SIRF: Golbus Medical's 'Inside Job'

Medical device maker Globus Medical Inc (NYSE: GMED) was down more than 5 percent Tuesday on the back of some interesting news from Southern Investigation Reporting Foundation (SIRF) regarding the purchase of Branch Medical Group (BMG).

Although the spinal orthopedic manufacturer purchased BMG in February 2015, according to SIRF, "little attention was paid" to the transaction.

Globus Medical's purchase was viewed as "another instance of a high-profile, larger company merging with a small, privately-held one," said SIRF.

However, upon further investigation, SIRF claims that the deal may be more akin to an "inside job."

"[I]n the bloodless language of business law the BMG purchase was known as a related party transaction."

Related Link: Globus Medical's FY16 Sales Guidance Tempers Q4, FY15 Above-The-Street Outlook

Nor, according to SIRF, was the transaction just "another instance" of a small takeover.

"[W]ith a $52.9 million all cash price tag, the purchase of BMG was not so small for Globus, which had just reported $474 million in sales for the prior year."

Regarding pricing, in the February 25, 2015, press release from Globus Medical, the company stated, "Globus expects the acquisition to be neutral to its 2015 earnings as the benefit from the reduced costs of manufactured parts will be delayed as Globus' current inventory levels are depleted and will be offset by expected investments to increase BMG's manufacturing capacity."

Senior vice president of product development at Globus, Andy Iott, commented, "BMG has grown to be our top supplier by consistently producing our most complex parts in a highly efficient manner. The close working relationship we have enjoyed over the years has enabled us to work together to get products to the market quickly."