Shares of Boston Scientific Corporation BSX gained 7.4% to close at $34.32 on Jun 11, 2018, following a speculation that the company's rival Stryker Corporation SYK might consider a bid for acquiring the former. This news is per a Wall Street Journal report.
Trading in both stocks was temporarily paused during Monday's session on the NYSE. Per yesterday's close, Boston Scientific's market cap was $47.5 billion as compared to Stryker's $63 billion.
Following the above, a Reuters' report stated that it is still unclear whether Boston Scientific is open to a potential buyout proposal by Stryker. The prospective acquirer too declined to comment on the report.
Meanwhile, a Benzinga report wrote, "Any bid would have to surpass $40 per share, according to Stifel Nicolaus, and Wells Fargo predicted shares could be valued around $42, based on the Becton Dickinson-CR Bard deal, according to Bloomberg."
Previous BSX-Stryker Alliance
Significantly, this is not the first time that Stryker and Boston Scientific have come up for strategic collaborations. Back in 2010, the orthopaedic devices giant bought Boston Scientific's Neurovascular unit for $1.5 billion. That time, the rationale behind this divestment decision by Boston Scientific came as part of the company's aggressive restructuring initiatives. More specifically, the neurovascular division, one of the company's non-core businesses, was struggling with depressed sales.
Rationale Behind Latest Rumored Deal
While Boston Scientific's position on the prospects of the possible sell-off rumor is still unknown, some analysts believe that the reason behind the company's contemplation over a probable sell-off might lie in its interest to gain a further competitive edge in the medical device space.
It is important to note that post the colossal mergers of Medtronic MDT -Covidien and Abbott ABT -St. Jude Medical over the last couple of years, Boston Scientific also needed to make a mammoth move to maintain its foothold in the highly competitive medical-technology space.
If the merger gets to materialize finally, considering both Boston Scientific and Stryker's present market cap, then the consolidated entity will have a combined market cap of more than $110 billion. According to Wells Fargo Securities, this is a position only behind Medtronic and Johnson & Johnson in terms of total device revenues.
Reacting to this widely speculated buyout bid, retired Twin Cities med-tech stock analyst Thom Gunderson said that it "makes perfect sense to me. Go big or go home is the rule of the day."
The analysts seem optimistic about the alleged deal and believe that if it finally works out, Boston Scientific will score a vantage point in the fast-growing competitive heart valve replacement market where it is currently trailing behind Edwards Lifesciences EW and Medtronic.
Also, this merger is expected to reduce costs for the combined company at a time when the healthcare industry is already battling against severe pricing pressure.
Share Price Comparison
Over the past year, shares of Boston Scientific have rallied 22.9%, ahead of Stryker's 20.3% increase. While the broader sector remained much below with a 2.2% rise.
Both Boston Scientific and Stryker currently carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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