A couple of weeks ago we noted the rash of medical device deals targeting spine surgery, some small, some not so small. Now the 800-lb. gorilla of medical device deals, Medtronic plc (NYSE: MDT) has weighed in with the biggest spine deal of the year.
On September 21, the Ireland-based company announced its acquisition of Israeli medtech company Mazor Robotics Ltd. (NASDAQ: MZOR) for $1.34 billion. The deal strengthens Medtronic’s position as a global leader in technologies for spine surgery.
Founded in 2001, Mazor pioneered the application of robotics technology for use in spinal procedures. In 2011 the company introduced the Renaissance system, and in 2016 launched the next-generation Mazor X Robotic Guidance System. More than 200 Mazor systems are in clinical use on four continents and have been used in more than 250,000 implants.
In May 2016, Medtronic and Mazor signed a strategic and equity investment agreement. Then in August 2017, Medtronic expanded the partnership to become the exclusive worldwide distributor of the Mazor X system, and has made 80 successful installations since its launch.
Medtronic will acquire all outstanding ordinary shares of Mazor for $58.50 per American Depository Share, or $29.25 per ordinary share, in cash. The price is net of Medtronic’s existing stake (11%) and cash acquired.
For all its cutting-edge robotic technology, Mazor wasn’t making money. It lost nearly $8.2 million on revenue of $66.5 million in the trailing 12-month period ending on June 30, 2018. That makes for a price/revenue multiple of 20.1x, pretty hefty even in these frothy days.
The transaction is expected to be modestly dilutive to its fiscal 2019 adjusted earnings per share but will generate a double-digit return on invested capital by year four. The deal is expected to close during Medtronic’s third fiscal quarter, ending January 25, 2019.
