Coverage: Stryker approaches Boston Scientific about deal
Medical device maker Stryker Corp. has made a takeover approach to rival Boston Scientific Corp., a combination that would give Stryker a strong position in stroke-preventing heart products.
Bill Berkrot of Reuters had the news:
A deal would create a combined company with a market value of more than $110 billion and a wide breadth of product offerings from cardiology and orthopedics to surgical supplies and neuroscience at a time when leaders in the sector feel the need to be able to offer hospitals and other customers a one-stop shopping experience.
Representatives of both Stryker and Boston Scientific declined to comment on the report. But the two have done business before. Stryker bought Boston Scientific’s neurovascular unit in 2010 for $1.5 billion.
Shares of Boston Scientific, which has a market value of about $44 billion, closed up 7.4 percent at $34.32, while Stryker shares fell 5.1 percent to close at $169.78.
Trading in both stocks was temporarily halted during Monday’s session on the New York Stock Exchange.
Joe Carlson of the Minneapolis Star-Tribune reported that the combined company would have $24 billion in sales:
However, such a deal would be logical, at least on its face.
Thom Gunderson, a longtime med-tech stock analyst who is now retired, said Monday that medical technology companies need to sell a wide breath of products to compete on a global scale. That’s especially true in the wake of crosstown heart-device rival Medtronic’s $50 billion acquisition of medical products maker Covidien, which was first announced four years ago this week.
“If Medtronic is going to offer a wide array of products, then others that want to be competitive … are going to have to start making the same kinds of big moves,” Gunderson said. “So you saw Abbott buy St. Jude Medical. Now you’ve got rumors of Boston Scientific and Stryker. Makes perfect sense to me. Go big or go home is the rule of the day.”
He said many medical device companies are likely to organize themselves into huge companies as the medical technology industry follows the lead of the pharmaceutical industry. Just as “Pharma” became “Big Pharma,” device makers are now in the process of becoming Big Device.
Michael Sheetz of CNBC.com reported that the combined companies could compete better with Medtronic:
A deal could allow the two companies to better compete with Medtronic, a medical device behemoth with a market value of $117.3 billion. The company’s shares fell 0.4 percent Monday.
BMO Capital Markets analyst Joanne Wuensch said if Stryker and Boston Scientific were to combine, it would be one of the final “major puzzle piece” acquisitions within the greater medical technology industry consolidations. In a note to clients, she cited other recent deals, including Abbott‘s acquisition of St. Jude Medical last year.
Yet J.P. Morgan analyst Robbie Marcus said he and his team “aren’t big believers” in the bigger is better strategy. His questions, he wrote Monday in a note, include whether a deal is financially possible, why Stryker would want to take on the risk when they’ve been executing so well, whether Boston would willingly sell, and whether there are any other potential bidders that could enter the mix.