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Stryker Expands with Entellus Acquisition

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Overview

On December 7, 2017, Stryker (SYK) entered into a definitive agreement to acquire Entellus Medical (ENTL) for $662 million, or $24 per share, which represents a ~50% premium to ENTL’s closing price on December 6, 2017. On December 7, SYK stock fell approximately -0.40%, while ENTL stock rose ~49.8%. The Vanguard Total Stock Market ETF (VTI), which has a ~0.17% exposure to Stryker, rose ~0.40%.

Medtronic (MDT) a major player in the US ENT (ear, nose, and throat) market, launched Stealthstation, a surgical navigation system for ENT procedures, in September 2017. Johnson & Johnson (JNJ) also operates in the ENT device space through its subsidiary, Acclarent.

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Details on Entellus Medical

Based in Plymouth, Minnesota, Entellus develops minimally invasive products for various ENT disease treatments. The company, founded in 2006 and a leader in the ENT market space, generated revenue of ~$23 million in fiscal 3Q17. Entellus’s ENT product portfolio consists of its flagship product, XprESS, which is a dilation system, and its Latera nasal implant. The company’s product portfolio is highly complementary to Stryker’s instrument business.

According to CNBC, Entellus CEO Robert White stated that “the combination of Stryker’s established commitment to making healthcare better and Entellus’ innovative products within the ENT segment will continue to provide our customers the tools they need for cost effective solutions. I look forward to the additional progress we will make together.”

The Entellus acquisition is expected to dilute Stryker’s adjusted diluted EPS (earnings per share) by ~$0.04 in fiscal 2018, and be accretive thereafter. For the deal, Stryker’s financial advisor is Guggenheim Securities, while the outside legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP (limited liability partnership). Entellus’s financial advisor is Piper Jaffray (PJC).

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