The Wall Street Journal is reporting that Stryker is looking at buying Boston Scientific.
Stryker has recently made a takeover approach to rival Boston Scientific, a move that would create a medical-device giant with a combined value of more than $110 billion, according to people familiar with the matter.
It is unclear whether Boston Scientific is receptive to the approach, and it is far from guaranteed there will be a deal. It comes amid a flurry of deal activity in the health-care sector as companies respond to industry and regulatory changes, demands for lower medical costs and the pressure to find new sources of growth.
A deal, should one be inked, would be one of the biggest of the year, given Boston Scientific’s market value of $44 billion Monday morning.
A combination of the two medical-device giants would bring together Stryker’s expertise in orthopedics, neurotechnology and spinal procedures with Boston Scientific’s operations in cardiovascular and so-called rhythm management, which develops implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities.
Stryker, based in Kalamazoo, Mich., had a market value of about $67 billion Monday morning before The Wall Street Journal reported news of the approach and its stock dipped. It is one of the biggest makers of knee- and hip-replacement parts, competing with companies including Johnson & Johnson and Zimmer Biomet Holdings Inc. The company develops a range of medical devices that are used in orthopedics, neurotechnology and other surgical procedures. Last year, it generated global net sales of $12.4 billion, up almost 10%. Profits slumped 38% to $1.02 billion, hurt by one-time charges stemming from changes in the U.S. tax code. Excluding this impact, earnings rose by 12% to $2.5 billion.
A takeover of Boston Scientific would diversify Stryker’s business into other areas of the medical-technology market and allow both companies to reach new customers.
Boston Scientific, based in Marlborough, Mass., is one of the biggest makers of heart devices such as pacemakers and artery-opening stents, competing with Medtronic PLC and Abbott Laboratories . It develops devices used in functions such as diagnosing and treating coronary artery disease, heart monitoring and a broad range of gastrointestinal and pulmonary conditions. The company also makes non-heart devices such as endoscopes.
Last year, Boston Scientific had net sales of $9.05 billion, up 7.9%. Profit fell to $104 million from $347 million.
Boston Scientific has had some victories and stumbles in launching newer heart products in recent years. Last year, it recalled its new heart-valve replacement product, Lotus, over manufacturing defects. Analysts say it is uncertain whether the product, once viewed as having big sales potential, will come back to the market. But the company has notched increased sales of its Watchman device, designed to prevent strokes in people with an irregular heartbeat.
There have been a number of big medical-device transactions in recent years as industry shifts prompt some of its biggest players to seek greater scale and diversity. Last year, Becton Dickinson & Co. acquired C.R. Bard Inc. for $24 billion. In 2015, Medtronic did a $49.9 billion deal to buy Covidien PLC.