Stryker will buy competitor Orthovita for $304M

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Posted: May 16, 2011 11:51 AM
Stryker will buy competitor Orthovita for $304M

Orthopedic implant and surgical products maker Stryker Corp. said Monday it will buy rival Orthovita Inc. for about $304 million in cash.

Orthovita's products include Vitoss bone grafts and Cortoss bone augmentation material. It also sells Vitagel, which is designed to reduce bleeding.

Stryker is offering $3.85 per share, a premium of 41 percent from Orthovita's closing price Friday. It will also assume $12 million in debt held by Orthovita. Shares of Orthovita jumped $1.09, or 39.9 percent, to $3.82 in morning trading. The stock has traded between $1.60 and $3.54 in the last year.

Stryker, of Kalamazoo, Mich., reported $7.32 billion in revenue in 2010. Orthovita, based in Malvern, Pa., had $95 million in revenue.

Mizuho Securities analyst Michael Matson said Orthovita's revenue growth has slowed over the last two years because procedure demand has slumped and prices have come under pressure. He said Stryker's large sales teams "should be able to generate substantially more revenue from Orthovita's products."

Matson added that Stryker is paying a hefty premium for Orthovita and said other deals could follow.

"We think this deal supports our view that acquisition activity in orthopedics is on the upswing," he wrote.

The boards of both companies have approved the deal, which also requires approval from the holders of at least half of Orthovita's shares as well as clearance from antitrust regulators. The companies said the holders of 14.5 percent of Orthovita shares have already committed to the deal. Stryker will start an offer for Orthovita shares within 10 days, and it expects the deal to close during the second quarter.

Stryker shares gained 70 cents to $63.98.