Stryker And St. Jude Acquisitions Signal Year-end Uptick In Device M&A;

Article preview from In-Vivo- November 01, 2010

The M&A market for medtech companies had already slowly started to climb off the mat after last year's collapse when Stryker and St. Jude Medical closed on two $1 billion-plus acquisitions. Still, Stryker's bid to acquire the neurovascular business of Boston Scientific and St. Jude's offer for structural heart disease company AGA Medical demonstrate how deep strategic acquirers are willing to dig to establish themselves in new markets.The combined price tag of $2.7 billion guaranteed that 2010 will be a better year for medical device mergers and acquisitions than 2009, at least as measured by disclosed prices paid.

Stryker And St. Jude Acquisitions Signal Year-end Uptick In Device M&A

Article preview from In-Vivo- November 01, 2010

The merger and acquisition market for medtech companies had already slowly started to climb off the mat after last year's collapse when Stryker Corp. and St. Jude Medical Inc. closed on two $1 billion-plus acquisitions. Still, Stryker's $1.4 billion bid to acquire the neurovascular business of Boston Scientific Corp. and St. Jude's $1.3 billion offer for structural heart disease company AGA Medical Holdings Inc. demonstrate how deep strategic acquirers are willing to dig to establish themselves in new markets. [201010138] [201010131] In acquiring AGA, St. Jude agreed to pay $20.80 per share, a 41% premium to the pre-announcement share price.

The combined price tag of $2.7 billion guaranteed that 2010 will be a better year for medical device mergers and acquisitions than 2009, at least as measured by disclosed prices paid. An analysis of data in Elsevier's Strategic Transactions recorded $11.7 billion paid out for medical device acquisitions last year versus $13.2 billion through the end of October this year. That dollar total came in on 73 deals this year versus 98 in all 2009, so acquirers are paying more per deal. (In both years roughly one-third of the total deals didn't make the terms public.) Michael J. Neuberger, managing director and sector head of health care investment banking at BMO Capital Markets says this year is primed for a strong finish. "The general overtone of the market being positive, people are thinking strategically of adding to their business," Neuberger says, pointing out that the stock market is at a two-year high and banks are lending money again.

The two acquisitions easily make it to the top of the deals closed in 2010, right behind Covidien Ltd.'s $2.5 billion acquisition of publicly traded peripheral vascular company ev3 Inc. [201010064] Each of the three top deals represents an effort by its acquirer to expand into new territories. But, more importantly, these deals clearly demonstrate the value companies are putting on devices that contain health care costs.

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