Medtronic Plc, the world’s largest multi-national manufacturer of heart-rhythm devices, has announced plans to buy HeartWare International Inc. for about $1.1 billion, adding more heart-failure devices to its line of products.
The two companies disclosed at the end of June that the acquisition will provide Medtronic with more diagnostic tools and treatments for heart failure, a condition occurs when the heart muscle does not pump blood as well as it should.
Minnesota-based Medtronic agreed to pay $58-per-share cash for HeartWare – a 93% premium over HeartWare’s Friday closing price of $29.98. The deal is expected to wrap up during Medtronic’s fiscal 2nd quarter ending on Oct. 28.
On Monday, HeartWare's shares jumped to $57.3 in premarket trading, while Medtronic's shares went down 2.4%.
The Massachusetts-based HeartWare manufactures devices known as ventricular assist devices (VADs) that mimic the heart’s blood-pumping function. The company's flagship product, the HVAD heart pump, is a mechanical pump that can be implanted in patients with advanced heart failure when one ventricle of the heart does not function properly. A compact version of the same pump, called the MVAD, is being developed by the company, but it hasn’t been launched yet.
According to Medtronic estimate, currently the global VAD market is about $800 million and is expected to grow by a percentage in the high-single, low-double digit in the years to come. Medtronic has been investing in companies that manufacture less-invasive surgical devices. This signals the company's intention to adapt its business to the shifting landscape of healthcare, particularly in regard to implantable devices and wearables.
In January 2015, the company acquired Dublin-based Covidien for $50 billion. The acquisition represented a consolidation of two of the world’s largest medical supply companies. Under that deal, Medtronic was allowed to move its corporate headquarters from Minneapolis to Dublin in what is known as inversion, a technique companies use to lower their tax burden.
HeartWare, with its 625 employees worldwide, would be the second medical device firm to be acquired by Medtronic after its acquisition of Covidien. HeartWare’s facilities are located in Framingham, Massachusetts; Arden Hills, Minnesota; Miami Lakes, Florida; and Hannover, Germany.
For the fiscal year ending on April 29, Medtronic reported earnings of $3.54 billion on revenue of $28.83 billion.
Heartware, on the other hand, had a loss of $72.8 million on revenue of $276.8 million in its most recent fiscal year ending Dec. 31.