LONDON (Reuters) - U.S. company Dentsply International secured a bigger bite of the global dental market by buying AstraZeneca’s dental implants and medical devices unit Astra Tech for $1.8 billion (1.1 billion pounds).
Dentsply, which beat off bids from rival medical technology groups and private equity firms, said on Wednesday the acquisition would increase its revenue by around a quarter and be accretive to earnings immediately.
Swedish-based Astra Tech, which had revenue last year of $535 million, is the world’s third-largest dental implants maker after Straumann and Nobel Biocare. It has a separate medical devices arm focussed on urology and surgery.
Acquiring Astra Tech will strengthen Dentsply’s leading position in the global dental market, while for AstraZeneca the disposal reinforces its role as a “pure play” pharmaceuticals company at a time when many rivals are diversifying.
AstraZeneca chief executive David Brennan said the auction process, run by JPMorgan, had attracted “a high degree of interest.” The price, however, was somewhat short of the $2 billion figure some analysts had been expecting.
The deal, expected to close in the second half, will not hit AstraZeneca’s core earnings in 2011 but will provide extra resources for the drugmaker to improve returns — a high priority for Brennan as the drugmaker heads into a wave of patent expiries on some of its biggest-selling medicines.
The company earlier this year announced a doubling of its 2011 share buyback programme to $4 billion.
York, Pennsylvania-based Dentsply said the transaction was expected to boost adjusted earnings per share by 12-17 cents in the first full year and by 30-40 cents by the third year, including the benefits of sales and operational synergies.
Bret Wise, Dentsply chairman and chief executive, said the deal would more than double his company’s position in dental implants, while urology and surgery provided additional growth opportunities.
Given the increasingly competitive nature of the global medical devices industry, Seymour Pierce analyst Mike Mitchell said it made sense for AstraZeneca to dispose of Astra Tech, though this made it more reliant on risky new drug development.
“Inevitably, however, AstraZeneca’s reliance on its pharmaceutical/share buyback model is even more emphatic, and today’s news does nothing to dispel our misgivings on the former,” he said, reiterating a “reduce” recommendation on the stock.
AstraZeneca shares were 0.2 percent lower by 0800 GMT, slightly outperforming a 0.5 percent decline in the European drugs sector.
Like other parts of the medical device sector, the dental implant market has been hurt by lower consumer spending but is starting to grow again as the economy recovers.
Swiss groups Nobel Biocare and Straumann had both been eying the Astra Tech business but pulled out of the process before tabling binding bids, Reuters reported earlier this month.
Despite the loss of those two potential trade buyers, Dentsply’s acquisition underlined corporate bidders’ resurgent appetite to use cash to make acquisitions and outbid private equity firms for strategic assets.
Editing by David Holmes and Dan Lalor