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Stryker to buy Sage for $2.8 billion

by Thomas Dworetzky, Contributing Reporter | February 03, 2016
Business Affairs Infection Control
Merger mania in the health care sector continues with the announcement that Kalamazoo-based medical technology maker Stryker Corp. has entered into a deal to buy Sage Products for $2.8 billion in cash.

According to Bloomberg News, this is one of over 590 such deals in the sector in the last 12 months. Those closed or in progress now total $82 billion for the period.

Sage, a 45-year-old, 800-person company based in Cary, Ill., makes products designed to prevent hospital-based conditions. Sage sales for fiscal 2015 totaled $430 million, up 13 percent from a year ago. Its purchase is one of the biggest deals Stryker has made to date, according to CNBC.
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"The company's established leadership team and innovative products that help prevent hospital-acquired conditions have driven consistent double-digit sales growth," stated Stryker CEO Kevin A. Lobo in a release. "This acquisition aligns with Stryker's focus on offering products and services that support a mindset of prevention, specifically in the area of "Never Events" such as hospital-acquired infections."

Sage, he added, "will also provide a consistent disposable revenue stream that will complement our capital equipment offerings."

The deal provides a $500 million tax benefit for Stryker, which had sales of $9.95 billion in fiscal 2015.

Sage's products include solutions for oral care, skin preparation and protection, patient cleaning and hygiene, turning and positioning devices, and heel care boots.

Stryker bought Sage from Chicago-based private equity firm Madison Dearborn Partners. "With Madison Dearborn's support, our business has grown domestically and we have achieved significant initial success with our international expansion," noted Sage CEO Scott Brown. "We believe that Sage is well-positioned for continued achievement and long-term success with Stryker, a company that understands our business, supports our goals and embraces our values."

Madison Dearborn stands to gain 320 percent on its $350 million investment, according to Bloomberg.

“We are fully aligned with Sage’s strategy and culture, and we see this acquisition as a very strong addition to our existing product portfolio. Stryker looks forward to helping Sage continue its impressive growth trajectory around the world,” Lobo told Crain's Detroit business.

This deal should close in the second quarter of 2016, and will at 5 cents to adjusted earnings for that year, bringing guidance to $5.75 per share, according to Stryker's statement.

J.P. Morgan Securities and Sullivan & Cromwell worked the deal for Stryker; Barclays, Kirkland & Ellis and Madden, Jiganti, Moore & Sinars were involved for Sage in the transaction.

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