--Medtronic will pay US$30.75 per American Depository Share
--The transaction is likely to close in the next few months
(Adds details of the deal in fourth paragraph, background of
Kanghui in fifth and sixth paragraphs, industry background in
seventh paragraph and figure of inbound M&A in healthcare
sector in eighth paragraph.)
By Prudence Ho
HONG KONG--Medtronic Inc. (MDT) said Friday it agreed to buy
China Kanghui Holdings (KH) for $816 million in cash, in a move to
enter China's medical device market.
The U.S. medical devices maker will pay $30.75 per American
Depository Share, representing a 22.5% premium to Kanghui's
Thursday closing price of $25.11 on the New York Stock
Exchange.
"Kanghui represents a significant investment in China,
accelerating Medtronic's overall globalization strategy," Medtronic
Chief Executive Omar Ishrak said in a statement.
The deal--the largest investment in a Chinese healthcare company
by a foreign company this year--will bring Medtronic a broader
product portfolio, local Chinese research and development,
manufacturing operations and distribution network, said in the
statement.
Kanghui, which was founded in 1997 and is headquartered in
Changzhou, is an orthopedic device maker. The Chinese orthopedics
market is fast-growing due to increasing healthcare expenditure
fueled by reform in the sector, an aging population and an
increasing number of orthopedic surgeons.
Last month, Kanghui reported second-quarter sales rose 23.6% on
year to CNY101 million from CNY81.8 million in the second
quarter.
"We view China's ortho industry as an attractive segment to
multinational companies, driven by favorable price and volume
trends. Leading local brands can help multinational companies
capture growth in emerging channels and combat domestic
competition," said in a Oppenheimer research report dated Sept.
13.
China have seen an increase in inbound merger and acquisitions
in the healthcare sector in recent years. According to Dealogic, a
total of US$1.32 billion inbound healthcare M&As were announced
so far this year, a 3% increase from USS$1.28 billion for the same
period of last year.
The transaction is likely to close in the next few months and is
subject to approval from shareholders of Kanghui.
Citigroup advised Medtronic for the transaction.
-Write to Prudence Ho at prudence.ho@wsj.com
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