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Healthcare equipment companies drive M&A activity in Q3

Deals for healthcare equipment companies largely drove M&A activity in the third quarter as companies shored up their core business with acquisitions.

Healthcare providers were also well represented, with Apollo Global Management LLC's acquisition of LifePoint Health Inc. topping the list of the largest healthcare deals for the period with a transaction value of about $5.51 billion.

Everett, Wash.-based Fortive Corp.'s $2.7 billion bid to acquire Johnson & Johnson's sterilization business Advanced Sterilization Products Services Inc., which develops solutions for cleaning medical devices and tools, was the second-largest deal for the period, according to data compiled by S&P Global Market Intelligence. The industrial equipment-maker signed the agreement with J&J unit Ethicon Inc.

Healthcare equipment company Medtronic PLC's planned acquisition of Israel-based Mazor Robotics Ltd. and Stryker Corp.'s deal for medical device company K2M Group Holdings Inc. were among the transactions during the quarter that had a value of more than $1 billion.

Another highlight for the quarter was Thomas H. Lee Partners LP-backed special purpose acquisition company Federal Street Acquisition Corp.'s $1.58 billion planned merger with medical equipment management company Universal Hospital Services Inc. Universal Hospital Services' majority owner, Irving Place Capital, will retain a minority equity stake in the merged entity, which will be named Agiliti Inc.

Biotechnology company Alexion Pharmaceuticals Inc.'s proposed acquisition of Syntimmune Inc. also crossed the $1 billion mark.

Seven of the industry's top 10 largest deals year-to-date occurred in the healthcare internet technology segment, Berkery Noyes said in its healthcare M&A trends report for the first half of 2018, adding that total transaction value for the period grew by 54% over the second half of 2017 from $13.63 billion to $20.93 billion.

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Cannabis markets

The deal activity in the medical cannabis industry is at an all-time high, partially owing to Aurora Cannabis Inc.'s recent M&A moves that have seen the Canadian producer and distributor acquire three companies in September alone. The cannabis company has completed 14 acquisitions since 2016 and is eyeing an IPO in the U.S. in October.

Aurora, whose acquisition portfolio includes MedReleaf Corp. and CanniMed Therapeutics Inc., has operations in 18 countries and five continents and has already become Europe's largest distributor of medical marijuana.

Potential transactions

Beijing-based biopharmaceutical company China Biologic Products Holdings Inc. snubbed an unsolicited $3.9 billion bid by a Chinese consortium.

The investor group, which comprises Feng Tai Global Ltd.'s owner David Gao, GL Capital Group, Bank Of China Group Investment Ltd. and CDH Investments, planned to acquire China Biologic's shares not already held by the group for $118 each in an all-cash deal.

Meanwhile, French hospital operator Ramsay Générale de Santé SA just recently raised the offer price of its proposed acquisition of Capio AB after its initial bid was rejected. Australia's Ramsay Health Care Ltd. owns 50.9% of Ramsay Générale.

Michael Levesque, a senior vice president at Moody's, said in a Sept. 20 research note that he expects some companies in the global pharmaceutical industry to divest noncore assets in the remainder of 2018. He also expects acquisition activity in the sector to pick up, noting that factors driving the deals include cost savings, attractive pipeline assets and the recent U.S. Tax Cuts and Jobs Act, which provides U.S. companies more efficient access to offshore cash.