\Hologic (HOLX) announced a $1.65 billion plan to acquire body-sculpting firm Cynosure (CYNO) early Tuesday, a day after Allergan (AGN) said it would pay $2.5 billion for fat-freezing Zeltiq (ZLTQ).
But investors were more forgiving of Allergan's purchase. Hologic stock fell 2.5% to 39.03 in the stock market today, touching a two-month low. Cynosure stock lifted 28%, near the purchase price of $66 a share and flirting with an all-time high.
The all-cash transaction has a $1.44 billion enterprise value of net cash, the company said, and is subject to approval by Cynosure stockholders.
Hologic, a leader in women's health, sees Cynosure as its ticket to the medical aesthetics market. Cynosure's portfolio includes more than 20 products in body sculpting, hair removal and skin revitalization.
IBD'S TAKE: Hologic has a middling IBD Composite Rating of 73, meaning it outperforms nearly three-quarters of all stocks in terms of key growth metrics like sales performance. But it's only ranked 10th in the 59-company Medical-Systems/Equipment industry group. Masimo stock leads with a CR of 93. Head to IBD's Stock Checkup for the top five performers.
Cynosure goes after the obstetrics and gynecological markets to make its sales — about 60% of its revenue is derived from that market vs. traditional plastic surgery and dermatology. Hologic has a strong presence in the OB/GYN market.
The deal is expected to be immediately accretive to earnings per share ex items, adding 3-5 cents in 2017. In 2018, that will grow to 13-15 cents, Hologic said in a press release. The transaction also fills the hole left when Hologic divested its blood screening business.
Hologic estimates the deal will help grow revenue by 150 base points and increase EPS ex items by double digits over the next several years. By year five, the return on interest will exceed Hologic's cost of capital, the company said.
"We had identified medical aesthetics as an attractive and complementary growth opportunity through our strategic planning process, and are pleased to have agreed to acquire Cynosure, the best-in-class company in the space," Hologic CEO Steve MacMillan said in the company's news release.
The medical aesthetics market is worth more than $2 billion annually across the globe, Hologic said. On Monday, Allergan put a $4 billion price tag on body sculpting alone when it announced its plan to buy Zeltiq, which uses a technique to freeze fat cells.
Zeltiq stock hit an all-time high, in response. Allergan stock closed up a fraction, and it rose 0.69% on Tuesday, to 248.47. Shares last week touched a six-month high of 249.64.
RELATED:
Hologic Still A Buy After Getting 'Lofty' Price For Blood-Screening Unit
