Medtronic makes a splash in China with $816M Kanghui buyout

Last month, Medtronic ($MDT) said it was shopping around in China for M&A opportunities, and now the device giant has made a purchase: China Kanghui Holdings ($KH) for $816 million in cash.

Kanghui is a maker of orthopedic technologies, boasting a portfolio of trauma, spine and joint reconstruction devices. The acquisition is the largest one Medtronic has ever made in China, Bloomberg notes, and absorbing Kanghui's business will help Medtronic get 20% of its revenue from emerging markets by 2016, one of CEO Omar Ishrak's stated goals.

Medtronic has had China in its sights for a few years, buying a 15% stake in devicemaker Shandong Weigao in 2007 and unveiling a new R&D shop in Shanghai last month. The Kanghui acquisition gives the company a greater presence in one of the world's fastest-growing medical device markets, Executive Vice President and President of Medtronic's Restorative Therapies Group Chris O'Connell said in a statement.

"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," O'Connell said. "This move will provide Medtronic sustainable advantages in the fast-growing Chinese orthopedic segment, as well as a foothold in the emerging global value segment in orthopedics."

Medtronic isn't the only device giant with its eye on Chinese expansion. St. Jude Medical ($STJ), Covidien ($COV) and GE Healthcare ($GE) have all opened R&D outposts in the country over the past year or so, looking to develop products specifically catered to the Chinese market. Earlier this month, Johnson & Johnson ($JNJ) announced an ambitious plan to open four "innovation centers" around the world, including China, to scout for potential partnerships and M&A targets.

Medtronic expects the deal to close in the next few months, and the company said the acquisition will likely be earnings-neutral through 2014.

- read Medtronic's release
- get more from Bloomberg

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