Acquisition spree continues for healthcare products and services
Henry Schein, Inc.
) as it completed the acquisitions of Ortho Technology, Modern
Laboratory Services and Accord, earlier this week. All the three
acquisitions, representing annual sales of $61 million, are
consistent with the company's advanced strategic plan to expand in
the domestic and international market.
Henry Schein believes that these acquisitions will have no
impact on the company's EPS in fiscal 2012. Financial terms
of the deals were not revealed.
Florida-based Ortho Technology is expected to strengthen Henry
Schein's position in the growing orthodontic market. Serving over
10,000 customers, Ortho Technology registered $24 million in sales
with its orthodontic products in the dental specialty market. With
the acquisition, Henry Schein also plans to expand further in the
relatively untapped $1.25 billion global orthodontics market.
Further, in order to expand its geographic footprint in Asia, Henry
Schein acquired Thailand based full-service dental distributor
Accord that recorded sales of $15 million in 2011. With this
acquisition, Thailand will be the 26th country where Henry Schein
will operate, the fifth largest dental market in Asia with current
market size of over $100 million.
The association with Accord, where Henry Schein currently holds
a 75% stake, will also help it to expand in the Southeast Asia that
represents an incremental $150 million market opportunity.
California-based Modern Laboratory Services, on the other hand, is
one of the major distributors of products and services for
physician office laboratories. In fiscal 2011, the company posted
$22 million in sales serving for 700 customers in the Western U.S.
The dental and office-based physician markets are currently being
driven by a number of positive demographic factors, including an
increasing worldwide population and a growing number of adults aged
65 years and above. The present demographic trends indicate growth
in the dental and medical markets as an aging US population is
increasingly using healthcare services.
Between 2011 and 2021, this section of the population, comprising
45 year olds and above, is expected to grow by approximately 14%.
Between 2011 and 2031, this age group is expected to grow by
approximately 27%. This compares well with expected total U.S.
population growth rates of approximately 9% between 2011 and 2021
and approximately 18% between 2011 and 2031.
As a result, Henry Schein is currently focusing on global expansion
through strategic partnerships and acquisitions. Last week, the
company entered into a global distribution agreement with
Israel-based dental technology company ReDent Nova. The latest
addition of these three companies is in pursuance of this strategy.
Henry Schein's portfolio consists of consumable products, small
equipment, laboratory products, large dental and medical equipment,
equipment repair services, branded and generic pharmaceuticals,
vaccines, surgical products, diagnostic tests, infection-control
products and vitamins.
The company continues to experience strong top-line growth and
has established a strong foothold in both domestic and
international markets in dental, veterinary and medical supply
distribution. We are also encouraged by the company's focus on
improving its cost structure to drive profitability.
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Henry Schein's performance should improve further with the gradual
recovery in the economic outlook. However, the company faces stiff
competition from the likes of
Patterson Companies Inc.
). The stock retains a short-term Zacks #3 Rank (Hold).