Stryker Corp. (NYSE: SYK ) spent more than 58 percent of its cash reserves during the first quarter on its $1.45 billion buyout of Boston Scientific’s (NYSE:BSX) neurovascular business.
The Kalamazoo, Mich.-based medical device maker had more than $4.91 billion in working capital as of March 31, including $735 million in cash and cash equivalents. That’s a significant drop from the $6.02 billion in capital and $1.76 billion in cash it had going into 2011, reflecting the payment made to Boston Scientific Jan. 3 to close the deal, according to regulatory filings.
Stryker forked over about 12 percent of its total assets to do the deal, not including an additional $70 million it paid in charges related to the transaction.
The announcement last October confirmed a deal that had been ground through the rumor mill for months. The cash deal includes another $50 million in milestone payments, contingent in part on the commercialization of the next iteration of Boston Scientific’s Target coils, which are delivered via catheter to treat hemorrhagic stroke. The milestones also depend on the successful transfer of manufacturing operations, expected to take about two years.
The BSX unit posted sales of about $348 million in 2009, but revenues have been on the slide for the better part of two years. At the time, Stryker officials said the acquisition would make the company a major player in the nearly $1 billion neurovascular market.
The Kalamazoo, Mich.-based company posted net earnings of $307.4 million, or 78 cents per diluted share, on sales of $2.02 billion during the three months ended March 31. That’s a bottom-line decline of 4.4 percent (or 2.5 percent, if you slice by diluted EPS) compared with the same period last year, when Stryker recorded profits of $321.7 million, or 80 cents diluted EPS, on sales of $1.80 billion.
The good news for Stryker is that sweet 12.0 percent top-line increase, and the knowledge that excluding the BSX buyout tab adjusted net earnings were up 9.9 percent to $353.4 million, or 90 cents adjusted EPS.
