Medical equipment manufacturer Stryker Corp. said last week it would spend $525 million to get into the healthcare device-reuse business.
Stryker's new tack
Equipment maker moves into device-reuse business
Kalamazoo, Mich.-based Stryker announced a deal to buy Ascent Healthcare Solutions, a privately held company based in Phoenix that reprocesses and remanufactures medical devices with $100 million in annual revenue, according to the companies.
Prior to the deal’s close, which is expected before the end of the year, Ascent will also pay its shareholders another $35 million from its balance sheet, said Lester Knight, a managing and founding partner of RoundTable Healthcare Partners, Lake Forest, Ill.
The private equity firm is Ascent’s largest minority owner with a 30% stake in the company. Knight said Stryker made an unsolicited offer to buy Ascent. RoundTable increased its investment eightfold, he said, but he declined to give the value of the investment.
Ascent through a spokeswoman declined to name its owners. John Grotting is its CEO, according to a RoundTable news release. The company was formed in 2005 by the merger of Vanguard Medical Concepts, Lakeland, Fla., and Alliance Medical Corp., Phoenix. At the time, ownership consisted of a group of financial firms and management from the two companies.
J. Patrick Anderson, a Stryker spokesman, said the deal is the company’s latest effort to diversify its business. Once acquired, Ascent is expected to operate as a division of MedSurg, the smaller of Stryker’s two business lines. MedSurg accounted for roughly 39% of its sales in the first nine months of the year and includes systems for surgical equipment, navigation, digital imaging, communication and endoscopy. Stryker reported $1.9 billion in sales through Sept. 30 for the equipment, a decline of 5% from the prior year after adjusting for exchange rate fluctuations.
Anderson declined to comment on who would head the division prior to the deal’s closing.
The company’s second and larger segment, orthopedic implants, reported $3 billion in revenue during the same period, up 6% from the same period a year ago after adjusting for exchange rate fluctuations. Stryker was one of four orthopedic equipment manufacturers that agreed in 2007 to publicly disclose physician consulting contracts and undergo monitoring after an investigation by the U.S. attorney’s office in New Jersey. The federal oversight expired after 18 months in March.
The deal also marks the company’s entry into the growing medical reprocessing industry, he said.
Stryker made at least one prior attempt to expand into reprocessing, its corporate filings show. Earlier this year, Stryker abandoned development efforts for sterilization equipment technology it acquired in 2005 when it bought PlasmaSol Corp. for $17.5 million.
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