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Henry Schein (HSIC) Expands by Signing JV With Casa Schmidt

Zacks Equity Research

Henry Schein, Inc. HSIC signed a joint venture (“JV”) with Casa Schmidt S.A. (a comprehensive provider of dental solutions for dental professionals in Spain and Portugal) to fulfill the mutual target of providing solutions and technologies to the health care professionals. The newly formed JV, Henry Schein España (where Henry Schein holds the majority ownership) will operate in Spain and Portugal, and will include senior management from both companies.

The deal is expected to close in the second quarter of 2020, subject to the approval of Spain’s National Commission of Markets and Competition. However, the financial terms of the deal have been kept under wraps.

With the JV, Henry Schein aims to strengthen its dental business segment globally. Notably, the dental business is a component of the company’s health care distribution arm.

 



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A Peek Into the Deal

Henry Schein España will include product portfolios of both Henry Schein and Casa Schmidt. Notable businesses from Casa Schmidt — including Schmidt Dental Solutions, Servimed and Importación Dental Especialidades — will also be part of the new company.

Rationale Behind the Deal

Henry Schein España is expected to broaden the market access of Henry Schein in Spain and Portugal by providing an expanded products and services portfolio to the current customers of both companies. Notably, Henry Schein has been serving dental professionals in Spain and Portugal since 1990, with a growing number of both branded, and private-label products and services.

Industry Prospects

Per a report by The Business Research Company, the global dental services market reached $436.2 billion in 2018 and is expected to reach $629.3 billion by 2022, witnessing a CAGR of 9.6% during the same period. Factors like increasing oral health awareness and rising elderly population are expected to drive the market.

Given the market potential, the signing of the deal has been timed well.

Recent Developments in Dental Business

During the fourth quarter, Henry Schein launched several products within the Henry Schein One portfolio. The company introduced the beta version of its Tech Dentrix to streamline collection procedures, curb mailing costs and boost cash flow.

Henry Schein launched Dentrix G7.3 in the fourth quarter to improve insurance payment procedures. Further, in the same quarter, the company launched a chairside dashboard for Dentrix Ascend, which delivers enhanced clinical patient outcomes for dentists, in the Symbian cloud-based system. Notably, Dentrix Ascend is Henry Schein's first cloud-based practice management system. Furthermore, the company completed the development work on demand for steady intervention with Dentrix Ascend, allowing the two platforms to sync data and function better.

In November 2019, Henry Schein One (a JV of Henry Schein) announced the availability of the Dentrix Smart Image connector for the DEXIS imaging software. The integration of Dentrix practice management software and DEXIS via the Dentrix Smart Image will likely enable oral health professionals to further automate their practice management.

Price Performance

Shares of Henry Schein have dipped 3.1% in the past year compared with the industry’s 13.5% decline.

Zacks Rank & Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, Medtronic plc MDT and Hill-Rom Holdings, Inc. HRC.

ResMed has a projected long-term earnings growth rate of 14.5%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.

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