U.S. Surgical Bid Could Muscle O.C. Firm Out of Imagyn Deal

Imagyn Medical Inc., the medical devices firm set to be acquired by Costa Mesa-based Urohealth Inc., received a higher offer Wednesday from giant U.S. Surgical Corp.

Imagyn, which makes devices for minimally invasive surgery, said it’s calling a meeting of its board to consider the $57.5-million offer--a cash or stock deal about 20% higher than Urohealth’s all-stock bid.

Imagyn wouldn’t comment further, though analysts speculated that Urohealth would likely lose any takeover battle for the Laguna Niguel-based company.

“If Urohealth sweetens their deal, U.S. Surgical is still likely to prevail because they have deeper pockets,” said John Calcagnini, an analyst at Oppenheimer & Co.

Carol Winslow, an analyst at Jefferies & Co., added that Urohealth would only dilute its already depressed stock further if it increased the number of shares it’s offering.

Urohealth, which has grown rapidly by acquiring medical device companies, “might be better off just to let this one go,” Winslow said.

Urohealth officials declined to comment.

A spokesman for Norwalk, Conn.-based U.S. Surgical said it made an unsolicited offer, but it’s too early to say whether the deal will be hostile or friendly.

The company says Imagyn’s innovative line of mini-surgical instruments would help it expand into the gynecological market--a business it’s also pursuing in a long-running battle to acquire Circon Corp. of Santa Barbara.

On news of U.S. Surgical’s offer, Imagyn shares rose 44 cents a share in Nasdaq trading to close Wednesday at $6.63--a dime above U.S. Surgical’s offer of $6.53 a share.

Urohealth slumped 63 cents to a two-year low of $4.63, while U.S. Surgical dropped 31 cents to $36.88 on the New York Stock Exchange.

It’s clear that ever since Imagyn announced the Urohealth deal on April 21, Imagyn shareholders have not been thrilled.

At that time, Urohealth was trading at about $7.75 a share and its offer to exchange 1.0358 of its shares for each Imagyn share was valued at about $70 million, or $8.30 a share. Imagyn stock plummeted $1.675 a share that day to $7.50--half the level of its initial offering price last year.

Since then, Urohealth stock has tumbled precipitously as the company repeatedly postponed release of its earnings for the year ended March 31. On July 1, it disclosed that not only had it lost a surprising $89 million during the year but expected revenue for its first quarter would fall millions short of analysts’ estimates.