Moving decisively to accelerate a key component of its emerging markets strategy, Covidien plc (NYSE:COV) has completed two transactions – one in Brazil and the other in China – that will enable it to help better meet the specific needs of underserved ‘value segment’ markets. The value segment includes markets with hospitals that primarily serve patients facing care affordability challenges.
In Brazil, Covidien has acquired WEM Equipamentos Eletrônicos Ltda., a privately held manufacturer of electrosurgical generators, disposables and accessories based in Ribeirao Preto. In China, Covidien has entered into a joint venture with the Changzhou Kangdi Medical Stapler Co., Ltd., a manufacturer of open stapler products based in Jiangsu Province.
Terms of the deals were not disclosed. Total impact on Covidien’s 2014 revenue and earnings is expected to be minimal, but each deal establishes a presence for Covidien in segments of the Brazil and China markets where the company currently has a limited footprint.
These underserved segments represent a strategic opportunity for Covidien, as growth resulting from scaling these businesses is expected to exceed that of the overall market over time. In addition to opening a new growth segment to Covidien, the transactions support the company’s vision to improve patient outcomes and expand global access to care.“These deals accelerate our entry into an increasingly important customer segment that we believe will enable us to grow above market over time and increase access to affordable healthcare solutions,” said Brian King, President, Emerging Markets, Covidien. “By combining Covidien’s proven business model with the capabilities of our new partners, we’ll be able to scale the value segment opportunity and help provide more affordable healthcare solutions in new markets.” Covidien has acquired all of WEM and will manage the business as part of its Brazilian operations. Covidien and Kangdi will partner through a shared ownership agreement with Covidien holding majority control and will operate as a separate joint venture.