One great way for companies to expand growth, earnings and product offerings beyond internal organic expansion is to go the takeover route. While sometimes it can prove to be dilutive, especially if the majority of the deal is done in stock, it can also prove to be accretive by adding earnings immediately. A large and comprehensive recent report from RBC spotlighted hundreds of small cap stocks in multiple sectors, defined as $4 billion in market cap and under, that could have a very real chance of being takeover candidates.
We screened the RBC list of takeover candidates for the higher profile and more well-known health care stocks. These may prove to be solid companies to own, even if they ultimately are not bought or merged. With that in mind, buying any of these companies is for accounts with a very high risk tolerance.
Haemonetics Corp. (NYSE: HAE) is a global health care company providing innovative blood management solutions for its customers. Together, the company’s devices and consumables, information technology platforms and consulting services deliver a suite of business solutions to help customers improve patient care and reduce the cost of health care for blood collectors, hospitals and patients around the world. A large screening or medical products company may have an interest in buying Haemonetics.
The Thomson/First Call consensus price target for the stock is $41.88. Haemonetics closed well above that level Wednesday at $44.14 a share.
Luminex Corp. (NASDAQ: LMNX) products aid global health care and life science research through the development, manufacturing and marketing of proprietary instruments and assays utilizing xMAP open-architecture, multi-analyte platform and MultiCode real-time polymerase chain reaction (PCR) and multiplex PCR-based technologies that deliver cost-effective and rapid results to clinicians and researchers. Agilent could be a possible suitor.
The consensus price target is $17.75. Luminex shares closed Wednesday at $16.21.
Merit Medical Systems Inc. (NASDAQ: MMSI) posted outstanding fourth-quarter earnings and sales topped Wall Street estimates. The company is a leading manufacturer and marketer of proprietary disposable medical devices used in interventional and diagnostic procedures, particularly in cardiology, radiology and endoscopy. Merit also plans to hold its first investor day next week, when chairman and CEO, Fred P. Lampropoulos, and other members of the leadership team will present the company’s three-year plan for revenue and growth, provide facility tours and discuss the product pipeline. A larger medical device company, as big as Medtronic, looking for Merit’s product line could be a possible suitor.
The consensus price target for the stock is posted at $19.75, but it closed up almost 7% Wednesday at $19.47.
NuVasive Inc. (NASDAQ: NUVA) has been a popular name when it comes to potential merger or takeover chatter for years. The company is a global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally integrated solutions for the spine. NuVasive has a presence in more than 25 countries, where hundreds of thousands of patients worldwide have been treated with the company’s comprehensive portfolio of procedurally integrated solutions. Again, a Medtronic or Becton Dickinson could want to add the company’s products.
The consensus price target is $54.33, and the stock closed down over 6% at $45.50 a share.
Omnicell Inc. (NASDAQ: OMCL) is another of the potential targets that posted very solid fourth-quarter earnings. The company is a leading supplier of comprehensive automation and business analytics software for patient-centric medication and supply management across the entire health care continuum — from the acute care hospital setting to post-acute skilled nursing and long-term care facilities to the home. One of the major health care providers could have an interest in the company.
Though the consensus price target is set at $34.71, the stock closed above that level Wednesday at $35.44 a share.
In the fast-growing health care sector, the likelihood of continued consolidation seems very possible. Larger companies with cash and appreciated stock prices will be looking to increase growth. Adding new capabilities via acquired products and services seems a likely route for some.
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