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Stryker snags a traceable sponge outfit for $120M

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Stryker ($SYK) is planning to trade $120 million for Patient Safety Technologies and its trackable surgical instruments, joining the ranks of medical device outfits looking to expand their hospital service offerings in a growing market.

The company conducts business through its SurgiCount Medical subsidiary, marketing the bar-coded Safety-Sponge line of surgical products and the SurgiCount 360 compliance software, which tracks the tools to help ensure surgeons don't leave them inside patients when procedures are complete. Sponges are the most common "retained foreign objects" in operating rooms, Stryker said, with about 2,300 incidents reported each year at an average cost of $400,000 each.

The $120 million tag is a roughly 50% premium to the stock's pre-deal closing price, and while the company's 2013 9-month revenue came in at $14.9 million, Stryker is betting its sizable sales staff and weight in the surgical instruments market can help expand the use of SurgiCount's technology.

"We are committed to providing solutions that result in a higher quality of care and level of safety for both patients and healthcare professionals," Stryker surgical president Timothy Scannell said in a statement. "This acquisition aligns with Stryker's focus on offering products and services that have demonstrated cost-effectiveness and clinical outcomes."

The deal comes amid a growing trend among the world's largest devicemakers to diversify their revenue streams by getting into hospital service. Medtronic ($MDT) led the charge last year with its acquisition of Cardiocom, a maker of compliance software.

- read the announcement

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