Wright Medical Does A Deal Both Opportunistic And Defensive (SeekingAlpha)
Summary
Wright Medical agrees to pay over 10x 12-month revenue for Cartiva, a fast-growing manufacturer of a cartilage replacement implant used in surgical procedures for the big toe.
Cartiva could add over 1% to Wright Medical's long-term growth rate and at higher margins, with worthwhile cross-selling opportunities in the early years.
The deal dilution is less than ideal, but Wright Medical continues to build a differentiated high-growth platform in extremities and post-deal fair value should be above $30/share.
For a company that many investors are certain that the CEO is going to sell at some point in the not-so-distant future, Wright Medical (WMGI) continues to show that it is very focused on building its business. To that end, the company announced Monday morning that it would be acquiring privately-held ortho implant company Cartiva for $435 million in cash. Although Wright is paying a high price for Cartiva, the valuation isn’t unreasonable relative to the growth and Wright is adding an uncommonly profitable product with meaningful growth potential.
Given the price Wright Medical is paying,...
