Abet Chichi2

[tomtomboombang]

I am upgrading DJ Orthopedics to a Buy with a target of $40

DJO has announced its plans to acquire the non-operative orthopedic bracing company Aircast for approx $290 mln in cash, which is approx 3x revs and 12x EBITDA

According to my calculations, Aircast will likely be $0.15 to $0.30 accretive to EPS in 2007, which now could be $2.00 per share ($1.73 is low ex-stock comp without the deal)

The Company gives potential synergies: 1) manufacturing - transferring NJ manufacturing to DJO's plant in Mexico, 2) distribution - keeping both direct sales forces cross-selling opportunities for bracing and Aircast, 3) tax - Aircast is 30% international.