In the August 2007
issue:
Medical Devices Attract Big Bucks-
Strategic Buyers Move To Consolidate Diagnostics Industry
Within July’s vibrant Medical Device merger
and acquisition market, diagnostic testing companies have taken center
stage.
Read the story to see who is making the big moves and why, and who is the
next likely target.
...
July’s Health
Care M&A Market--
Activity Remains Robust Despite Credit Challenges
Jitters in the financial markets have recently led some to ask whether the
health care merger and acquisition market will seize up.
Placing the question in context, we discuss which factors favor continued
robust M&A activity.
...
In the Departments
Services
-Health Care Services
-Deal Summaries
-Additional Transactions
-Transaction Updates
Technology
-Deal Summaries
-Additional
Transactions
-Transaction Updates
-Health Care
Technology
Sign up for a trial subscription and get
the current issue!
Read more about
The Health Care M&A Monthly.
Articles Archive
Companies Mentioned in this issue:
August 2007
A
Abbott Laboratories p10
Acadia Pharmaceutical p16
Actavis Group p16
Alnylam Pharmaceuticals p15
Alta Healthcare System p3
American Imaging Management p8
Anaheim Memorial Medical Center p4
Arrow International p10
Ascension Health p4
AstraZeneca plc p16
Atria Senior Living p8
B
Banc of America Securities LLC p14
Bank of America, NA p3
Barbara Ann Karmanos Cancer Institute p4
Bayer Diagnostics p1
Beckman Coulter p10
Biogen Idec p16
BUPA p4
C
Cardiokine p16
Caritas Christi Health Care p4
Cepheid p10
Chester River Health System p4
Cinven p4
Citigroup Global Markets p8
Clinique de Carouge p4
Coast Carolina Medical Center p4
Colony Capital p4
Coventry Health Care p8
Credit Suisse p14
Credit Suisse Securities p8
D
Dade Behring Holdings p1
Detroit Medical Center p4
Diagnostic Products Corporation p1
DJO, Inc. p14
DOCS International p8
Domain Associates p16
E
Eastern Health System p4
Encore Medical Corp. p14
Envision Hospital Corp. p4
ev3 p14
F
Flexpoint Partners, LLC p3
Forest City Enterprises p8
Fortress Investment Group p8
Forward Ventures p16
FoxHollow Technologies p14
G
GE Healthcare p10
Gen-Probe p10
GlaxoSmithKline p15
Goldman Sachs p8
Greater Southeast Community Hospital p4
H
Harris Williams & Co. p2
HCA p4
Holiday Retirement Corp. p8
Hologic p10
Hospital de la Tour p4
I
ICON plc p8
IntegraCare Home Health p3
Intercell p16
Interwest Partners p16
J
J.P. Morgan Securities p15
JPMorgan p8
K
Kyphon p10
L
Lazard p14
Lazard Capital Markets, LLC p10
LifePoint Hospitals p4
Luminex p10
M
Manor Care p8
Meda AB p16
MedPointe p16
Medtronic p10
Mercapital p4
Merck p15
Montreux Equity Partners p16
N
NovaCardia p16
Novartis AG p16
Novator p16
O
Option Care p3
P
Piper Jaffrey p10
PRA International p8
Prime Healthcare Services p4
Prospect Medical Holdings p3
R
ReAble Therapeutics p14
Roche Diagnostics p10
S
Siemens AG p1
Sirna Therapeutics p15
Skyline Ventures p16
Sonic Healthcare p4
St. John Health p4
St. John Riverview Hospital p4
St. Vincent Catholic Medical Center p4
Sunrise Medical Laboratories p4
Sunrise Senior Living p8
T
Targacept p15
Teleflex p10
Tenet Healthcare Corp. p4
The Blackstone Group p14
The Braff Group p3
The Carlyle Group p8
The Cypress Group p16
U
UBS Investment Bank p8
University of Maryland Medical System p4
USP Hospitales p4
V
Ventana Medical Systems p10
Versant Ventures p16
Via Christi Health System p4
Vista Health Plans p8
W
Wachovia Securities p14
Walgreen p3
Walgreens Home Care p3
WellPoint p8
Z
Zimmer Holdings p14
|
Medical Devices Attract Big Bucks--
Strategic Buyers Move To Consolidate Diagnostics Industry
Email Editor
July posted a total of 11 acquisitions
in the Medical Device sector. That
represents 14% of the month’s health care M&A deal volume. However, the
combined value of those 11 deals was $15.4 billion, or 47% of all dollars
spent on health care M&A activity. Dealmakers are clearly bullish about
the sector.
