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Merit Medical Systems (MMSI - Snapshot Report) recently disclosed that it has completed its previously announced acquisition of Thomas Medical Products from GE Healthcare, a division of General Electric (GE - Analyst Report) for cash payment of $167 million. The acquisition is expected to be immediately accretive to adjusted net earnings of Merit Medical.

Malvern, Pennsylvania-based Thomas Medical specializes in catheter-based vascular access delivery devices for diagnostic and therapeutic procedures in electrophysiology, cardiac rhythm management, interventional cardiology and interventional radiology applications, primarily on an OEM basis. Post acquisition, Thomas Medical will operate as Malvern Division under Merit Medical. Thomas Medical expects to declare revenues of $37 million in 2012 with annual gross and operating margin of 55% and 44%, respectively.

Accordingly, the recent acquisition will enhance the cardiology business of Merit Medical. Further, Thomas Medical will increase Merit Medical’s existing OEM business (approaching $100 million in annual revenues). The enhanced portfolio should act as a growth catalyst for Merit Medical.

The acquisition should allow for innovation and new product development, on the basis of extended intellectual property. Also, substantial geographical expansion is on the cards for Merit Medical in major economies such as China, Japan, Russia and Gulf States as the company capitalizes on Thomas Medical’s direct sales network and global dealer presence.

Merit Medical financed the acquisition with the help of Wells Fargo (WFC - Analyst Report) by expanding its existing credit facility to $275 million.

This is Merit Medical’s second acquisition in two months, the first being the acquisition of Medigroup’s assets in November. While the Medigroup buyout was targeted at expanding Merit Medical’s dialysis business, the recent acquisition underlines the company focus on its cardiology franchise. As a provider of disposable medical devices for cardiology, radiology, endoscopy and other interventional and diagnostic procedures, these acquisitions are a strategic fit for Merit Medical.

We believe that a diversified product pipeline coupled with recent acquisitions should propel growth going forward. We have a long-term ‘Outperform’ recommendation on Merit Medical which carries a short-term Zacks #1 Rank (Strong Buy). Other medical sector Zacks #1 Rank stocks are Thoratec (THOR - Analyst Report) and Cantel Medical .

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