Stryker Buys MAKO for $1.65 Billion

One of our medical device companies, Stryker ($SYK), said this morning that it’s buying MAKO Surgical ($MAKO) for $1.65 billion. That’s $30 per share which is an 86% premium based on yesterday’s close. Stryker clearly wanted MAKO bad.

MAKO is involved in robotic-assisted surgery. While the company isn’t yet profitable, Wall Street places a high premium on stocks in this field. MAKO is expected to generate revenue of $126 million this year, so Stryker is paying 13 times that. That’s a hefty price tag.

I’m usually not a fan of major acquisitions. While this is a large deal, it’s still worth about 6% of Stryker’s market value. Shares of SYK are down about 2.4% which usually happens to the acquirer. I’m inclined to give Stryker the benefit of the doubt. Afterall, the company has grown its profits nicely for several years so someone there knows what they’re doing.

I was glad to see Wells Fargo reaffirm their Outperform rating for SYK. A few other firms had recently raised their ratings on Stryker before the deal. RBC Capital just raised their price target from $74 to $81. Deutsche Bank went from $75 to $79. Earlier this month, Credit Suisse went Neutral to Outperform.

Posted by on September 25th, 2013 at 10:29 am


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