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Stryker Is Set to Acquire K2M Group Holdings

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Performance of K2M Group Holdings

Today, K2M Group Holdings (KTWO) is trading at $27.41, which represents a rise of ~25.62% from yesterday’s closing price of $21.82. K2M Group’s stock price started rising after it announced its acquisition by Stryker (SYK). Also, today, K2M Group Holdings hit its 52-week high of $27.47.

K2M Group Holdings hit its 52-week low of $16.44 on December 8, 2017.

Acquisition deal

Today, K2M Group Holdings announced a definitive agreement with Stryker whereby Stryker will acquire all issued and outstanding shares of K2M Group Holdings’ common stock for $27.50 per share. The transaction cost of $27.50 per share amounts to a net value of ~$1.4 billion.

Stryker’s purchase reflects a 27% premium over K2M Group’s average closing price over the 90 trading days that ended on August 29.

K2M Group Holdings specializes in the development of devices for complex spinal and minimally invasive solutions. K2M Group Holdings’ spine portfolio is expected to strengthen Stryker’s spine division significantly.

In the second quarter, K2M Group Holdings reported revenue of $73.58, reflecting a rise of ~12.01% YoY (year-over-year). In 2017, K2M Group reported net revenue of $258.0 million, which reflected a rise of ~9.04% YoY. Analysts expect K2M Group to generate revenue of $289.6 million in 2018.

The acquisition of K2M Group Holdings will help Stryker strengthen its position as a leader in the global spine market, which is currently valued at $10.0 billion.

Analysts’ recommendations for Stryker

Of the 28 analysts tracking Stryker in August, 11 have recommended “strong buys,” while seven have recommended “buys” on the stock. Ten analysts have recommended “holds” on Stryker in August.

On August 30, Stryker had a consensus 12-month target price of $183.93, which represents an ~8.71% return on investment over the next 12 months.

Peers’ ratings

Of the nine analysts tracking Glaukos (GKOS), ~67% have recommended “buys” on its stock, while among the five analysts tracking Inspire Medical Systems (INSP), ~60% have recommended “buys.”

On August 30, Glaukos and Inspire Medical Systems had consensus 12-month target prices of $60.25 and $51.0, respectively, representing falls of ~10.69% and ~5.15%, respectively, over the next 12 months.

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