryker Corporation SYK is likely to take over Boston Scientific Corporation BSX, creating a market value of more than $110 billion.

If the deal materializes, the combined entity will have one of the MedTech’s broadest spectrums of product offerings that include cardiology, orthopaedics, surgical supplies and neuroscience. Yesterday, shares of Stryker have dropped 5.1% to close at $169.78. Boston Scientific’s shares have increased 7.4% to close at $34.32.

How Likely is the Deal to Materialize?

The chances of the deal are uncertain because there are no confirmatory statements or press releases from the company representatives.


In fact, investors should never forget about Stryker’s highly-rumored acquisition plans of Smith & Nephew from 2015, which never materialized.

On the brighter side, this is not the first time Stryker has been tied up with Boston Scientific. Stryker acquired Boston Scientific's neurovascular unit in 2010 for $1.5 billion, which indicates probability of a second collaboration now.

However, reaching any particular conclusions at this moment might be a bit too early.

Analysts’ Opinion

The Wall Street Journal claims this agreement to be “one of the largest in a year that is shaping up to be one of the busiest ever for mergers and acquisitions”.

If the deal matures, Wells Fargo Securities analyst Lawrence expects it to outpace Medtronic MDT and Johnson & Johnson JNJ in total device revenues.

Morningstar analyst Debbie Wang focused on the need of increasing consolidation in healthcare to provide a comprehensive product portfolio to customers. Stryker’s supposed deal with Boston Scientific seems prudent in this regard.

How Will Stryker Benefit?

If the deal happens, Stryker will gain control of Boston Scientific's line of heart devices such as stents, defibrillators and Watchman device to prevent blood clots. Boston Scientific achieved clinical milestones for Ranger Drug Coated Balloon and WATCHMAN Left Atrial Appendage Closure device.

Further, the company will also leverage on Boston Scientific’s solid foothold in the underpenetrated emerging economies. The company also registered double-digit growth on a year-over-year basis in the emerging markets in the last reported quarter. If the deal materializes, Stryker might profit from Boston Scientific’s strength, especially in the BRIC nations.

Stryker has a Zacks Rank #2 (Buy). Shares of the company have outperformed the industry over a year’s time. The stock has returned almost 20.2%, better than the industry's rise of 14.7%.

Stryker’s Acquisition Profile Shines Bright

Stryker has been following an acquisition-driven strategy to boost growth. Recently, the company acquired Entellus Medical, Inc in an all cash transaction for $24 per share or an equity value of approximately $662 million.

Stryker also acquired VEXIM for €183 million. VEXIM specializes in the development and sale of vertebral compression fracture solutions for.

In 2017, Stryker completed the acquisition of NOVADAQ for a net purchase price of $674 million. NOVADAQ is a leading developer of SPY fluorescence imaging technology that provides surgeons with visualization of blood flow and perfusion with more than250 clinical studies and array of specialties. The company's product portfolio is highly complementary to Stryker's visualization platform.

‘Let’s Wait and Watch’

If Stryker manages to acquire Boston Scientific, the Medical world will achieve a solid benchmark in terms of providing a comprehensive suite of MedTech solutions. This will reduce pricing pressure and competition. Further, the companies with a strong acquisition policy gain from rapidly-expanding large customer base, moderate leverage and enhanced cash flow.

Meanwhile, the MedTech fraternity has been riding on the ongoing merger and acquisition (M&A) trends, making it one of the most profitable investment arenas.

Glancing at major acquisitions in the recent past, Becton, Dickinson and Company’s takeover of C. R. Bard for $24 billion and JOHNSON & JOHNSON’s buyout of Covidien for about $43 billion deserve a mention. Per data provided by BioSpectrum Asia, M&A activity in the MedTech space surged 50% in 2017, increasing the value of aggregate M&A to more than $200 billion.

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