Will New Acquisition Boost Invacare?

• Email
• Share
• Print

Shares of Invacare (NYSE: IVC), an Ohio-based company that makes and sells wheelchairs, lifts, and other medical products in North America, Australia, and Europe, rose nearly 11% yesterday following the announcement that the company will buy Germany's WP Domus, a maker of bath lifts, walkers, and other products, for approximately $230 million.

It's perhaps unsurprising that the company's market value got a bump yesterday: Anecdotally, at least, it seems that acquisitions of privately held companies tend to mean a better same-day pop for their public acquirers because there's less information for the public to second-guess and no arbitrage opportunity for traders. Still, this deal holds significant business promise as well.

The acquisition, for one, is expected to boost Invacare's earnings right away -- though only negligibly this year. Next year it's seen adding 2004 revenue of $116 million and $0.25 to $0.30 in 2005 earnings per share (EPS). That latter figure represents a substantial boost to the market's current estimate of $2.80. (Only two analysts were surveyed for the number I found on Yahoo!'s (Nasdaq: YHOO) finance site, however.) The company turned in 2003 sales and EPS of $1.25 billion and $2.25, respectively.

Also encouraging is that Invacare intends to keep WP Domus' top people on board while using its own sales force to round out geographic holes in its new operations' -- Alber, Aquatec, or Dolomite -- capabilities. All told, this move seems to only improve Invacare's positioning as a company serving an aging global population.

The company has pretty good-looking financials to boot. Following today's move, Invacare now looks slightly rich based on next year's EPS estimates -- but if investors keep jerking the shares around as they have these last 12 months, there may be a good opportunity to look closely at the company waiting around the bend.

Fool contributor Dave Marino-Nachison doesn't own shares of any of the companies mentioned.