Orthopedic heavyweight Stryker is certainly optimistic about Mako Surgical's robot surgical technology. The company is planning on paying $1.7 billion to acquire the firm, representing an 86% premium on Mako's closing price on Tuesday. Stryker believes that the acquisition will help it better appeal to cost-conscious hospitals, which could potentially use Mako's technology to save money by boosting efficiency.
"Our combined expertise offers the potential to simplify joint reconstruction procedures, reduce variability and enhance the surgeon and patient experience," explained Stryker president Kevin A. Lobo in a press release.
"They're paying a lot--around 13 times this year's sales. That's a pretty big price," said medtech analyst Raj Denhoy at Jefferies & Co. in an interview with The Wall Street Journal. "Stryker has shown its willingness to pay to expand into new areas."
Investors on Wednesday may be skeptical at the high cost of the deal. Stryker's stock was down 2.24% in midday trading. Conversely, Mako's stock surged by more than 13% at 1:00 p.m. Wednesday. In the past five years, the company's stock has increased by 82.44%.
A number of research analysts have recently downgraded Mako Surgical's stock. These include analysts at Summer Street and Zacks--the latter downgarded the firm's "neutral" status to an "underperform" rating. Needham & Company set a "hold" rating for the stock. By contrast, recently analysts at Oppenheimer boosted their price on Mako shares from $23.00 to $26.00 early in August.
An investigation into potential breaches of fiduciary duty to shareholders has been launched by the securities litigation companies Brower Piven and Faruqi & Faruqi, LLP. The firm plans "to determine, among other things, whether the board of directors of Mako Surgical breached their fiduciary duties by failing to maximize shareholder value." Under the most recent buyout plan, Mako shareholders would receive $30.00 per share for common stock. The stock traded on Tuesday for $16 per share. Still, that price is not as high as the company's peak in early 2012.