In a bid to expand its global footprint,
) has completed two major transactions - one in Brazil and the
other in China. The terms of the deal were however, undisclosed.
However, no significant impact from the two deals is expected on
Covidien's 2014 revenues and earnings. The company's shares fell
1.4% in the trading session following the news release. The
stock has raked in a one-year return of roughly 30% and is up
around 2.3% so far this year.
In Brazil, Covidien purchased WEM Equipamentos Eletronicos Ltda.,
a privately held manufacturer of electrosurgical generators,
disposables and accessories. Covidien has acquired all of WEM and
plans to manage the business as part of its Brazilian operations.
Currently, Brazil's balanced mix of stable economic growth and
environmental sustainability, combined with programs for
effective distribution of wealth, yields the perfect conditions
needed for a business to flourish. Moreover, with the health care
system improving and becoming more accessible in the country,
demand for medical devices will also rise significantly.
On the other hand, China is one of the most attractive among the
fast growing emerging markets. Improvements in infrastructure,
broadening of insurance coverage and significant support for
innovation act as catalysts that stimulate growth for companies
like Covidien in the Chinese market.
Observing this, Covidien has agreed to partner with Changzhou
Kangdi Medical Stapler Co., Ltd., a manufacturer of open stapler
products based in the Jiangsu Province. Covidien and Kangdi have
forged a shared ownership agreement with the former holding
majority control. It will operate as a separate joint venture.
Through the two deals, Covidien plans to steadily increase its
presence in the value segment markets that cater to hospitals
engaged in serving patients who seek affordable healthcare
Both the transactions promise Covidien reduced manufacturing
costs and extensive support from the complementary channels.
Additionally, local brands should help Covidien meet the
affordability needs of the value segment in both the countries.
The strong intent to cater to the underserved segment is
consistent with the company's vision to usher in better patient
outcomes through affordable healthcare solutions.
The dynamic medical devices industry has unlimited opportunity
for growth worldwide, particularly in the emerging economies like
Brazil, China and India. These countries are expected to ring in
the next wave of growth in the market for healthcare products.
Currently, Covidien carries a Zacks Rank #2 (Buy).
Investors interested in the medical industry can also look at
Cardiovascular Systems Inc.
Mead Johnson Nutrition Company
). While CSII and MJN carry a Zacks Rank #1 (Strong Buy), CFN has
the same Zacks Rank as Covidien.
CAREFUSION CORP (CFN): Free Stock Analysis
COVIDIEN PLC (COV): Free Stock Analysis
CARDIOVASCLR SY (CSII): Free Stock Analysis
MEAD JOHNSON NU (MJN): Free Stock Analysis
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