Symmetry Medical
(
SMA
), which supplies instruments to orthopedic devices makers,
reported that it has struck a definitive agreement to purchase the
surgical instruments unit of Codman & Shurtleff Inc.
("Codman").
Codman, a part of
Johnson & Johnson
's (
JNJ
) DePuy family of companies, makes devices for neurological
disorders. Its leading brands include the BOOKWALTER retractor
systems, OPTI-LENGTH extended length surgical instruments,
QUAD-LOCK sterilization container systems and CLASSIC PLUS and
CLASSIC surgical instruments.
Under the deal terms, Symmetry will buy the surgical instruments
business of Codman for $165 million in cash. Codman will offer
transitional services (including administrative and distributional
support) to Symmetry for a period of time following the deal
closure.
The deal encompasses Codman's reusable stainless steel and
titanium surgical hand-held instruments and retractor systems,
sterile disposable surgical products and sterilization containers,
which are used in various surgeries.
Symmetry plans to fund the acquisition through an amendment to
its Senior Secured Credit Facility and the issuance of senior
subordinated notes worth $65 million. The transaction, which is
subject to customary closing condition and government clearances,
is expected to consummate by end 2011.
Following the acquisition, the surgical instrument portfolio
will be integrated into Symmetry's fully-owned unit Specialty
Surgical Instrumentation ("SSI"), resulting in a business worth
more than $100 million in annual sales. The combin ed business will
be renamed "Symmetry Surgical" and will be located in Nashville,
Tennessee. Besides diversifying its revenue base, the acquisition
enables Symmetry to broaden its global presence.
Symmetry is the largest OEM provider of orthopedic implants and
instruments to orthopedic devices manufacturers. Its major
customers include Johnson & Johnson's DePuy,
Stryker
(
SYK
) and
Zimmer Holdings
(
ZMH
).
Symmetry Medical's "Total Solutions" approach has differentiated
it from the rivals and provided a substantial growth opportunity.
Most of its customers are expanding outsourcing, realizing the
benefits of a "One-stop shop" solution that allows them to focus
their efforts on marketing and R&D.
Symmetry is investing in revamping its management structure and
enhancing customer collaboration, which should support growth.
Moreover, the company should benefit from higher demand for its
solutions as its major customers ramp up spending and accelerate
product launches.
However, Symmetry still faces price and procedure volume
pressure on the orthopedic front. Also, the company's high spending
may continue to weigh on its bottom line. Currently we are Neutral
on Symmetry Medical. The stock retains a Zacks #4 Rank, which
translates into a short-term "Sell" recommendation.
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
SYMMETRY MEDICL (
SMA
): Free Stock Analysis Report
STRYKER CORP (
SYK
): Free Stock Analysis Report
ZIMMER HOLDINGS (
ZMH
): Free Stock Analysis Report
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