As Western markets falter, medical device companies are looking China's way, and now Stryker ($SYK) is betting big on the East, agreeing to purchase Trauson Holdings for $764 million in cash.
Trauson specializes in trauma and spinal devices, and Stryker has had a manufacturing relationship with the Chinese outfit since 2007. Stryker expects the buyout to close next quarter, and the company says it's acquiring China's largest trauma device manufacturer and expanding its reach in a fast-growing market. The company reported sales of about $60 million in 2011, Stryker said.
"The acquisition of Trauson is a critical step toward broadening our presence in China and developing a value segment platform for the emerging markets through a well-established brand," CEO Kevin Lobo said in a statement. "...With its research and development expertise, manufacturing capabilities and strength of its distribution network, Trauson is a compelling opportunity for Stryker to drive growth in China and other emerging markets for years to come."
Stryker slashed its 2012 revenue projections back in October in part because of declining demand for its reconstructive devices, and, in the third quarter, Stryker's international trauma and extremities sales plummeted 10.6% compared to the previous year.
In acquiring Trauson's market heft and established products, Stryker's betting on a boon to the company's of-late overseas struggles. And the devicemaker might be right on the money. Trauson holds market dominance in areas like pelvic plates and artificial joints, devices that will explode in demand as China's giant population continues to age.
Medtronic ($MDT) had similar goals in its $816 million buyout of Kanghui Holdings, a player in China's orthopedics market, and, in May, Johnson & Johnson ($JNJ) snapped up surgery-device company Guangzhou Bioseal Biotech, its first acquisition of a Chinese devicemaker. Medtronic and J&J are also among the growing list of med tech companies that have established R&D centers in the country, looking to leverage local talent and develop products for the Chinese market.
- read Stryker's announcement