Smith & Nephew plc
) has entered into a definitive agreement to acquire assets of
its Brazilian distributor, Pró Cirurgia Especializada (PCE). PCE
has been associated with the company for the last 30 years and
has distributed its sports medicine, orthopedic reconstruction
and trauma offerings in Brazil.
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Although no financial detail of the transaction has been
announced, we are encouraged by the company's focus on
strengthening its foothold in the emerging markets. The deal is
expected to close in the second half of 2013.
We believe that this takeover will allow Smith & Nephew to
have a direct control over its business in Brazil. The Emerging
and International markets recorded underlying growth of 14% to
$133 million in the fourth quarter of 2012.
In the recent past, the company had shifted its focus to its
Advanced Wound Management franchise due to a clouded orthopedic
space. Earlier, in Dec 2012, Smith & Nephew acquired
Texas-based Healthpoint Biotherapeutics for $782 million in cash.
The company considers this acquisition as an important step
toward creating a strong portfolio in bioactives, the fastest
growing area of advanced wound management.
However, with the current improvement in the orthopedic market
along with gradual signs of stability in the U.S., the company is
also trying to ramp up its Advanced Surgical Devices business as
well, which was underperforming during the global economic
downturn. Along with the PCE acquisition, the company recently
launched two new products from this segment.
Smith & Nephew currently carries a Zacks Rank #3 (Hold).
Although the company is growing at a healthy pace in the
under-penetrated emerging markets, challenging scenario in Europe
continues to be an overhang. Pricing pressure also remains a
While we remain on the sidelines for Smith & Nephew, other
stocks in the medical devices space such as
) warrant a look. These stocks carry a Zacks Rank #2 (Buy).