With a clear eye toward expanding its focus on emerging markets, Smith & Nephew ($SNN) this week announced plans to snatch up its long-time Brazilian-based distributor.
The U.K. device giant declined to disclose how much it is paying for Pró Cirurgia Especializada (PCE), the Brazilian outfit that has distributed its sports medicine, orthopedic reconstruction and trauma products in Brazil for 30 years. If all goes well, the deal will close by the 2013 second half.
Many of Smith & Nephew's device industry competitors, including Johnson & Johnson ($JNJ), Covidien ($COV), Medtronic ($MDT), Boston Scientific ($BSX) and others, have turned to both M&A and emerging markets in Asia and South America to fuel new growth. And Smith & Nephew acknowledged its acquisition of PCE takes it on the same path.
"Building a substantial and sustainable business in Brazil is central to our strategy to be leaders in the emerging markets," Smith & Nephew CEO Olivier Bohuon said in a statement. "We know PCE well, having worked together for many years, and are confident that its deep market expertise and customer relationships give us a strong platform."
Translated, owning PCE outright rather than simply partnering will give Smith & Nephew a greater stake and a well-connected homegrown base from which to pursue aggressive growth in Brazil and nearby markets in the coming months and years.
Emerging markets could be a vitally important shot in the arm for Smith & Nephew, considering it faced a net profit decline at the end of its 2012 fourth quarter, with a slump in hip and knee implant sales as well as trauma devices. The company has slashed U.S. jobs (blaming the device tax), and continues to focus on slashing expenses. It's also looking for more acquisitions to help it diversify and generate new revenue. Beyond PCE, that has included Smith & Nephew's $782 million purchase of wound management business Healthpoint in late December.
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