Stryker to buy Sage Products in Cary for $2.7 billion

Stryker Corp., a maker of medical devices, has agreed to buy Sage Products LLC for $2.78 billion in cash from its private equity owner Madison Dearborn Partners.

The purchase will come with a $500 million tax benefit for Kalamazoo, Michigan-based Stryker, the company said in a statement today. Sage, based in Cary, makes products for surgery and medical care.

Sage had sales of $430 million in fiscal 2015, compared with $9.95 billion for Stryker. Stryker's biggest business is orthopedics, such as artificial hips and knees used in replacement surgery. Sage makes a complementary group of surgical items, including ones meant to reduce "never events," such as operations on the wrong leg.

Sage plans to continue to operate under its existing brand name as part of Stryker's Medical division. Sage's current executive committee, led by President and CEO Scott Brown and Chairman of the Board Vincent Foglia, will remain in place and continue leading Sage from its headquarters in Cary.

"Over our 45 years, we have achieved incredible growth through our focus on innovation, our Sage culture and our deep commitment to our community," Brown said. "With MDP's support, our business has grown domestically and we have achieved significant initial success with our international expansion. We are grateful for MDP's partnership over the past few years and believe that Sage is well-positioned for continued achievement and long-term success with Stryker, a company that understands our business, supports our goals and embraces our values."

Medical device companies have been consolidating to sell groups of products as hospitals and purchasing groups try to control costs. Last year, Medtronic Plc completed an about $46 billion deal for Covidien Ltd.

The deal is expected to close in the second quarter. Stryker said it will add 5 cents to its adjusted earnings for 2016, which the company predicts will be $5.55 to $5.75 a share.

JPMorgan Chase & Co. served as Stryker's financial adviser, and Sullivan & Cromwell as legal adviser. Sage was advised by Barclays, and by the law firms Kirkland & Ellis and Madden, Jiganti, Moore & Sinars.