Sirona, Dentsply to merge in largest dental devices deal ever, worth $13.3B

Image from Sirona's Galaxis software--Courtesy of Sirona

In what's being billed as a merger of equals, dental device bigwigs Dentsply International ($XRAY) and Sirona Dental Systems ($SIRO) are joining forces in an all-stock deal valued at about $13.3 billion. It's the largest M&A deal in the dental space ever.

At least according to John Santemma, the global head of healthcare investment banking at Jefferies, as cited in The Wall Street Journal. Combined company Dentsply Sirona will have annual revenues of about $3.8 billion and earnings of more than $900 million.

The transaction tops Danaher's ($DHR) $2.2 billion buyout of dental specialist Nobel Biocare in December 2014. Zimmer's $13 billion buyout of Biomet also resulted in an enlarged dental unit at Zimmer Biomet ($ZBH). The two companies' dental units had revenues of $500 million in 2014.

Dentsply shareholders will own 58% of the combined company upon closure, expected in Q1 2016. The company had net sales of $2.9 billion in 2014, almost half of which came from specialty products like root canal instruments and bone grafting materials. Consumables like tooth whiteners accounted for 28% of net sales, followed by consumable medical devices (13%) like urology catheters and medical drills, and dental lab products(10%) like artificial teeth.

Meanwhile, Sirona had revenues of $1.1 billion in FY 2014, led by computer-aided design and computer-aided manufacturing systems, which accounted for 37% of revenues. The segment focuses on "digital dentistry offerings" like digital impressions. Imaging systems (34%), offerings to treatment centers (19%), and instruments (10%) accounted for the remainder of revenues. Operating income was $238 million.

The new company will have impressive breadth and depth, covering everything from dental imaging systems, implants, and orthodontic implants, to fluoride, specialized dental instruments and office furniture.

The new headquarters will be in York, PA, the site of Dentsply's current headquarters. Sirona CEO Jeffrey Slovin will become the CEO of Dentsply Sirona.

"Combining Sirona's proven digital solutions and equipment with Dentsply's leading consumables platform creates the most comprehensive dental solutions offering available to meet customer demand in every key segment. I look forward to leading the talented teams of both Sirona and Dentsply as we drive the global digitization of dentistry, offer superior solutions to customers and patients and create The Dental Solutions Company," he said in a statement.

The company will have an R&D staff of more than 600 people. The deal is expected to result in more than $125 million in annual synergies by the new company's third year.

- read the release

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