ZURICH (Reuters) -- Swiss dental implants maker Straumann (STMN.S) is buying a 49% stake in Brazil's Neodent for 260 million Swiss francs ($277 million), a pricey attempt to expand in a booming market for cosmetic surgery and offset sluggish demand in Europe.
Cosmetic dental surgery is already widespread in Latin America and Straumann expects a growing middle class to splash more cash on their teeth.
An estimated two million dental implants were sold in Brazil in 2011, which makes it the second largest market by volume after the United States. That contrasts with Europe, where austerity-hit consumers have been putting off expensive dental treatments which are generally not reimbursed by insurers.
"With this acquisition ... Straumann can unlock the full potential of the South American markets," Straumann President and Chief Executive Beat Spalinger said in a statement.
Analysts said the deal was pricey, but made sense.
"[The] acquisition of Neodent is expensive, but the step to increase exposure to emerging markets through a distinguished value player is the right one," said Vontobel analyst Carla Baenziger.
Shares in Straumann were trading up 2.9 percent at 150.90 Swiss francs by 5:20 a.m. EDT, compared to a slightly negative European healthcare sector index .
Options to raise its stake
The Swiss firm also set out targets to more than double its net revenues and employees by 2020.
It predicted the global market for implant, restorative and regenerative dentistry would grow by a high-single digit percentage between now and then, driven by an aging population and an expanding middle class in emerging markets.
Under the terms of the all-cash deal with Neodent, Straumann will receive options to increase its stake to 100% over the next six years. The companies will continue to operate as separate brands.
Privately owned Neodent had sales of 167 million Brazilian real ($84 million) last year and accounts for approximately one-third of the local market.
According to the International Society of Aesthetic Plastic Surgery, five Latin American countries -- Brazil, Mexico, Colombia, Venezuela, and Argentina -- rank among the top 20 nations where most surgical procedures were carried out last year.
Straumann said it expects to achieve a gross profit margin in the range of 76% to 78% and operating margin of up to 25% in 2020.
Last month, the group reported a fall in first quarter sales partly due to struggling markets in Europe and Asia. ($1 = 1.9964 Brazilian real)
Reporting by Caroline Copley Editing by Jane Merriman and Mark Potter.
© Thomson Reuters 2011. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to colleagues, clients or customers, use the Reprints tool at the top of any article or visit: www.reutersreprints.com.
