Stryker Corp. Acquiring K2M Group Holdings for $1.4 Billion

Stryker Corporation announced today a definitive merger agreement to acquire K2M Group Holdings Inc. for $27.50 per share, or a total equity value of approximately $1.4 billion. K2M, which was founded in 2004, has emerged as a key player in the roughly $10 billion spinal market.
 
With annual sales approaching $300 million, K2M brings to Stryker’s Spine division a highly complementary and innovative portfolio, which includes a strong position in the complex spine market. Additionally, K2M’s broad portfolio will strengthen Stryker’s Spine offering in the core spinal segment, including an attractive minimally invasive spine portfolio, further Stryker’s capabilities in additive manufacturing, and expand the company’s global footprint. K2M’s compelling product portfolio and sales force focus have driven a double-digit compounded annual growth rate over the past five years.  
 
The combined business will have a competitive portfolio across Stryker’s Spine product categories and leverage a more powerful commercial engine. With the addition of K2M’s product portfolio, track record of execution and pipeline, Stryker Spine’s business will be well-positioned to sustain innovation and provide its customers and employees with proven products.   
 
“This acquisition underscores our commitment to the spinal market, which is the largest segment of Orthopaedics with significant unmet needs,” stated Kevin A. Lobo, chairman and CEO of Stryker. “We believe K2M will significantly enhance our presence with surgeons, patients and employees in both the spine and related neurotechnology markets.”

The closing of the transaction is subject to expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, approval of the merger by K2M’s stockholders and other customary closing conditions. Upon closing of the transaction, it is expected that Eric D. Major will serve as president of Stryker’s Spine division and lead the combined business in its continued growth and innovation. Bradley W. Paddock, the current president of Stryker’s Spine division, will assist with transitioning his responsibilities to Major while also supporting the integration efforts.
 
“Joining Stryker will be a very exciting next chapter for our global team and surgeon customers around the world,” said Major, currently the chairman, CEO, and president of K2M. “Stryker’s leadership in the orthopedic and neurosurgical market, combined with K2M’s culture of innovation and leadership in complex spine and minimally invasive solutions, represent a powerful opportunity for Stryker to strengthen its leadership in the $10 billion global spine market.”
 
The acquisition of K2M is expected to close late in the fourth quarter of this year and is expected to have an immaterial dilutive impact to Stryker’s net earnings per diluted share and adjusted net earnings per diluted share¹ in 2018. There is no change to Stryker’s previously announced expected adjusted net earnings per diluted share¹ for the full year, which is a range of $7.22 to $7.27. For 2019, and beyond, Stryker reaffirms its previously stated long-term financial goals for sales, operating margins and adjusted net earnings per diluted share.¹
 
Citigroup Global Markets Inc. served as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP served as outside legal counsel for Stryker in connection with this transaction.
 
Stryker is one of the world’s leading medical technology companies and, together with its customers, is driven to make healthcare better. The company offers products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes.

Reference
1. A reconciliation of expected net earnings per diluted share to expected adjusted net earnings per diluted share and other important information accompanies this press release.