In a bid to bolster its vascular business, therapeutic and diagnostic devices maker AngioDynamics (ANGO) has agreed to buy Massachusetts-based privately held Navilyst Medical in a cash and stock deal.
Navilyst Medical, which focuses in the vascular access, interventional radiology and interventional cardiology markets, was acquired by private equity firm Avista Capital Partners from Boston Scientific (BSX) in 2008. The entity generated sales of $149 million in 2011.
Navilyst offers its products in 76 countries globally. Its products/technologies include the Xcela peripherally inserted central catheters (“PICCs”), Vaxcel/Xcela implantable ports, NAMIC fluid management devices and the patented PASV valve technology.
Per the deal, AngioDynamics will take over Navilyst from Avista Capital Partners for $372 million. The company will issue roughly 9.5 million shares to Avista Capital Partners. Following the deal closure, Avista will hold roughly 27% of the company’s outstanding stock and will get two seats on its Board of Directors.
The transaction, which has been cleared by the Boards of both companies, is subject to customary closing conditions, antitrust clearance and the approval of AngioDynamics’ shareholders and is expected to consummate in fourth-quarter fiscal 2012 (ending May 31).
AngioDynamics noted that it plans to finance the acquisition using its cash on hand and a $150 million loan from J.P. Morgan (JPM), Bank of America (BAC) and KeyBank National Association.
Following the acquisition, AngioDynamics will have at least $50 million in cash and liquid investments and $150 million in debt. J.P. Morgan Securities and Barclays Capital, a unit of Barclays PLC (BCS), acted as financial advisors to AngioDynamics and Navilyst Medical, respectively, on the deal.
AngioDynamics’ Vascular division, which accounted for roughly 70% of its sales in fiscal 2011, remains affected by competition and sustained pricing pressure. Revenues from its vascular access business declined 2% in the most recent quarter. The company’s new president and CEO, Joseph DeVivo, has been exploring acquisition/licensing opportunities since he assumed charge in September 2011.
The deal is a strategic fit for AngioDynamics and augurs well with its business model. The acquisition is expected to double the company’s share of the vascular access market besides boosting its scale. The integrated entity will offer a comprehensive suite of products to its customers.
The acquisition provides AngioDynamics, among others, the NAMIC brand, which has been a gold standard in fluid management for over four decades. NAMIC will allow the company to establish its foothold in the cardiology market, providing opportunities to boost its peripheral vascular business.
On the operational front, the acquisition provides AngioDynamics with Navilyst’s world-class manufacturing facility based in Glens Falls, New York, and state-of-the-art R&D facilities in Marlborough, Massachusetts.
AngioDynamics expects the acquisition to add at least 8 cents a share to its adjusted earnings in fiscal 2013. Moreover, the company foresees the combined entity to generate revenues of roughly $360 million in 2013. Additionally, AngioDynamics expects cost savings of roughly $5 million and $7 million for the year. The deal also brings in opportunities for tax saving and operational improvement.
AngioDynamics has market leadership positions in several of its operating segments including angiographic products and thrombolytic catheters and products. Its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific and C. R. Bard (BCR).
AngioDynamics recently snipped its sales and earnings outlook for fiscal 2012 based on the voluntary recall, in the U.S, of the ablation zone estimator (“AZE”) software for its popular tumor-zapping NanoKnife systems. The recall has resulted in a temporary halt on the nationwide shipments of the NanoKnife system.
Based on these developments, AngioDynamics expects NanoKnife’s sales to shrink by roughly $3.6 million in second-half 2012. Accordingly, the company reduced its revenue guidance for fiscal 2012 to a band of $215.5 million to $219.5 million from $218 million to $222 million. We currently have a Neutral rating on AngioDynamics, supported by a short-term Zacks #3 Rank (Hold).
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