Biotech Values

[DewDiligence]

STJ Acquires AGAM in $1.3B Cash+Stock Deal

[The nominal buyout price of $20.80/sh is a 41% premium to Friday’s close and a 43% premium to AGAM’s IPO price in Oct 2009. AGAM’s Amplatzer device is a leader in the treatment of PFO, which has been a black hole (heheh) for competitor NMTI (#msg-5464374, #msg-19023136, #msg-10141757, #msg-26218478, #msg-51424497).

No separate CC for this deal because STJ is holding its regular quarterly call on Wednesday.]

http://www.reuters.com/article/idCNN1825573220101018

›Mon Oct 18, 2010 1:54pm EDT
By Susan Kelly and Lewis Krauskopf

CHICAGO/NEW YORK, Oct 18 (Reuters) - St Jude Medical Inc (STJ) will buy AGA Medical Holdings Inc (AGAM), a maker of devices for structural heart defects and vascular problems, for more than $1 billion in cash and stock, the companies said on Monday.

The acquisition is expected to help St Jude diversify into faster-growth treatment areas beyond its core heart rhythm management line of implantable cardioverter defibrillators and pacemakers.

"In the case of St Jude, it's a nice fit," said Jefferies & Co analyst Raj Denhoy. "It will help them build out their presence with interventional cardiologists in the cath lab."

At $20.80 per share, the deal values AGA Medical shares at a 41 percent premium to Friday's closing price. The companies valued the deal at about $1.3 billion, including the assumption of about $225 million in debt.

Shares of AGA climbed $5.96, or 41 percent, to $20.67 on Nasdaq. Shares of St Jude rose 16 cents, or 0.4 percent, to $40.06 in on the New York Stock Exchange.

While St Jude's maturing ICD and pacemaker markets are facing slower demand and increasing pricing pressures, analysts see AGA's markets for devices to address structural heart defects as offering several $1 billion-plus opportunities that are in the early stages of development.

AGA sells a closure device for atrial septal defect, which is a hole in the wall that separates the heart's upper chambers. It also sells vascular plugs that are used to block blood flow to diseased peripheral vessels and tumors.

"This deal is a positive for St. Jude and represents an opportunity for market expansion with AGA's products and should provide incremental growth drivers for the company's atrial fibrillation and structural heart programs," said William Blair & Co analyst Ben Andrew.

AGA posted sales of nearly $200 million in 2009. But the biggest potential for growth is expected to come from areas where the company hopes to gain expanded indications for its products.

AGA's closure device is in clinical trials where it is being tested for the treatment of patent foramen ovale, or PFO, another type of hole between the heart's upper chambers that may be linked to stroke or migraine headaches.

The company is also testing a left atrial appendage closure device, which has potential to reduce the risk of stroke in patients with atrial fibrillation.

Big device makers including St Jude and rivals Medtronic Inc (MDT) and Boston Scientific Corp (BSX) have been buying up smaller companies with promising new technologies for treating a range of cardiovascular problems as the markets for more established heart devices such as stents and ICDs slow.

AGA Medical went public last October at $14.50 per share. Its major shareholders include those affiliated with private equity firm Welsh, Carson, Anderson & Stowe, and AGA Medical's co-founder Franck Gougeon.

The deal involves an even split between cash and stock. The exchange ratio for the stock component will be determined by the average closing price of St. Jude stock over 10 trading days, ending two days before the close of the exchange offer.

St Jude said it expects the transaction to close by year's end and it does not affect its earnings outlook for 2010.

AGA, in a regulatory filing, said it agreed to pay a breakup fee ranging from about $21.7 million to $32.5 million if it were to terminate the merger agreement with St Jude.‹