Why China Kanghui Holdings' Shares Soared
Sep 28th 2012 3:44PM
Updated Sep 28th 2012 3:52PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: China Kanghui, which makes implants specifically designed for trauma, the spine, and joint reconstruction, agreed to be purchased for $816 million, including debt, or $30.75 a share -- a 22.5% premium to yesterday's closing price. For Medtronic, the deal is expected to be earnings neutral in both 2013 and 2014 despite the fact that China Kanghui's sales rose by 35% last year.
Now what: Today's move really isn't that surprising because Medtronic has made no secret about wanting to make acquisitions in emerging markets to drive growth. China Kanghui will allow Medtronic to expand its presence in China, although the price, about 27 times China Kanghui's forward earnings, seems a bit steep to me.
Craving more input? Start by adding China Kanghui Holdings to your free and personalized Watchlist so you can keep up on the latest news with the company.
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