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How Stryker Plans to Integrate Novadaq

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Overview

On September 1, 2017, Stryker completed the acquisition of Novadaq Technologies. The company announced the deal on June 19, 2017. For details on the announcement, read Stryker Acquires Novadaq, Enhances Its Endoscopic Offerings. That day, Stryker’s stock price fell, and the iShares Core S&P 500 ETF (IVV) rose ~1.4%. SYK makes up ~0.23% of IVV’s total holdings.

The acquisition was completed at a purchase price of $674 million. The highly complementary product portfolios of the two companies will help Stryker enhance and expand its position in the endoscopy market. With a comprehensive portfolio of offerings, it is better positioned to gain more market share. In 3Q17, the acquisition closed earlier than expected and contributed to the company’s US endoscopy sales, which grew ~13.8% YoY (year-over-year).

Integration progress

According to Stryker, it has integrated the Novadaq team with its endoscopy division. Cross-training programs on the products and hands-on training sessions are being conducted for the combined sales force. Stryker has also finalized its sales structure for 2018, and aims to identify portfolio synergies. The two teams are collaborating to standardize the comprehensive imaging portfolio. Novadaq’s extensive research team is also expected to contribute to expanding Stryker’s capabilities in the imaging market. The company is positioned well to gain greater market share amid intense competition from the likes of Medtronic (MDT), Intuitive Surgical (ISRG), and Johnson & Johnson (JNJ).

The Novadaq acquisition is not expected to affect earnings in 2018, nor earnings accretive after that. In fiscal 2017, the acquisition is expected to be dilutive to Stryker’s adjusted earnings per share by around $0.05. In the next article, we’ll take a look at Stryker’s acquisition of French company Vexim.

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