St. Jude Medical to Buy Siemens Pacesetter

Siemens Pacesetter Inc., the Sylmar-based producer of cardiac pacemakers and other medical equipment, will be purchased for about $500 million by St. Jude Medical Inc., the world’s leading maker of heart valves, the companies announced Tuesday.

The deal will place St. Jude, based in St. Paul, Minn., in the top tier of pacing-device makers and will put both companies in a better position to compete in the rapidly changing health care industry, St. Jude Chief Executive Ronald A. Matricaria said.

“You really have to be a market leader, have low-cost manufacturing and manufacture the highest-quality products that deliver clinical value,” Matricaria said. “If you’re a company that has that kind of profile, you’re going to succeed.”

The deal is also a significant diversification for St. Jude, which last year took in 95% of its revenue from one product. The company, with about 700 employees, earned $110 million on sales of $253 million in 1993. Siemens has about 1,300 employees worldwide and reported sales of $350 million in 1993.

The purchase would also include the pacemaker operations of Siemens’ cardiac systems division in Solna, Sweden.

“I was really brought in to get the company to diversify,” said Matricaria, who joined St. Jude last year from Eli Lilly & Co., where he was head of the cardiac pacemaker unit. “We want to be a world leader in cardiac rhythm management in the broadest sense.”

In a prepared statement, Siemens’ German parent said it opted to sell its cardiac stimulation business “to focus in core markets where our research and technological strengths are greatest.”

In February, 1993, Siemens Pacesetter was beaten to the domestic market for defibrillator devices, which calm heartbeats, by its chief rival, Medtronic.