U.S. healthcare group Danaher Corp (DHR.N) is to buy Nobel Biocare Holding AG (NOBN.S) for an agreed $2.2 billion to become the world's biggest player in a dental implants market benefiting from growing demand for cosmetic dentistry.
Danaher said on Monday it would pay 17.10 Swiss francs per Nobel Biocare share in cash, about 23 percent above Nobel Biocare's closing price on July 28, the day before the Swiss firm said it was in talks with potential buyers.
However, Nobel Biocare shares fell as much as 6 percent after analysts had predicted the company could fetch over 20 francs per share.
"From my side, it doesn’t fill me with that much enthusiasm. But I don’t expect there will be a second bid," Sebastien Buch, a portfolio manager at Union Investment which owns roughly 3 percent of Nobel Biocare’s shares, told Reuters.
Danaher is a leading provider of dental equipment, but only a small player in the fragmented dental implants market after its acquisition of low-cost manufacturer Implant Direct.
The purchase of Nobel Biocare, the world's No.2 dental implants maker, will bring Danaher a premium range of implants and boost its dental business to sales of around $3 billion.
Vontobel analysts forecast the global dental implants market is set to double to $6 billion by 2025, helped by recovering Western economies and rising incomes in developing countries.
Danaher President and Chief Executive Thomas P. Joyce told a conference call that Nobel Biocare's recent investment in high-growth markets such as China, eastern Europe and Latin America - which now make up about 20 percent of sales - had made it an attractive opportunity.
Fellow dental implant players such as Henry Schein (HSIC.O) and Dentsply (XRAY.O) had been cited as possible bidders for Nobel Biocare, while the company had reportedly also attracted interest from buyout group EQT Partners.
Analysts at Berenberg said it was "by no means a certainty" that Nobel Biocare's shareholders would agree to tender their shares at Danaher's price, adding it was possible that other potential suitors could enter the fray with a higher offer.
The deal, recommended by Nobel Biocare's board, requires the acceptance of 67 percent of Nobel Biocare's shareholders.
But other analysts said the price was fair and counter bids looked unlikely. Swiss rival Straumann (STMN.S) ruled out interest in Nobel Biocare last month, while Zimmer (ZMH.N) is busy with its purchase of Biomet Inc for more than $13 billion.
"Nobel has run an extensive sales process and we believe that Nobel is less attractive for private equity in light of its weak cash flow and no synergy opportunities," said Bank of America Merrill Lynch analyst Ed Ridley-Day.
Joyce said Danaher expected the deal to help it deliver a 10 percent return on invested capital (ROIC) by 2019. It expects the deal to add five cents to earnings per share by 2015 and ten cents by 2016.
MEDTECH M&A
The Nobel Biocare deal follows on from a wave of mergers among medical supplies makers this year, including Medtronic Inc's (MDT.N) $42.9 billion deal to buy Dublin-based Covidien Plc (COV.N) in June.
Like other makers of premium implants, Nobel Biocare has struggled since the financial crisis as cash-strapped consumers, particularly in southern Europe, cut back on pricey dental work which is not generally reimbursed by insurers.
Nobel Biocare's stock is down 80 percent since its all-time high in 2007. The company grappled with years of sliding sales and dwindling market share as it faced competition from a growing number of so-called "value" players.
But signs have grown that a long-awaited turnaround is taking root and the company has notched up five consecutive quarters of revenue growth at constant exchange rates.
Although the premium market is growing at a slower pace than the value segment, Danaher said it still expects dentists to prefer premium implants for complex cases. It expects the premium segment to keep growing in the 3-5 percent range.
Nobel Biocare had sales of 567 million euros ($735 million) and net profit of 42.6 million euros in 2013. It has $556 million of bonds and loans.
Danaher said Nobel Biocare would continue to operate as a standalone company and maintain its own brand and identity.
The deal is expected to be completed in late 2014 or early 2015. Nobel Biocare was advised by Goldman Sachs, while Credit Suisse acted as financial adviser and offer manager to Danaher.
At 1315 GMT (9.15 a.m. EDT), Nobel Biocare shares were down 5.5 percent at 17.1 Swiss francs.
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