A manufacturer of medical devices and equipment in the region is acquiring a company that will join its spine division.
Kalamazoo-based Stryker (NYSE: SYK) said today it signed a definitive agreement to acquire all of the issued and outstanding shares of common stock of K2M Group Holdings (Nasdaq: KTWO) for $27.50 per share, or a total equity value of about $1.4 billion.
Leesburg, Virginia-based K2M has annual sales "approaching" $300 million and makes products for the roughly $10-billion spinal market.
“This acquisition underscores our commitment to the spinal market, which is the largest segment of orthopedics with significant unmet needs,” said Kevin Lobo, chair and CEO, Stryker. “We believe K2M will significantly enhance our presence with surgeons, patients and employees in both the spine and related neuro-technology markets.”
Stryker said K2M will add minimally invasive spine technology to its portfolio and further its capabilities in additive manufacturing, while expanding the company’s global footprint.
K2M has seen a double-digit compounded annual growth rate over the past five years.
“Joining Stryker will be a very exciting next chapter for our global team and surgeon customers around the world," said Eric Major, chair, CEO and president, K2M.
“Stryker’s established leadership in the orthopedic and neuro-surgical market, combined with K2M’s culture of innovation and leadership in complex spine and minimally invasive solutions, represent a powerful opportunity for Stryker.”
Upon closing of the transaction, Eric Major will serve as president of Stryker’s spine division and lead the combined business.
Bradley Paddock, current president of Stryker’s spine division, will assist with transitioning his responsibilities to Major, while also supporting the integration efforts.
Closing and earnings impact
The closing of the transaction is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, approval of the merger by K2M’s stockholders and other customary closing conditions.
Stryker’s acquisition of K2M is expected to close late in the fourth quarter of 2018 and is expected to have an immaterial dilutive impact on Stryker’s net earnings per diluted share and adjusted net earnings per diluted share in 2018.
There is no change to Stryker’s previously announced expected adjusted net earnings per diluted share for the full year, which is a range of $7.22-$7.27.
New York-based Citigroup Global Markets served as financial advisor for the transaction.
Skadden, Arps, Slate, Meagher & Flom, also based in New York, served as outside legal counsel for Stryker.
Stryker offers a diverse array of medical products and services that “help improve patient and hospital outcomes.”
Its products are used in more than 100 countries around the world.
The company reported 2017 revenue of about $12.4 billion.