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 Medical Action Industries (NASDAQ:MDCI), a global developer and supplier of disposable medical products, rocketed higher by as much as 94% after agreeing to be acquired by Owens & Minor (NYSE:OMI).
So what: Under the terms of the deal, which values Medical Action Industries at $208 million net of cash, Owens & Minor will pay $13.80 per share in cash that'll be financed by cash on hand as well as its borrowing power available under a revolving credit facility. Although both boards have voted in favor of the deal, Medical Action Industries' shareholders will still need to approve it as well. Owens & Minor is forecasting that the deal will be accretive to adjusted EPS in fiscal 2015 and beyond, and will create $10 million to $12 million in cost synergies by the end of 2016. If approved by Medical Action's shareholders the deal would be expected to close in the fourth quarter.
Now what: The merger and acquisition wave in health care continues, albeit this was a much smaller purchase than some of the proposed deals we've witnessed in recent weeks. It's tough to see how Medical Action Industries' shareholders won't go for the all-cash deal that values their company at a 95% premium to yesterday's close. It also represents a share price that Medical Action Industries' shareholders haven't seen in four years. Given that 45% of Medical Action's business was tied to Owens & Minor in the first place the deal appears to make sense on both ends, with Owens & Minor internalizing its costs and Medical Action shareholders getting a nice premium that's close to 15 times trailing 12-month EBITDA.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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