Nellcor to Buy Puritan-Bennett in $475-Million Stock Swap : Health care: The merger comes less than six months after Puritan turned aside a lower offer.

Nellcor Inc., a maker of hospital patient-monitoring devices, will buy Puritan-Bennett Corp., a maker of electronic breathing instruments, in a stock swap worth $475 million.

The deal announced Monday comes less than six months after Puritan turned aside a lower offer from another suitor. Thermo Electron Corp., a maker of industrial control devices, had bid $390 million for Puritan.

Nellcor, based in Pleasanton, Calif., is the largest manufacturer of devices called pulse oximeters, which continuously measure the oxygen in a patient’s blood. The devices are standard equipment in operating rooms and critical care units.

Puritan-Bennett, based in suburban Overland Park, Kan., makes ventilators to assist people too weak to breathe on their own. It also makes oxygen systems for hospitals and commercial airplanes.

Executives said the deal will add to profits because the two companies’ products complement each other and the firms will be able to consolidate expenses.

They noted that they both have significant operations in the San Diego and Kansas City areas and in Tijuana, although they didn’t specify whether any plants would be closed.

“We expect this merger to create both immediate and long-term synergies in revenue and earnings growth, cost savings and new-product development,” said C. Raymond Larkin Jr., Nellcor’s president and chief executive, who will retain both titles in the new company.

The merger is the latest in the health care industry, where pressure to cut costs has triggered a wave of mergers and consolidations in the past two years. It is subject to approval by federal regulators.

Analysts said Nellcor is a much better fit for Puritan-Bennett than Waltham, Mass.-based Thermo Electron Corp., which makes industrial, environmental, medical control and monitoring devices.

Thermo Electron began courting Puritan-Bennett last summer, offering $24.50 per share. The proposal drew 72% support from Puritan-Bennett shareholders before the company’s board killed the deal, saying the offer was inadequate.

“The price is better this time,” said James Steiner, an analyst who follows Puritan-Bennett for the securities firm Dain Bosworth in Minneapolis.

Steiner said Thermo Electron regarded Puritan-Bennett as an undervalued asset, while Nellcor is looking at the company with long-term plans.

“Thermo may have been able to wring some of the excess costs out of Puritan, but I’m not sure they could bring the synergies that Nellcor brings,” he said.

“It gives Nellcor a much broader product line than they had before in the respiratory field and increases their exposure in the home care market, which is growing faster than the hospital care market,” said another analyst, Vivian Wohl of Robertson Stephens & Co. in San Francisco.

Under the deal’s terms, Puritan-Bennett shareholders are to receive 0.88 share of Nellcor common stock for every share of Puritan-Bennett common stock they own. That values Puritan at $36.30 per share, 39% higher than its market price as of the close of trading Friday.

Puritan shares jumped $7.25 to $33.375 on the news in Nasdaq trading Monday, while Nellcor’s fell $1.625 to $39.625.