), the leading medical device provider in the global orthopedics
market, must have big dreams about the small and not-so-old
robotic assisted surgery developer
MAKO Surgical Corp.
); otherwise it would not have agreed to acquire the latter at a
handsome premium of 85.5% to its closing price of $16.17 on Sep
Stryker inked a deal to acquire MAKO for $30 per share, putting
the deal's value at about $1.65 billion. The deal also includes
the issuance of 3.953 million shares related to a previously
planned acquisition by MAKO.
What Makes Mako?
Based in Fort Lauderdale, Fla., MAKO was founded in Nov 2004 and
generated sales of $102.7 million last year. The deal will allow
SYK to get hold of MAKO's advanced robotic arm technology known
as Robotic Arm Interactive Orthopedic System, or RIO. The
technology helps orthopedic surgeons in performing knee and hip
joint replacement surgeries.
MAKO's product line also includes Restoris implants and the
recently introduced Makoplasty total hip arthroplasty, which is a
new robotic arm system intended for patients in need for complete
What Drives the Hefty Premium?
Stryker is very much excited about inheriting MAKO's robotic
technology as the company believes it has long-term potential for
human joint reconstruction. It is worth to note in this context
that MAKO's pioneering RIO system has not been widely adopted as
it should be due to inadequate training and marketing efforts. As
a result, SYK intends to fill up this gap by utilizing its
efficient marketing and training system and gain a competitive
edge in the stagnant hip-and-knee replacement market.
Secondly, Stryker can proceed with the further implant
development for MAKO's technologies utilizing its R&D
capabilities. MAKO lack resources compared to Stryker in
developing implants for its systems. Therefore, the acquisition
clearly bridges this gap and enables SYK to meet the wider joint
Although the acquisition is yet to be approved by MAKO
shareholders, there is no reason to believe that they will not
sanction the deal simply because it is set at a hefty premium.
Shares of MAKO soared 82.2% to $29.46 yesterday.
However, shareholders of Stryker do not look happy about the
deal. This is because the acquisition will reduce the company's
adjusted earnings per share by about 10 cents-12 cents in the
first full year (excluding acquisition and integration costs), be
neutral in the second year and finally accretive to earnings in
the third year, which seems a bit too far. Shares of SYK slipped
2.9% to $68.79 after the market closed yesterday.
Currently, Stryker retains a Zacks Rank #3 (Hold). While we
remain on the sidelines about the company, other medical products
companies that are performing well include
), with a Zacks Rank #1 (Strong Buy), and
Boston Scientific Corporation
), with a Zacks Rank #2 (Buy).
ALERE INC (ALR): Free Stock Analysis Report
BOSTON SCIENTIF (BSX): Free Stock Analysis
MAKO SURGICAL (MAKO): Free Stock Analysis
STRYKER CORP (SYK): Free Stock Analysis
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