Globus Medical's $3 bln deal for NuVasive to fortify spinal business spooks investors

Illustration shows U.S. Dollar banknotes
Woman holds U.S. dollar banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

Feb 9 (Reuters) - Globus Medical Inc (GMED.N) said on Thursday it would acquire peer NuVasive Inc (NUVA.O) in an all-stock deal valued at about $3 billion to build scale in the competitive market for spinal devices.

NuVasive shareholders will receive 0.75 of Globus shares, implying a per-share offer of $57.72 and a premium of about 26% to Wednesday's close.

Shares of Globus Medical fell more than 17%, with analysts raising concerns around deals in spinal device space.

NuVasive traded much lower than the offer price at $46.53.

Similar deals in the spinal device market, such as Stryker (SYK.N) acquiring K2M Group and several others, have had more revenue "dis-synergies and loss of integration" than other areas of medtech over the years, said Baird analyst Jeffrey Johnson.

There were also some added concerns about how the deal is of value for Globus.

"To double-down on spine is somewhat surprising in our view and adds a lower growth organization," said BTIG analyst Ryan Zimmerman.

The companies said there was minimal overlap among the geographies and customers that they cater to, and the complementary nature of their products makes Nuvasive a good fit for Globus.

"We both have very rich product portfolios to still develop," said Globus Medical Chief Executive Officer Daniel Scavilla.

Through the deal, the Pennsylvania-based company expands its presence in the spine surgery space, where it competes with larger device makers like Johnson & Johnson and Medtronic Plc (MDT.N).

Globus, which has been trying to acquire NuVasive since late 2021, said the deal would contribute to its adjusted earnings within a year after close, which is expected in mid-2023.

NuVasive makes implants and provides imaging solutions used in spinal surgeries. The company expects its net sales to increase 7% to 8% in 2023, while Globus estimates its full-year net sales to rise 6% to 8%.

NuVasive shareholders will own about 28% of the combined company, while Globus shareholders will own the rest.

Reporting by Raghav Mahobe in Bengaluru; Editing by Maju Samuel

Our Standards: The Thomson Reuters Trust Principles.