Dear but good

From: Sydney Morning Herald (subscription) - New South Wales,Australia - Mar 8, 2005

by Michael Evans

Investors continue to warm to Cochlear's acquisition of Swedish hearing implant maker Entific, pushing the shares up a further 88c to $31.76, their highest since October 2003.

Broking analysts are largely positive but maintain a few reservations.

Sophie Johnson from UBS said the deal was a "significant positive for Cochlear", saying however that there was a near-term negative in the dilution of the return on invested capital from about 60 per cent to the 30-40 per cent range.

Andrew Goodsall from Citigroup Smith Barney described the deal as "expensive" at $195 million but raised his share price target to $35.21 and upgraded the stock to a "buy" from a "hold".

In response to criticisms on Friday that the deal was expensive, Cochlear chief executive Chris Roberts told the Herald: "If you look at the revenue stream we're buying, if you look at the gross margins which are 80 to 85 per cent [and] right into our distribution space with potential synergies, I think it's financially very, very attractive."

Roberts also said "there's no other acquisitions on our horizons at this stage".

Copyright © 2005. The Sydney Morning Herald.