DENTSPLY Ties Up with Korean Firm - Analyst Blog

Leading dental products maker DENTSPLY International (XRAY) has collaborated with South-Korean dental implant devices maker DIO Corporation. The companies will focus on dental implant production across Asia and Europe leveraging their top-notch manufacturing capabilities.

Busan-based DIO Corporation produces a broad range of dental implants (including BioTite-H and SM implant), dental devices and associated accessories. It is an established player in the South Korean dental implant market with presence across several emerging markets, which bode well for DENTSPLY's international expansion strategy.

Under the agreement,DENTSPLY will initially retain less than 20% of DIO and will make an additional investment in debentures with an option to convert into shares after a year. The deal offers opportunities for synergies and is expected to be modestly accretive to DENTSPLY's adjusted (excluding transaction costs) earnings in the first year following the transaction closure, which is expected imminently.

DENTSPLY has a strong international presence. The company's products are used in over 120 countries enabling it to leverage the changing dental practice across North America and Western Europe, which emphasizes preventive care and cosmetic dentistry. One of the company's major customers is Henry Schein Inc (HSIC), a dental products distributor.

DENTSPLY is pursuing an aggressive acquisition strategy to boost growth. The company is devoting a major portion of its cash flows to acquisitions and share repurchases.

Moving forward, DENTSPLY is expected to benefit from the recovery in the global dental market with several product segments and geographies showing signs of growth. Not being a life-sustaining product, the dental market was badly affected by the economic downturn that resulted in patients deferring their adoption.

DENTSPLY's diverse product range, significant international presence, new product introductions and acquisition initiatives are expected to boost operating metrics over the forthcoming quarters. Moreover, the company is poised to grow its share of the dental implant market driven by a strong product base and significant investment on product/technology innovation and sales/marketing infrastructure.

However, DENTSPLY's international operations are exposed to foreign exchange translation risk given the devaluation of the euro against the U.S. dollar. Moreover, growth in the company's domestic market has ebbed due to a slow economic recovery and competitive pressure. We are currently Neutral on DENTSPLY.

 
HENRY SCHEIN IN (HSIC): Free Stock Analysis Report
 
DENTSPLY INTL (XRAY): Free Stock Analysis Report
 
Zacks Investment Research