In an attempt to augment its portfolio of efficiency solutions for hospitals, medical device major Medtronic, Inc. (MDT - Analyst Report) has recently acquired an Italian-based private manufacturer of medical and surgical equipments – NGC Medical S.p.A. (NGC) – for $350 million.
Prior to the acquisition, Medtronic had a 30% ownership stake in NGC Medical. This acquisition reflects Medtronic's persistent efforts to transform itself from a volume-based entity to a value-based healthcare services company, on the back of its cost-effective products and services.
The transaction is expected to be neutral to Medtronic's fiscal 2015 earnings, as it is likely to be accretive in the long run.
The primary business of NGC Medical involves project planning, production and distribution of medical and surgical devices. NGC Medical designs and installs Hemodynamics, Electrophysiology and Interventional Radiology Laboratories, Cardiovascular suites, operating rooms and intensive care units through a custom-made organizational model to suit the specific needs of the particular institution.
Currently, NGC Medical manages such units at 30 hospitals all over Italy and is seeking to fast expand its service contributions across Europe, the Middle East and Africa.
Post-acquisition, NGC Medical will form an integral part of the Managed Services arm within Medtronic's Hospital Solutions business. It will continue to operate as a separate entity in its capacity as a brand-agnostic partner to hospitals.
On Medtronic's part, the acquisition will strengthen its potential to offer high value-for-money services to both healthcare services providers as well as receivers.
The Medtronic-NGC Medical collaboration should better address the challenges that plague the health care system at present, supported by high-quality services rendered at competitive costs.
In Europe, Medtronic Healthcare Solutions has already partnered with a number of hospitals and healthcare programs over the past year to increase effectiveness and improve patient outcome. Medtronic has numerous existing contracts with healthcare centers in Europe reflecting a steady revenue stream of over $0.5 billion and is currently in talks with an additional 150 healthcare systems worldwide in order to expand its Hospital Solutions business.
Medtronic presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical products industry include ICU Medical, Inc. (ICUI - Snapshot Report) , Abaxis, Inc. (ABAX - Analyst Report) and Conatus Pharmaceuticals Inc. (CNAT - Analyst Report) . While ICU Medical sports a Zacks Rank #1 (Strong Buy), Abaxis and Conatus hold a Zacks Rank #2 (Buy) each.