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Cooper Companies Acquires Contact Lens Maker

Zacks Equity Research

The Cooper Companies Inc. (COO) revealed that it has entered definitive agreements to acquire European manufacturer and distributor of soft contact lenses and solutions, Sauflon Pharmaceuticals Ltd for a handsome amount of $1.2 billion. COO will finance the deal with off-shore cash and credit facilities.

The handsome value for the deal looks justified as it will strengthen COO’s CooperVision portfolio with multi-tier daily strategy offerings. The fast growing multi-tier daily strategy offerings include silicone hydrogel and hydrogel lenses, including options within all categories -- spheres, torics and multifocals.

Sauflon Pharmaceuticals expects to report a 22% rise in revenue to $210 million for the fiscal year ending Oct 31, 2014. The acquisition is anticipated to close before the end of fiscal year. It is expected to be accretive to COO’s earnings per share in fiscal 2015.

In the fiscal 2014-second-quarter, COO’s adjusted earnings per share scaled up 9.3% to $1.64 from the year-ago level of $1.50 and beat the Zacks Consensus Estimate by 3 cents.

Revenues increased 7.4% to $412.3 million and were in line with the Zacks Consensus Estimate of $412 million. Revenues went up 9% in constant currency, excluding the divestiture of Aime (CooperVision's rigid gas permeable contact lens and solutions business in Japan).

Revenues in the CooperVision segment rose 7% (9% in constant currency and excluding the divestiture of Aime) to $331.1 million. The segment continued to gain share across all geographies driven by COO’s silicone hydrogel products, especially Biofinity and MyDay.

For fiscal 2014, COO’s earnings per share are expected in the band of $6.78 to $7.00 compared with the earlier range of $6.75 to $7.00, while adjusted earnings per share are projected in the band of $6.80–$7.00 compared with the prior range of $6.75 to $7.00. The current Zacks Consensus Estimate of $6.90 lies within the guided range.

COO continues to expect total revenue between $ 1,685 and $1,725 million for the year, including CooperVision revenues of $1,365–$1,395 million. The current Zacks Consensus Estimate of $1,711 million lies within the guided range.

Currently, COO retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical/dental supply industry that warrant a look are AmerisourceBergen Corp. (ABC), Steris Corp. (STE), and West Pharmaceutical Services, Inc. (WST). All these stocks carry a Zacks Rank #2 (Buy).

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