ArthroCare to Acquire Opus

ArthroCare Corp., a maker of devices used in arthroscopic surgery, said Tuesday that it had agreed to buy privately held Opus Medical Inc. for $130 million in cash and stock to gain technology used to repair shoulder damage.

Opus shareholders will receive $30 million in cash and $60 million in ArthroCare stock at the close of the deal, expected at year-end. Opus’ current owners also will receive $40 million next year and a contingent payment based on Opus’ 2005 sales, Sunnyvale, Calif.-based ArthroCare said.

About 400,000 surgeries to repair rotator cuffs -- the muscles and tendons surrounding the upper arm and shoulder -- are conducted each year around the world.

San Juan Capistrano-based Opus’ arthroscopy devices may reduce trauma and make repairs of the rotator cuff faster and easier than traditional surgery, ArthroCare said.

“The products it has acquired are extremely complementary to its current sports medicine line and will provide fuel for revenue growth through the next few years,” analyst William Plovanic of First Albany Capital wrote in a research note. He rates the stock “buy” and doesn’t own any.

ArthroCare Chief Executive Michael A. Baker said Opus would generate as much as $17 million in sales this year. ArthroCare expects the purchase to have no effect on per-share earnings in 2005 and to add to them thereafter.

The company expects its revenue from its own product line to increase 30% and Opus’ revenue to jump at least 50% in 2005. Plovanic said he expected Opus’ sales to rise even higher.

Shares of ArthroCare gained 62 cents to $25.15 on Nasdaq.