Medical device maker Medtronic to buy HeartWare for $1.1 billion

Tuesday, June 28, 2016

Medtronic Plc said it would buy HeartWare International Inc (HTWR.O) for about $1.1 billion, bulking up its portfolio of devices for treating heart diseases and pushing deeper into the market for less-invasive surgical products.

HeartWare shares rose as much as 92 pct to $57.58 in morning trading on Monday, just below the offer price of $58 per share in cash. Medtronic shares fell about 2 percent.

HeartWare's flagship product, the HVAD System, is placed in the body through a less-invasive surgery and assists with blood flow when the heart is unable to pump blood efficiently.

The company, which had a market value of $525.87 million as of Friday, is also developing MVAD System - a next-generation heart pump that is 40 percent smaller than the HVAD System.

However, MVAD has been facing issues such as clotting-related side effects in trials, pulling down HeartWare's stock by 61 percent in the year to Friday's close.

"Medtronic is catching HeartWare at a near bottom which makes the acquisition premium more palatable," Cowen and Co analysts wrote in a note.

HeartWare is the second biggest player in the U.S. heart pumps market with a 40 percent share. St Jude Medical Inc's (STJ.N) Thoratec unit leads the market with a 60 percent share.

Medtronic said the global heart pump market was estimated at about $800 million. The market is expected to grow in mid to high single digit in percentage terms in 2016 and 2017, and in high-single or low-double digits thereafter.

The deal comes a couple of months after AbbVie Inc (ABBV.N) said it would buy lung cancer drug developer Stemcentrx and France's Sanofi SA (SASY.PA) offered to acquire cancer drug maker Medivation Inc (MDVN.O).

The offers led to expectations that there could be more deals in the sector as a drop in biotech stocks this year pushes down the valuations of companies, setting the stage for offers at premiums as high as 50-100 percent.

Medtronic said the HeartWare acquisition was expected to close during its second quarter, which ends on Oct. 28.

Last month, the company bought a stake in Israel's Mazor Robotics Ltd MZOR.T and acquired Smith & Nephew Plc's (SN.L) gynecology unit.

J.P. Morgan Securities LLC is Medtronic's financial adviser for the transaction and Ropes & Gray LLP is its legal counsel.

Perella Weinberg Partners LP and Shearman & Sterling LLP are advising HeartWare.


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