In response to the company's announcement that it has accepted a takeover offer, shares of Wright Medical Group (NASDAQ:WMGI), a medical device maker focused on extremities and biologics products, rose 28%% as of 10:25 a.m. EST on Monday.
Wright Medical Group announced today that it has agreed to be acquired by Stryker (NYSE:SYK).
Here are the details of the proposed transaction:
- The total value of the deal is $5.4 billion.
- The equity is valued at $4.7 billion, or $30.75 per share. That represents a 52% premium over the volume-weighted average closing price of Wright's stock over the 30-day period ending on Oct. 31.
- The deal will be paid for with cash.
- The boards of both companies have already approved it.
- The acquisition is expected to close in the second half of 2020.
- The closing is subject to certain regulatory approvals and also needs to be approved by Wright Medical's shareholders.
Wright's CEO Robert Palmisano said: "We believe this transaction will provide truly unique opportunities and will create significant value for our shareholders, customers, and employees. By merging our complementary strengths and collective resources, we will be able to advance our broad platform of extremities and biologics technologies with one of the world's leading medical technology companies that shares our vision of delivering breakthrough and innovative solutions to improve patient outcomes."
Traders are bidding up Wright's shares in response.
Stryker is a $76 billion medical device giant that has plenty of financial resources to close this deal, so the likelihood of it going through looks very high.
Stryker's CEO Kevin Lobo stated: "This acquisition enhances our global market position in trauma and extremities, providing significant opportunities to advance innovation, improve outcomes, and reach more patients. Wright Medical has built a successful business, and we look forward to welcoming their team to Stryker."
He also noted that the company's adjusted EPS will not be impacted in 2020 if the deal goes through as planned. It will lead to about $0.10 in adjusted EPS dilution in 2021 but is expected to be accretive thereafter.
Wright's investors are off to a great start to the week and deserve to take a victory lap today. With shares currently trading at about $2 cheaper than the takeover price, it's up to them to decide if they will wait until the deal closes in 2020 to get the full $30.75 or to sell today at a discount.
Either way, it's time for them to start researching other great healthcare stocks to buy with the proceeds.