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Philips (PHG) Expands Portfolio With BioTelemetry Acquisition

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Koninklijke Philips N.V. (PHG - Free Report) recently inked an agreement to acquire BioTelemetry , a provider of remote cardiac diagnostics and monitoring in the United States.

Per the deal, Philips will make a cash tender offer to buy all of BioTelemetry’s issued and outstanding shares for $72 per share. The implied enterprise value, including BioTelemetry’s cash and debt, is $2.8 billion.

Additionally, Philips will incorporate roughly 1,900 BioTelemetry employees in its Connected Care business segment. Further, the company expects to complete the acquisition in the first quarter of 2021.

Rationale Behind the Acquisition

The integration of BioTelemetry’s cardiac diagnostics and monitoring solutions with Philips’ existing portfolio, which includes real-time patient monitoring, therapeutic devices, telehealth and informatics, drives the expansion of the latter’s cardiac care portfolio.
 

Koninklijke Philips N.V. Price, Consensus and EPS Surprise

Koninklijke Philips N.V. Price, Consensus and EPS Surprise

Koninklijke Philips N.V. price-consensus-eps-surprise-chart | Koninklijke Philips N.V. Quote

The acquisition enhances the company’s patient care management capabilities by improving patient care across care settings for multiple diseases and medical conditions at both hospitals and homes.

Philips provides services to approximately 300 million patients in hospitals and 10 million sleep and respiratory care patients per year in their homes. BioTelemetry monitors more than 1 million patients per year and above 30,000 unique referring physicians per month. Notably, the integration expands Philips’ customer base and will drive top-line growth in the long haul.

Further, the company expects the buyout to aid revenue growth and adjusted EBITA margin expansion in 2021. Moreover, the EBITA margin is expected to surpass 20% by 2025.

The growth will be majorly driven by cross-selling opportunities, geographical expansion, along with innovation in the company’s product line-up, such as Philips’ Health Suite digital platform.

Momentum in Connected Care Segment Aids Growth

Philips’ shares have gained 17% year to date compared with the Zacks Electronics - Miscellaneous Products industry’s growth of 16.4%.

Notably, Philips’ Connected Care segment benefits from the coronavirus-induced elevated demand in both Sleep & Respiratory Care and Monitoring & Analytics businesses.

Further, strong demand for patient monitors, hospital ventilators, computed tomography and portable ultrasound systems led by the pandemic is a key catalyst. Moreover, strong adoption of the company’s telehealth solutions such as tele-ICU, tele-radiology and tele-pathology is a major positive.

Notably, the company’s Connected Care business revenues (24% of total revenues) soared 36% year over year to €1.56 billion, with a comparable sales growth of 42% in the third-quarter of 2020. Philips expects this strong momentum to continue in the fourth quarter of 2020. Moreover, the acquisition of BioTelemetry bodes well for the company’s Connected Care business.

Zacks Rank & Stocks to Consider

Philips currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Qorvo (QRVO - Free Report) and Arrow Electronics (ARW - Free Report) . Qorvo sports a Zacks Rank #1 (Strong Buy), while Arrow Electronics carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Qorvo and Arrow Electronics is pegged at 15.8% and 9.8%, respectively.

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