), a developer of aesthetic treatment systems, entered into a
definitive acquisition agreement with
Palomar Medical Technologies Inc.
), in which the former is going to take over the latter for $294
million in cash and stock.
Cynosure, which is looking forward to this acquisition,
expects the inclusion of Palomar to be a strategic fit as the
inclusion of Palomar will complement the company's existing
product line and enhance Cynosure's customer base.
Accordingly, Cynosure expects the acquisition to further
bolster the company's sales and strengthen its worldwide
distribution network. The acquisition will also add more than 40
patents in Cynosure's portfolio, thereby boosting its
intellectual property position.
As per the terms of the deal, Cynosure will issue 5.2 million
shares and fund the cash of $147 million through existing cash
balance. The company will be acquiring Palomar for $13.65 a share
($6.825 will be provided in cash and the balance through common
We note the acquisition price reflects a a premium of 23% and
34% on Palomar's average closing price and average enterprise
value, respectively, since the announcement of Palomar's fiscal
2012 results (on Feb 7, 2013).,
Cynosure expects this acquisition to be accretive to its 2014
performance with the implementation of project synergies in the
range of $8 million and $10 million by 2014. Post-acquisition,
the cash balance of the company is expected to be around $87
million and it will remain debt-free.
These figures are calculated on an adjusted basis as of Dec
31, 2012. The board of directors of both the companies voted
unanimously and the deal is expected to be completed by end of
third quarter 2013.
Palomar has created a global footprint by producing products
like Icon and Starlux laser and Intense Pulsed Light (IPL). Its
recently introduced product Vectus Diode Laser has proved
Palomar's worldwide excellence. Palomar is dedicated toward
improving patient care which is reflected in its products, with
features like skin cooling, temperature control and energy
Currently, on a combined basis, Cynosure and Palomar have a
large installed base of over 20,000 aesthetic laser systems with
a distribution network across more than 100 countries worldwide.
The collective revenue for both the companies in fiscal 2012 was
$234 million of which 52% is attributable to North America while
the rest came from the international markets.
Cynosure develops and sells non-invasive and minimal invasive
products to rejuvenate skin, treat vascular and benign pigmented
lesions, reduce cellulite, remove hair and treat onychomycosis.
The company sells products in North America and international
Earlier, in 2006, Cynosure had entered into a cross-agreement
with Palomar under which Cynosure had the rights to sell Palomar
products and in return royalty ranging 3.75%− 7.5% of net sales
Currently, Cynosure carries a Zacks Rank #3 (Hold). However,
we are more positive about other stocks such as
Rofin-Sinar Technologies Inc.
) all of which carry a Zacks Rank #2 (Buy) and are expected to do
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