Henry Schein to Acquire SAS to Strengthen Dental Offerings

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Just a day before its fourth-quarter earnings announcement, Henry Schein Inc.HSIC announced its decision to acquire Southern Anesthesia + Surgical (SAS). SAS is a U.S.-based distributor in the field of anesthesia and surgical supplies, catering to oral surgeons, dental anesthesiologists and periodontists. Financial terms of the deal have not been disclosed.

This worldwide distributor of full-service dental products and services believes the acquisition of SAS to be a strategic one, uniting two leading dental-surgical supply companies. Henry Schein's dental business will be enriched with SAS' controlled and non-controlled pharmaceuticals, as well as surgical supplies which currently caters to approximately 11,500 customers and had sales of $72 million in 2016. SAS' customers are expected to benefit from the broader array of products and services of Henry Schein.

SAS currently has an extensive product offering with over 13,000 stock keeping units and it serves all 50 states. Henry Schein plans to incorporate SAS' business within its subsidiary ACE Surgical Supply Co. The company expects to close the acquisition in the second quarter of 2017 subject to regulatory approvals.

In this regard, we note that, Henry Schein has recently implemented inorganic means to harness growth in dental business. Last month, the company acquired a majority ownership interest in Dental Cremer - a distributor of dental supplies and equipment in Brazil.

Earlier in December, the company acquired Poland-based dental distributor Marrodent. The acquisition has paved the way for the company to expand its dental business among Poland's approximately 26,000 practicing dentists and 20,000 dental offices. The company also completed its takeover of a 90% ownership stake in Dental Trey - an Italy-based distributor of dental consumable merchandise and equipment.

We believe the acquisition of SAS, post its closing, should also help in strengthening the company's dental offerings and thereby boost its top line.

Share Price Movement

Over the past three months, Henry Schein has consistently traded above the Zacks categorized Medical - Dental Supplies industry. The stock is currently up 13.17% which is higher than 7.05% gain of the broader industry. Also Henry Schein recorded a CAGR of 5.7% over the last five years for revenues, reflecting strong fundamentals in its growth performance. Management earlier provided cautious 2017 guidance on North American dental business which has been plagued by several issues.

However, a rising share price trend is indicative of brighter days ahead. We expect the acquisition of SAS to be further helpful in holding investors' optimism on the stock's North America's performance.

Zacks Rank & Key Picks

Henry Schein currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks include Glaukos Corporation GKOS , Cardiovascular Systems CSII and Neogen Corp. NEOG . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Glaukos gained over 100% in the last one year compared with the S&P 500's gain of 22.4%. The company has a stellar four-quarter average earnings surprise of over 100%.

Cardiovascular Systems surged over 100% in the last one year compared with the S&P 500. It has a four-quarter average earnings surprise of 67.8%.

Neogen gained 34.6% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared with the industry average of 15.2%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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