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Twin Acquisitions for DENTSPLY

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In an effort to expand its foothold in international markets, DENTSPLY International Inc. (XRAY - Free Report) announced twin acquisitions of dental companies based in Hong Kong and New Zealand. No further details of the deals were disclosed by the company.

DENTSPLY has already closed the acquisition of QAHR, a direct dental selling company. QAHR is headquartered in Hong Kong with operations spread across mainland China. Since 2000, XRAY has been associated with certain dental implant brands of QAHR.

DENTSPLY forged a second agreement to buy certain assets of New Zealand-based Triodent. Triodent produces professional dental consumables used in restorative dentistry and is also renowned for its unique sectional matrix system.

Both the companies together generate about $30 million of revenues annually. Given the existing commercial relationship with the two companies, the acquisitions are expected to boost XRAY revenues by about $15 million each year.

Our Take

The buyouts of QAHR and Triodent conform to DENTSPLY’s recent strategy to expand via accretive acquisitions. The company’s indebtedness had increased significantly since it acquired Astra Tech in 2011. Since then, it had refrained from entering into major deals. However, with recent visible trends of decreasing debt levels, the company has once again returned to its earlier acquisitive mode.

Moreover, given the ongoing difficult dental market condition in Europe, we believe that XRAY’s initiative to grow its business in the ‘Rest of World’ segment should help lift up its dwindling top-line growth.

In the last reported quarter, DENTSPLY’s net revenues inched up 1.2% to $704.0 million but lagged the Zacks Consensus Estimate of $716 million. In constant currency, net sales grew 2.7%, excluding precious metals content, indicating strong internal growth in the U.S. and Rest of World geographic regions, and continued sluggish internal growth in Europe.

DENTSPLY presently sports a Zacks Rank #2 (Buy). Other players in the Medical/Dental Supplies industry, which look attractive at current levels, include Align Technology (ALGN - Free Report) , McKesson Corp. (MCK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . All these stocks carry a Zacks Rank #1 (Strong Buy).

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