Medtronic to Acquire Arterial Vascular
Medical technology giant Medtronic Inc. said Monday that it had agreed to acquire Arterial Vascular Engineering Inc. for $3.7 billion, forming the world’s largest stent manufacturer.
Stents--small wire mesh tubes that support coronary blood vessels weakened by disease--constitute the fastest-growing market in the $130-billion medical devices business.
Santa Rosa-based Arterial Vascular is one of a handful of companies riding a powerful wave of stent growth.
Pacemaker market leader Medtronic, whose stents have been also-rans, reached out to acquire Arterial Vascular less than a month after agreeing to buy Sofamor Danek Group Inc., which specializes in spinal implants, also for $3.7 billion.
Arterial Vascular is the No. 1 U.S. stent maker. Its profit has soared ninefold since its coronary stent was approved for U.S. sales less than a year ago.
The acquisition is the latest in a string for Medtronic, and could give the company an edge in a market where it lags rivals such as Guidant Corp.
“This fills a very important gap they had,” said Kurt Kruger, an analyst with NationsBanc Montgomery Securities. Medtronic let the stent market “pass them by, and now they have one of the major players,” he said.
Medtronic stock fell $2.38 to close at $67.63 on the New York Stock Exchange, while Arterial Vascular shares surged $16.50 to $48.88 on Nasdaq.
The stock prices of two other top stent makers declined. Guidant shares fell 94 cents to close at $85.81 on the NYSE, and Boston Scientific Corp. stock fell $1.88 to close at $49.50, also on the NYSE.
The Arterial Vascular deal is the fifth major transaction for Minneapolis-based Medtronic since July and calls for the exchange of $54 worth of Medtronic stock for each share of Arterial Vascular stock in a pooling of interests, which would make the deal tax-free to stockholders. Medtronic also is assuming $600 million of Arterial Vascular’s debt.
“We will be looking to wind up with fewer facilities than we currently have. . . . Also, we’ll be bringing the sales forces around the world together,” said Medtronic Chief Executive William George.
The two firms have about 650 salespeople and, after consolidation, George said, “We’ll field something in excess of 500 people.”
Arterial Vascular Chief Executive Scott Solano will report to Medtronic President Art Collins and assume responsibility for the combined vascular businesses of Medtronic and Arterial Vascular, the companies said.
Medtronic said the deal is subject to customary conditions and is expected to be completed in 90 to 120 days.
“This is a great deal for Medtronic,” said Steven Halper, medical technology analyst at investment bank and brokerage Donaldson, Lufkin & Jenrette. “They’ve upped the ante here in terms of being very aggressive in pursuing acquisitions.”
