Chinese medical device player Mindray Medical ($MR) was down 7% in early trading on the news that it would acquire the remaining stake of orthopedics player Wuhan Dragonbio Surgical Implant Co. Mindray first gained a controlling stake in Dragonbio for $35.5 million in 2012. Investors may be taking the deal as a sign that a June take-private offer is now off the table. The deal is slated to close this month.
Investors' lack of enthusiasm about the deal pushed Mindray close to its 52-week low share price. The company still has a respectable $2.9 billion market cap, but its share price has declined by roughly one-third in the past two years.
Private take-out offers for Mindray have long been rumored. Last month, the company officially said that it is considering a $30-per-share take-private offer. But after rising to above that share price at the time, now Mindray shares have sunk to below $25 apiece, indicating that investors have diminishing confidence that this take-private deal will get done at the disclosed share price.
In the most recent quarter, Mindray reported net revenues of $272.5 million, representing 2.9% growth year over year. The company has three divisions: patient monitoring and life support products, which had net revenues of $102.8 million; in vitro diagnostics ($75.1 million); and medical imaging systems ($66.7 million). Orthopedics, accessories and services contributed $27.8 million.
Like Mindray, Dragonbio is a Chinese domestic medical device maker. It specializes in trauma, spine, joint and other surgical products. Mindray will fund the deal with existing cash reserves; it had a whopping $1.1 billion in cash at March 31.
"Since we acquired a majority stake of Dragonbio in 2012, the integration has been well on track," said Mindray co-CEO and CSO Minghe Cheng in a statement. "We are optimistic about the prospects of the orthopedic consumable market in China and have therefore decided to make Dragonbio our wholly owned subsidiary."
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