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Stryker to buy Orthovita for $316 million
May 16, 2011 / 3:28 PM / 6 years ago

Stryker to buy Orthovita for $316 million

CHICAGO (Reuters) - Stryker Corp (SYK.N) plans to buy Orthovita Inc (VITA.O), maker of biologics used in spine surgery, for about $316 million, continuing a consolidation trend in the medical device business.

Stryker said on Monday that it will pay $3.85 a share for Orthovita, a 41 percent premium over the company’s closing share price on Friday. The value of the transaction includes net debt of $12 million.

Orthovita competes in the $5 billion market for orthobiologics, which are proteins and other agents designed to boost the body’s healing process. It is a leader in synthetic bone grafts.

The deal should help Stryker better compete against larger rivals Medtronic Inc (MDT.N) and Johnson & Johnson (JNJ.N), while Stryker’s marketing heft should bolster sales of Orthovita’s product lines, analysts said.

“We consider this deal a good fit for Stryker and believe the company should be able to drive a turnaround in Orthovita’s performance over the next 12-24 months,” said Robert W. Baird & Co analyst Jeff Johnson.

The deal is the latest in series of acquisitions in the medical device business, driven by slowing numbers of medical procedures because of a weak economy that has left many Americans without jobs and health insurance.

J&J in April said it would buy Swiss orthopedic device maker Synthes Inc SYST.VX for $21.67 billion.

Stryker has been taking advantage of a strong cash position to buy other companies, most recently Boston Scientific Corp’s (BSX.N) neurovascular business for $1.5 billion. Best known for its hip and knee implants, the company is looking for faster growth as sales in those businesses have slowed.

Before buying the Boston Scientific unit, Stryker was expanding through several smaller acquisitions that included the Sonopet ultrasonic device business, ulcer treatment maker Gaymar Industries and Porex surgical products.

Orthovita also makes biosurgery products such as Vitagel, which are designed to control intra-operative and post-operative bleeding.

Orthovita generated sales of $95 million in 2010.

A tender offer is scheduled to begin within 10 business days and is expected to close in the second quarter of 2011.

Shares of Kalamazoo, Michigan-based Stryker rose 82 cents, or 1.31 percent, to $64.11 in morning trading on the New York Stock Exchange. Shares of Orthovita were up $1.09, or 39.93 percent, at $3.82 on Nasdaq.

Reporting by Susan Kelly and Toni Clarke. Editing by Gerald E. McCormick and Robert MacMillan

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