Hospira (NYSE:HSP) hasn't been on its own for very long. A little more than a year ago, the medical products company began trading as a separate company following its spinoff from Abbott Laboratories (NYSE:ABT). To date, Hospira has concentrated on getting its house in order by, among other things, ridding itself of an underperforming manufacturing site and tightening management practices. Now, though, the company has taken another step in its evolution as an independent entity. At first glance it looks like a misstep, but there may be more to the deal than meets the eye.

Hospira announced yesterday that it will make its first acquisition. The firm plans to pay $23 million in cash and assume $1 million in debt to purchase Physiometrix (NASDAQ:PHYX), a maker of anesthesia monitoring products. Admittedly, the deal is pretty small, and Hospira can certainly afford it. The company generated more than $40 million in free cash flow last quarter, and as of March 31 it had $256.8 million in cash and equivalents.

Still, just because Hospira has cash to spare doesn't mean it should rush to spend it. Physiometrix's loss from operations was $5.4 million in 2004 on revenue of $1.9 million. Although Physiometrix's market share in the anesthesia monitoring space has grown impressively so that it now stands at 20%, Hospira's offer of 12 times trailing revenue seems pretty steep given the small firm's losses.

However, the purchase likely has more to do with Hospira's generic anesthesia segment than Physiometrix's attractiveness as a standalone firm. Physiometrix's products are currently sold under contract by Hospira rival Baxter (NYSE:BAX), which has a sizeable generic anesthesia franchise. After the deal closes, Hospira will market Physiometrix's wares.

Hospira already competes with Baxter in anesthesia sales and could soon try to market a generic version of propofol, a difficult-to-make anesthetic whose only generic manufacturer currently is Baxter. As it steps up its own anesthesia efforts, Hospira is probably hoping synergies with Physiometrix's products will give it an edge over its longtime competitor.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.