Diagnostic Testing
Siemens AG (NYSE: SI) has offered approximately $7.0 billion to
acquire Dade Behring Holdings (NASDAQ: DADE). Dade develops,
manufactures and sells clinical diagnostic instruments, reagents and
consumable supplies and services to clinical laboratories. Under terms of
the deal, Siemens will pay $77.00 for each common share of DADE. The price
SI is offering represents a 38% premium to DADE’s prior-day price. Based
on recent financials, the transaction is valued at 3.9x revenue and 17.2x
EBITDA.
This acquisition complements and expands on SI’s 2006 acquisitions of
Bayer Diagnostics and Diagnostic Products Corporation. The deal
is expected to increase Siemens Medical Solution’s Group’s margin from
2009 onwards. It also gives the company a large footprint in the
diagnostics industry both in the U.S. and globally.
Jeffrey Frelick, VP and Diagnostic Laboratories Equipment Analyst at
Lazard Capital Markets, LLC, observed in a conversation with us that
this deal enhances SI’s place in the continuum of care, so they can get as
many “touches” on hospital patients as possible, e.g., from blood tests
when they enter the hospital all the way to sophisticated imaging scans.
In essence, they’re using the deal to position themselves as a one-stop
shop for diagnostic testing. Generalizing to the overall diagnostics M&A
market, Mr. Frelick believes that future dealmakers will tend to favor
high-growth companies with molecular diagnostics, tests for infectious
diseases, diabetes and cardiology.
Current estimates place SI in second place in the diagnostics industry,
with a 12% market share, after Roche Diagnostics (SWX: ROCZ.S),
with 18%. They are followed by DADE and Beckman Coulter (NYSE: BEC)
with about 11% to 12% each. This deal helps SI overtake Roche. But Roche
also wants to enlarge its own market position. It recently offered $75.00
per share, or $3.0 billion, to acquire Ventana Medical Systems
(NASDAQ: VMSI). Ventana specializes in tissue-based diagnostics,
particularly in the area of cancer, and would complement Roche
Diagnostics’ existing cancer treatment franchise. VMSI’s board rejected
the offer as inadequate even though it offered a 45% premium to the
stock’s prior-day price. With shares trading up as high as $80.25,
investors seem to think a richer proposal could emerge. Rebuffed, Roche
has switched gears to a hostile approach.
News of the Dade-Siemens deal has also sparked some speculation that
Beckman Coulter, as the last pure-play diagnostics company in the top
tier, might be the next takeover target for the big players. Second-tier
companies, focused on specific areas of diagnostic testing, could also
come into play and include Cepheid (NASDAQ: CPHD), Gen-Probe
(NASDAQ: GPRO) Hologic (NASDAQ: HOLX) and Luminex (NASDAQ:
LMNX). Other possible targets? GE Healthcare (NYSE: GE) recently
cancelled its $8.1 billion acquisition of the two diagnostics divisions of
Abbott Laboratories (NYSE: ABT), originally announced in January.
The ostensible reason was that the parties could not agree on final terms,
but an FDA recall of products from one of ABT’s plants may have helped
destabilize the deal. ABT now has to re-reclassify the operations as a
continuing business line, and while it will continue to manage them in the
near term, it is probably not averse to finding another buyer. There are
likely some strategic buyers left over from the early rounds of the
dealmaking that GE ultimately won. For its part, GE indicated that the
company will continue to look for diagnostic opportunities, particularly
in the in-vitro field. The strategy, if not the target company, remains
the same: to acquire early lab tests, such as blood and urine tests, to
complement the company’s existing medical scanning business and expand its
continuum of diagnostic testing.
