Stryker has announced a definitive merger agreement to acquire all of the issued and outstanding shares of common stock of K2M Group Holdings, a company specialising in minimally invasive spinal devices, for US$27.50 per share, or total equity value of approximately US$1.4 billion. K2M, which was founded in 2004, has emerged as a key player in the roughly US$10 billion spinal market.
With annual sales approaching US$300 million, K2M bolsters Stryker’s Spine division, in particular with devices indicated for use in the complex spine market and with a minimally invasive spine portfolio. K2M has experienced a double-digit compounded annual growth rate over the past five years.
“This acquisition underscores our commitment to the spinal market, which is the largest segment of orthopaedics with significant unmet needs,” states Kevin A Lobo, chairman and chief executive officer, Stryker. “We believe K2M will significantly enhance our presence with surgeons, patients and employees in both the spine and related neuro-technology markets.”
“Joining Stryker will be a very exciting next chapter for our global team and surgeon customers around the world,” says Eric D Major, chairman, chief executive officer, and president of K2M. “Stryker’s established leadership in the orthopaedic and neurosurgical market, combined with K2M’s culture of innovation and leadership in complex spine and minimally invasive solutions, represent a powerful opportunity for Stryker to strengthen its leadership in the US$10 billion global spine market.”
The closing of the transaction is subject to expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, approval of the merger by K2M’s stockholders and other customary closing conditions. Upon closing of the transaction, it is expected that Eric D Major will serve as president of Stryker’s Spine division and lead the combined business. Bradley W Paddock, the current president of Stryker’s Spine division, will assist with transitioning his responsibilities to Major, while also supporting the integration efforts.
The acquisition of K2M is expected to close late in the fourth quarter of this year and is expected to have an immaterial dilutive impact to Stryker’s net earnings per diluted share and adjusted net earnings per diluted share in 2018. There is no change to Stryker’s previously announced expected adjusted net earnings per diluted share for the full year, which is a range of US$7.22–$7.27. For 2019 and beyond, Stryker reaffirms its previously stated long-term financial goals for sales, operating margins and adjusted net earnings per diluted share.