Medical device maker Medtronic, Inc. (MDT) agreed to acquire Chinese peer China Kanghui Holdings (KH) for $816 million in cash. The deal, primarily subject to approval from the shareholders of China Kanghui, is expected to close over the next few months.
"Kanghui represents a significant investment in China, accelerating Medtronic's overall globalization strategy with an established value segment distribution network and strong R&D and operational capabilities," Medtronic Chairman and CEO Omar Ishrak said in a statement.
Changzhou, China-based China Kanghui is the provider of orthopedic implants and associated instruments for trauma, spine, cranial maxillofacial, and craniocerebral under the Kanghui and Libeier brand names. It sells products in 29 countries across Asia, Europe, South America, Africa, and Australia.
"This move will provide Medtronic sustainable advantages in the fast-growing Chinese orthopedic segment, as well as a foothold in the emerging global value segment in orthopedics," Ishrak added.
The deal will see Medtronic pay $30.75 per American depositary receipt to China Kanghui shareholders in an all-cash valued at $755 million net of Kanghui's cash. The offer price represents a 22.5 percent premium over China Kanghui's closing share price of $25.11 on Thursday.
The deal will broaden Medtronic's product portfolio and help it establish a larger and more direct local presence in China, one of the fastest growing medical device markets. It is also in line with Medtronic's corporate globalization strategy.
Further, the deal will give Medtronic access to China Kanghui's strong local research and development as well as manufacturing operation along with its vast China distribution network and an exceptional management team.
It will also broaden Medtronic's orthopedics participation by gaining access to China Kanghui's strong product portfolio and new product pipeline in trauma, spine and joint reconstruction.
Medtronic said it expects the deal to be earnings neutral for fiscal years 2013 and 2014 as the company intends to offset any dilutive impact of the transaction.
"We are proud of the company we've built and recognize there is a tremendous opportunity to accelerate our global vision by building on Medtronic's size, scale and expertise as part of this combined organization," China Kanghui CEO Libo Yang noted.
MDT closed Thursday's regular trading session at $43.48, up $0.41 or 0.95% on a volume of 3.10 million shares, and KH closed at $25.11, up $0.61 or 2.49% on a volume of 19,438 shares.
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