S&N to acquire Adler Mediequip as part of growth strategy
Espicom View: While this proposed acquisition is unlikely to put Smith & Nephew ahead of biggest rival, DePuy Synthes, it could help to boost percentage of revenues in emerging markets and the minimal growth that Smith & Nephew has seen in recent years for its Advanced Surgical Devices Sector. With a predicted CAGR of 29.3 per cent from 2011 to 2018 for sales of orthopaedic and prosthetic devices in India, plus a growing trend in the export market of such devices, this strategic acquisition should help the company to return to overall growth following first quarter earnings that missed analysts' estimates.
Smith & Nephew has entered into an agreement to acquire Adler Mediequip and with it, the brands and assets of Sushrut Surgicals, a leader in mid-tier, orthopaedic trauma products for the Indian market. The transaction is expected to complete upon the satisfaction of customary conditions. The terms have not been disclosed.
The acquisition will give S&N a well-established platform to provide and develop products for the mid-tier market in India and for export. In particular, it gives the company an entry point to India's trauma segment. For S&N, in 2012, global trauma revenue increased by a modest 1 per cent to US$462 million (US$457 million in 2011), representing underlying revenue growth of 3 per cent and -2 per cent unfavourable foreign currency translation. With specific regard to Trauma, in 2011, S&N estimated that it held the number three position, behind Synthes and Stryker, but ahead of DePuy and Zimmer. However, DePuy's June 2012 acquisition of Synthes put Johnson & Johnson's combined DePuy Synthes unit in number one market positions for for both reconstructive and trauma orthopaedic devices.
In 2012, S&N's revenue from emerging/international markets for the Advanced Surgical Devices Sector, under which Trauma sits, was by far the lowest, accounting for only 6.5 per cent of the global total. Further penetration into the Indian market should make a significant contribution to S&N's Trauma revenues. Business Monitor International/Espicom data show that in 2011, total sales of orthopaedics and prosthetics in India amounted to US$182.26 million and this is expected to grow to US$1,099.65 by 2018. Exports of orthopaedics and prosthetics from India in 2011 were valued at US$20.0 million, continuing to show mostly year-on-year increases that represent CAGR of 30.4 per cent since 2007. Focusing purely on fixation devices, exports in 2011 had a value of US$13.1 million, while total sales for 2011 and predicted sales for 2018 are valued at US$25.64 million and US$109.88 million, respectively.
Adler employs 116 people, while approximately 50 Sushrut employees (which include an experienced sales force that directly supports the Adler business) will also transfer as part of the arrangement. Products include primarily trauma implants and instrumentation, as well as spine and limb salvage portfolios. Adler is owned by the Pitre family and its senior management team will continue with the business.
The Sushrut-Adler Group was founded in 1973 with the incorporation of Sushrut Surgicals, by Mrs Vimal Pitre. With the setting up of Adler Mediequip, the eventual manufacturing company of the group in 1992, Sushrut embarked on a different journey; one focused on developing and strengthening the brand and forging meaningful relationships with the orthopaedic community in India. The Sushrut distribution network in India has grown to 150 distributors. Sushrut's International efforts began in the late 1990s; the group now has a presence in 29 countries across the Far East, Middle East, Europe and Latin America. The Sushrut-Adler Group offers a comprehensive range of trauma implants and instruments that cater to internal and external fixation.