Urohealth Offers 35% More for Imagyn

Urohealth Systems Inc. on Friday sweetened by 35% its deal to buy Imagyn Medical Inc. for stock, and the boards of the two Orange County medical device companies endorsed the revised terms.

Imagyn, a Laguna Niguel company whose low stock price and innovative instruments for gynecological surgery make it an attractive target, also said it rejected an unsolicited offer received earlier this week from giant U.S. Surgical Corp.

Urohealth’s revised deal, announced before the stock market opened Friday, was initially valued at $58.8 million--slightly higher than U.S. Surgical’s bid of $57.5 million in cash or stock.

However, shares of Costa Mesa-based Urohealth fell slightly Friday, pushing the value of the deal to $56.5 million.

Still, Imagyn Chief Executive Franklin D. Brown said the Urohealth offer beats that of Norwalk, Conn.-based U.S. Surgical for several reasons. He noted, for instance, that under the revised offer, Imagyn’s stake in Urohealth, a rapidly growing company, will increase from 23.5% to 29.6%.

Brown added that the fit between the two companies is “extremely good.” He said that although Imagyn’s strength is in the technology of its product line, it needs the sort of powerful distribution system that Urohealth is working to build.

The revised deal brought little response from investors. Urohealth stock closed at $4.88 a share, off 6 cents, in Nasdaq trading, and Imagyn was unchanged at $6.88. In New York Stock Exchange trading, U.S. Surgical shares fell $1.63 to close at $37.75.

Urohealth increased the terms of its all-stock offer to 1.4 of its shares for every Imagyn share. It had originally offered 1.0358 shares. Urohealth expects to issue about 11.4 million shares of common stock to complete the exchange.

The revised Imagyn-Urohealth deal, subject to approval by shareholders of both companies as well as regulators, is expected to close by the end of August.