Other Medical Devices
Medtronic (NYSE: MDT) is paying approximately $3.9 billion to
acquire Kyphon (NASDAQ: KYPH), a company that designs, manufactures
and markets medical devices to treat and restore spinal anatomy. Under
terms of the deal, MDT will pay $71.00 per share in cash and assume $350.0
million in long-term debt. The overall deal value includes $700.0 million
that MDT will spend to buy shares in stock options that have vested. This
deal, valued at 8.76x revenue, offers KYPH shareholders a 32% premium over
the stock’s prior-day price. This acquisition expands MDT’s spinal
treatment business; the company’s spinal and navigation unit represented
20% of total revenue in its most recent financial year. Goldman Sachs and
Piper Jaffrey served as financial advisors to MDT; JPMorgan provided
similar services to KYPH.
In a deal valued at $2.0 billion, Teleflex (NYSE: TFX) is acquiring
Arrow International (NASDAQ: ARRO), a company that develops,
manufactures and markets disposable catheters, heart assist devices and
related products for critical and cardiac care applications. Under terms
of the deal, TFX will pay $45.50 per share in cash. The acquisition,
valued at 3.9x revenue, refocuses the strategic balance among TFX’s
various business units; once this deal closes, the medical segment will be
the company’s largest source of revenue and profitability. Banc of America
Securities LLC served as financial advisor to TFX, Lazard provided similar
services to ARRO.
ReAble Therapeutics is paying $1.6 billion to acquire DJO, Inc.
(NYSE: DJO), a company that manufactures and markets rehab and
regeneration products for the nonoperative orthopedic, spine and vascular
markets. Backed by The Blackstone Group (NYSE: BX), ReAble (fka
Encore Medical Corp.) is paying $50.25 in cash for each share of DJO
stock, and assuming certain debt.
This transaction, valued at 3.6x revenue, offers a 19% premium to DJO’s
prior-day price. This acquisition will provide ReAble with a complementary
set of orthopedic rehabilitation and pain management products. The deal
has a breakup fee of $18.7 million. Wachovia Securities served as
financial advisor to DJO in this transaction; Credit Suisse provided
ReAble with similar services.
News of this deal sent shares of Zimmer Holdings (NYSE: ZMH) up
2.6% on the speculation that the orthopedics giant would follow suit and
become an acquisition target. While attractive because of low debt load
and strong cash flow, ZMH’s fundamentals tend not to favor an LBO. As one
equity analyst noted, “There’s nothing broken, nothing to sell off, so why
do it?”
In a merger valued at $780.0 million, ev3 (NASDAQ: EVVV) is
acquiring FoxHollow Technologies (NASDAQ: FOXH), a rival that
develops, manufactures and sells medical devices primarily for treating
peripheral artery disease and other cardiovascular disease. Under terms of
the deal, FOXH shareholders are to receive 1.45 shares of EVVV common
stock plus $2.75 in cash for each share of FOXH common they own. After
completion of the merger, current ev3 shareholders will own 59% of the
combined company; current FOXH shareholders, 41%. This deal creates an
endovascular devices company with a larger footprint than either could
have individually. It offers FOXH shareholders a 20% premium over the
stock’s 30-day average trading price. Banc of America Securities provided
financial advice to EVVV, J.P. Morgan Securities provided similar services
to FOXH.
|
|
FREE TRIAL
TO THE
HEALTH CARE M&A INFORMATION SERVICE!
If you like this article, there’s lots more
waiting for you in The Healthcare M&A Information Service. It’s the
bible of what's going on in health care M&A today.
Sign up for two free months right now! There’s no
obligation, no writing “cancel” on a bill. Happy reading!
|
|