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Stryker (SYK) to Boost Digital Capabilities With New Buyout

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Stryker Corporation (SYK - Free Report) recently signed a merger agreement to acquire all the issued and outstanding shares of common stock of Vocera Communications (VCRA - Free Report) for a total equity value of $2.97 billion and an enterprise value of $3.09 billion.

Per management, the buyout is likely to allow Stryker to significantly advance its digital capabilities to enhance the lives of caregivers and patients.

The buyout is anticipated to be completed in the first quarter of 2022 and is likely to have a neutral effect on net earnings per share in 2022. Per the terms of the agreement, Stryker will begin a tender offer for all outstanding shares of common stock of Vocera for $79.25 per share in cash.

This transaction is another step in Stryker’s acquisition-driven strategy to boost its growth profile.

Few Words on Vocera

Established in 2000, Vocera emerged as a leading platform in the digital care coordination and communication category. This growing segment expanded amid pandemic and aims to lower the cognitive overload for caregivers by offering the best patient care possible.

Per management at Vocera, the deal presents an opportunity for the company on the back of common mission, goals and culture shared by both companies as well as Vocera’s capability to add clinical and economic value for its consumers.

Rationale Behind the Acquisition

The buyout complements Stryker’s Advanced Digital Healthcare offerings on the back of Vocera’s highly developed software proficiency, unique and innovative hardware solutions, and the capability to allow secure remote communication between patients and their families.

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Vocera provides an extremely complementary and innovative portfolio to Stryker’s Medical business that will cater to the growing need for hospitals to connect caregivers and different data-generating medical devices. This, in turn, will boost efficiencies as well as safety and outcomes.

Backed by this combined business, Stryker is likely to accelerate its commitment toward putting a check on adverse events via the continuum of care.

Market Prospects

Per a Grand View Research report, the global digital health market was valued at $96.5 billion in 2020 and is projected to see a CAGR of 15.1% from 2021 to 2028. Rising cases of obesity, increasing prevalence of chronic diseases, growing need for remote patient-monitoring services, and augmenting patient engagement & connectivity are major levers for the market. Hence, this deal comes at an opportune time for Stryker.

Notable Developments

In October 2021, per the third-quarter 2021 earnings release, Stryker witnessed a strong performance across all three segments. The company delivered organic sales growth of 8.4% from the 2019 level, backed by strong double-digit growth from its MedSurg and Neurotechnology businesses, offset by a weakness in hip, knee and spine due to the resurgence of COVID-19 cases.

In September, Stryker's Trauma & Extremities division introduced a Citrelock Tendon Fixation Device System, which offers surgeons a differentiated design through a tendon thread featuring Citregen, which is a resorbable technology. Citregen, in particular, has chemical and mechanical qualities intended for orthopaedic surgical applications.

Price Performance

Shares of this currently Zacks Rank #3 (Hold) player have gained 11.4% in the past year compared with the industry’s growth of 8.2%.

Stocks to Consider

Two better-ranked stocks in the broader medical space are Abiomed, Inc. (ABMD - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .

Abiomed beat estimates in each of the trailing four quarters, the average being 5.8%. ABMD currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Abiomed’s long-term earnings growth rate is estimated at 20%. ABMD’s earnings yield of 1.2% came against the industry’s (3.6%).

Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.

Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.