St. Jude Medical (STJ) has officially completed its acquisition of cardiac devices maker AGA Medical Holdings. This follows the recent federal antitrust clearance of the deal. Pursuant to the agreement, AGA Medical has been merged with St. Jude’s wholly-owned subsidiary Asteroid Subsidiary Corporation.
St. Jude announced its acquisition of Plymouth, Minnesota-based AGA Medical for $1.3 billion in October 2010. The deal value includes the assumption of $225 million of AGA Medical debt. Under the deal, shareholders of AGA Medical were offered $20.80 (in the form of cash and/or stock) for each share they hold.
Following the acquisition, 50% AGA Medical shares surrendered in the merger were converted into the right to receive $20.80 in cash while the remaining 50% receiving 0.54 of a share of St. Jude’s common stock for each share of AGA Medical common stock.
AGA Medical specializes in making devices for treating structural heart defects and vascular abnormalities with minimally invasive transcatheter treatments with revenues of $199 million in 2009. Many of the company’s products are used to treat heart defects in children. Its coveted AMPLATZER occlusion (closure) devices are currently sold in 112 countries.
AGA Medical has the leading share of the market for structural heart defect occluders. The company has a robust pipeline with a number of products currently under clinical trials. Should they be successful, St. Jude can look forward to blockbuster opportunities.
Consolidation binge among the top-tier U.S. medical devices companies continues as they battle to grab share in the mature pacemaker and implantable cardioverter defibrillator (ICD) markets. St. Jude, like its peers Medtronic (MDT) and Boston Scientific (BSX), is exploring new avenues of growth by targeting smaller companies with promising growth prospects.
The acquisition provides St. Jude with the opportunity to expand into fast-growing new therapy areas beyond its legacy ICD and pacemaker markets. The addition of AGA Medical is expected to considerably strengthen St. Jude’s atrial fibrillation and cardiovascular franchises.
The integration of the complementary product lines will make the combined entity a leading player in the structural heart market. AGA Medical has historically grown at a healthy pace with revenues increasing at a compound annual rate of 19% over the last five years.
St. Jude expects the acquisition to help its sales grow at a low double-digit rate in 2011. Moreover, the deal is expected to be accretive to earnings starting 2011. St. Jude expects AGA Medical to contribute $20 million to $25 million in revenue in fourth-quarter 2010. We are currently Neutral on St. Jude, which is supported by a short-term Zacks #3 Rank (Hold).
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