By Zacks Equity Research
September 25, 2014 12:30 PM
Healthcare logistics company Owens & Minor Inc. (OMI) recently signed a definitive agreement to acquire ArcRoyal – an Ireland-based privately-held surgical kitting company. The acquisition is intended to strengthen Owens and Minor’s manufacturer service offerings in the assembly of kits, packs and trays and expand its global reach. Ever since Owens and Minor entered the acquisition agreement on Sep 19, its shares have declined nearly 3.8% till yesterday. Financial details of the ArcRoyal takeover have been kept under wraps. Earlier in June, Owens & Minor signed a similar contract to acquire U.S.-based Medical Action Industries (MDCI), a producer of custom procedure trays (CPTs) and minor procedure kits, for $13.80 per share in cash. This represents a total transaction value of approximately $208 million, including assumed debt, net of cash. Both the acquisitions are highly complementary to each other and are expected to enhance Owens & Minor’s global sourcing opportunities. Subject to certain customary regulatory approvals, both transactions are projected to close in the fourth quarter of 2014. ArcRoyal is well-known in Europe and has an established manufacturer customer base. The pending acquisition is expected to enhance the company’s ability to produce kits, packs and trays for the healthcare market, allowing it a direct reach to the European markets. ArcRoyal’s kitting capabilities will also enhance Owens & Minor’s existing unitized delivery services. Furthermore, the acquisition of ArcRoyal is expected to significantly advance Owens and Minor’s strategy of “Connecting the World of Medical Products to the Point of Care” by broadening its service offerings to provider and manufacturer customers. Currently, Owens & Minor carries a Zacks Rank #4 (Sell). Better-ranked stocks in the medical products industry include ICU Medical (ICUI), Conatus Pharmaceuticals Inc. (CNAT) and Eagle Pharmaceuticals (EGRX). ICU Medical sports a Zacks Rank #1 (Strong Buy), while both Conatus Pharmaceuticals and Eagle Pharmaceuticals carry a Zacks Rank #2 (Buy).