Stryker Corp. (NYSE: SYK), a maker of medical devices, has agreed to buy Sage Products LLC for $2.78 billion in cash from its private equity owner Madison Dearborn Partners.
The purchase will come with a $500 million tax benefit for Kalamazoo, Michigan-based Stryker, the company said in a statement on Monday. Sage, based in Cary, Illinois, makes products for surgery and medical care.
Sage had sales of $430 million in fiscal 2015, compared with $9.95 billion for Stryker. Stryker’s biggest business is orthopaedics, such as artificial hips and knees used in replacement surgery. Sage makes a complementary group of surgical items, including ones meant to reduce “never events,” such as operations on the wrong leg.
Medical device companies have been consolidating to sell groups of products as hospitals and purchasing groups try to control costs. Last year, Medtronic Plc completed an about $46 billion deal for Covidien Ltd.
The deal is expected to close in the second quarter. Stryker said it will add 5 cents to its adjusted earnings for 2016, which the company predicts will be $5.55 to $5.75 a share.
There have been a handful of medical device deals in the middle-market. Conmed Corp. (Nasdaq: CNMD) is buying SurgiQuest Inc. and 3M Co. (NYSE: MMM) completed its purchase of Polypore International Inc.’s (NYSE: PPO) separations media business. For more see, Medical Devices Drives Health Care M&A.
JPMorgan Chase & Co. served as Stryker’s financial adviser, and Sullivan & Cromwell as legal adviser. Sage was advised by Barclays, and by the law firms Kirkland & Ellis and Madden, Jiganti, Moore & Sinars.
-- Additional Reporting By Demitri Diakantonis