Stryker asks to extend anti-trust deadline for K2M deal

Dive Brief:

Stryker has re-filed its pre-merger notification with the Federal Trade Commission and Department of Justice to allow more time for the review of its proposed $1.4 billion acquisition of spine device maker K2M Group Holdings, K2M said in a regulatory filing.
K2M said two shareholder lawsuits seeking class action status were filed on Oct. 11 in U.S. District Court in Delaware challenging the merger.
The notification starts a new waiting period under the Hart Scott Rodino antitrust act that will expire on Nov. 16 unless extended or terminated earlier.

Dive Insight:

Stryker announced in August its intention to buy K2M for $27.50 a share to bolster its position in the spine products and related neurotechnology markets. K2M makes devices used in complex spinal fixation and deformity procedures as well as minimally invasive technologies and techniques.

The shareholder lawsuits, Brown vs. K2M Group Holdings and Franchi vs. K2M Group Holdings, allege K2M officers and directors failed to disclose information on K2M’s financial projections in the proxy statement filed with the Securities and Exchange Commission. In the Brown suit, the plaintiff filed a motion for a preliminary injunction to prevent a shareholder vote on the merger until additional information is disclosed.

“While defendants are touting the fairness of the merger consideration to the company’s shareholders in the proxy, they have failed to disclose certain material information that is necessary for shareholders to properly assess the fairness of the proposed transaction, thereby rendering certain statements in the proxy false and/or misleading,” according to the lawsuit. The financial projections were used by the company’s adviser, Piper Jaffray, in its recommendation to the board that shareholders vote in favor of the deal, the suit argues.

K2M said it believes the lawsuits are without merit and intends to vigorously defend against them. The company said a previously announced shareholder meeting to vote on the merger agreement would be held on Nov. 7 as planned. K2M also said it continues to expect it will complete the deal in the fourth quarter of 2018.

When the deal was first announced, Leerink analyst Richard Newitter said the K2M acquisition would give Stryker a boost in two of the fastest-growing segments of the spine market: spinal deformities and cage systems used in fusion surgery.

Stryker's spine division has lagged the growth rates seen in its other businesses in recent quarters. The purchase of K2M would bring in K2M co-founder and CEO Eric Major to lead Stryker's spine division as president.