Orthopedic devices giant Stryker Corp ( SYK - Analyst Report ) has commenced its $3.85 per share tender offer for its previously announced acquisition of orthobiologic and biosurgery products maker Orthovita Inc ( ) .

The Michigan-based devices maker struck a deal on May 16 to buy Pennsylvania-based Orthovita for $316 million in cash. Per the agreement, shareholders of Orthovita will receive $3.85 for each share they hold, representing roughly 41% premium over Orthovita’s closing price of $2.73 on May 13.

The transaction has been cleared by the Boards of both companies. Moreover, Orthovita’s Board recommended its shareholders to tender their shares. Shareholders holding roughly 14.5% of Orthovita’s outstanding shares have already committed to tender their shares.

Stryker launched the tender offer through its indirect wholly owned subsidiary Owl Acquisition Corporation. The offer, which is slated to expire at midnight June 24, 2011, is subject to the tender of a majority of the outstanding shares of Orthovita and other customary closing conditions. Following completion of the tender offer and the satisfaction (or waiver) of all conditions, Owl Acquisition Corporation will merge with Orthovita.

Orthovita, with annual sales of $95 million, is a leader in synthetic bone grafts and competes in the $5 billion orthobiologics (substances that help heal injuries) market. The company’s orthobiologic product range includes the Vitoss bone graft substitute and the Cortoss bone augmentation material. Moreover, its Biosurgery business offers hemostasis products including the Vitagel surgical hemostat.

The acquisition is a strategic fit for Stryker, highly complementing its existing orthobiologics offering while strengthening its competitive position. Upon fruition, the deal is expected to be neutral to the company’s adjusted earnings per share for 2011.

We believe that Stryker is well placed for growth driven by new product launches, acquisitions and an improving hospital capital spending backdrop. However, the company remains exposed to stiff competition and pricing and procedure volume pressure on its hip, knee and spine products. Our long-term Neutral recommendation on Stryker is supported by a short-term Zacks #3 Rank (Hold).