Why MAKO Surgical Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of MAKO Surgical (UNKNOWN: MAKO.DL  ) , a robotic surgical device company with a focus on hip and knee replacement surgeries, soared as much as 83% after medical device maker Stryker (NYSE: SYK  ) announced that it would purchase MAKO Surgical for $1.65 billion.

So what: Under the terms of the deal, Stryker will pay $30 per share in cash to acquire MAKO, an 86% premium to yesterday's close. Stryker anticipates that -- not including merger and acquisition costs -- it will dilute EPS by $0.10-$0.12 in the first year, be neutral in the second year, and be earnings accretive thereafter. To fund the purchase, Stryker plans to issue 3.953 million shares of its common stock.

Now what: I think I speak for a lot of investors when I say, "What the heck?" There's coming out of left field, and then there's this! I can say that I do understand to some extent why Stryker made this acquisition since it is one of the largest orthopedic device makers in the world and MAKO's surgically assisted robotic devices are only going to help improve diversity in that product line. But, at a price of $30 per share? MAKO, which has yet to prove it can turn a profit, gets $30 per share? I'm not sure if Stryker is just desperate for growth now that it's being forced to pay the 2.3% medical device excise tax under Obamacare or what, but I suspect it grossly overpaid for MAKO Surgical. However, if you own MAKO, rejoice! The deal is still subject to a MAKO shareholder vote, but they'd be absolutely silly not to approve an 86% all-cash premium!

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  • Report this Comment On September 25, 2013, at 9:26 PM, wjcoffman wrote:

    They won't get all the shares - I'm holding onto mine until they offer me $35/share. Then I'll break even, less trading fees of course. Ahhahaaahahhaaaa!

  • Report this Comment On September 26, 2013, at 1:39 PM, DufferWD wrote:

    Quite a bit of stockholder lawsuits coming out claiming that MAKO didn't ask for enough. I sold on the news and I still came out with a loss.

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