In continuity of its strategic investment plans, Henry Schein, Inc. (HSIC) recently announced the acquisition of a 60% stake in BioHorizons, a U.S based manufacturer of advanced dental implants with sales of $115 million. However, the financial terms of the agreement remain undisclosed.
Post the takeover, BioHorizons will continue to operate as an independent company. The transaction involves a two-step process: a recapitalization through which Henry Schein will lend approximately $145 million to BioHorizons to fund distribution to shareholders, which will occur prior to the deal’s closure, followed by the equity investment.
The transaction is expected to be sealed by the end of the year, subject to regulatory approval. Henry Schein expects the acquisition to be dilutive to its earnings per share by 3–5 cents in 2014 and accretive by 3–4 cents in 2015.
The acquisition of BioHorizon marks Henry Schein’s entry into the global implant market, which is estimated to touch $4.2 billion by 2016. Combined together, the U.S and Canadian markets alone reveal a potential of $1.5 billion in 2016, up from $1 billiion in 2012.
Foreseeing the opportunities in the implant market, Henry Schein has also made investments in CAMLOG Biotechnologies AG, a leading manufacturer of implants in Europe.
As the Dental business of Henry Schein contributes a major portion of revenues, the company wants to expand this business through strategic investments like BioHorizon and others.
The current demographic tailwinds, greater consumer awareness and high success rates in implant procedures are some of the few drivers noticed in the implant market. Modern-day digitization in dental implants also supports performance of the sector participants by increasing patient comfort and enhancing their overall dental experience.
One of the largest provider of health care products and services to office-based dental, animal health and medical practitioners, Henry Schein expects that such strategic investments will eventually fortify its foothold in two of the largest implants markets, namely the U.S and Germany.
The investment in BioHorizon provides Henry Schein the chance to strengthen its portfolio in the biologics market, a critical adjunct to the implant market. This is expected to be greatly beneficial for dental practice as the company already offers its customers a wide array of products and services associated with implant dentistry.
Henry Schein is optimistic about this investment sufficing its dual objective of providing innovative and modern techniques in oral healthcare and gaining a prominent position in the dental specialty market.
Additionally, the animal health arm of Henry Schein recently acquired an 80% stake in privately-held Medivet S.A., a leading distributor of animal health products and services in Poland.
We believe apart from organic investment, such inorganic developments will also boost operational growth for Henry Schein in the long term.
Currently, Henry Schein carries a Zacks Rank #3 (Hold). Investors interested in the industry may consider stocks like Align Technology Inc. (ALGN) and McKesson Corp. (MCK) and Merit Medical Systems, Inc. (MMSI). All these stocks carry a #1 (Strong Buy).