Masimo (NASDAQ:MASI) stock is falling hard on Wednesday after the company revealed plans to acquire Sound United for a whopping $1.025 billion.
Masimo is a medical technology company focused on the development of non-invasive patient monitoring devices. With that being its main business, investors appear baffled at its plans to acquire audio device manufacturer Sound United.
Even so, Masimo argues that there are advantages to the acquisition. That includes it being immediately accretive to the company’s non-GAAP earnings per share after closing. For the record, the two companies expect the deal to close in the middle of 2022.
Masimo also claims that it sees potential to “cross-leverage technologies” between the two companies. That aligns with its goals of ” connected monitoring across both the hospital and home.”
Joe Kiani, chairman and CEO of Masimo, said the following about the deal hammering MASI stock today.
“The technology and expertise within Sound United will serve us well as we aim to augment our Masimo SafetyNet strategy. Their well-established reputation and presence in the home can help us accelerate adoption of our wearables, and integrated, home-based telemedicine solutions.”
Masimo is planning to use a mix of cash on hand and funds from a new credit facility to acquire Sound United. It will also leave the company’s brand and leadership team intact afterward. That will have them working under Masimo and supporting its consumer health business.
Heavy trading of MASI stock comes alongside today’s news. As of this writing, more than 5 million shares of the company’s stock have been traded. That’s a massive jump from its daily average trading volume of about 336,000 shares.
MASI stock is down 35.6% as of Wednesday afternoon.
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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.