Medtronic and China Kanghui Holdings have announced that they have entered into a merger agreement whereby Medtronic will acquire Kanghui. The agreement calls for Medtronic to pay approximately US$816 million in cash (US$30.75 per American depository share).
As a leading provider of orthopaedic devices in China, Kanghui brings a strong product portfolio and new product pipeline in trauma, spine and joint reconstruction. The combined portfolio expands Medtronic’s offerings in orthopaedic surgery and complements the company’s existing presence in spine, neurosurgery, neuromodulation, advanced energy and surgical navigation.
“China is one of the fastest growing medical device markets with significant scale opportunities, and now Medtronic will establish a bigger and more direct local presence,” said Chris O’Connell, executive vice president and president of Medtronic’s Restorative Therapies Group, including the Neuromodulation, Spine, Surgical Technologies and Diabetes businesses. “Kanghui brings Medtronic a broad product portfolio, a strong local R&D and manufacturing operation, a vast China distribution network and an exceptional management team. This move will provide Medtronic sustainable advantages in the fast-growing Chinese orthopaedic segment, as well as a foothold in the emerging global value segment in orthopaedics.”
“We are proud of the company we have built and recognise there is a tremendous opportunity to accelerate our global vision by building on Medtronic’s size, scale and expertise as part of this combined organisation,” said Libo Yang, CEO of Kanghui. “We look forward to bringing to Medtronic our local operating expertise in China, including our wide distribution network, strong local sales and marketing teams, local manufacturing and R&D, as well as our active presence across a number of value orthopaedic product lines that are necessary for success in China and other emerging markets.”
The transaction is expected to close in the next few months and is subject to customary closing conditions, including approval from the shareholders of Kanghui. Medtronic expects the net impact from this transaction to be earnings neutral for fiscal years 2013 and 2014 as the company intends to offset any dilutive impact of the transaction.