Thoratec acquisition pushes St. Jude Medical to 52-week high

St. Jude Medical (NYSE:STJ) shares hit a 52-week high yesterday on rumors of the $3.4 billion buyout of Thoratec (NSDQ:THOR) it confirmed today, also reporting a more than 7.4% bottom-line gain for the 2nd quarter and boosted its outlook for the rest of the year.

Little Canada, Minn.-based St. Jude posted profits of $290 million, or $1.02 per share, on sales of $1.41 billion, for profit growth of 7.4% on a sales decline of -2.2%.

Adjusted to exclude 1-time items, earnings per share were $1.03, 3¢ ahead of analyst’s consensus forecast. Wall Street was looking for revenues of $1.39 billion for the quarter.

“St. Jude Medical’s second quarter results reflect the continued success of our innovation-based growth strategy. We remain confident in our key programs that accelerated sales growth in the first half of 2015 and are raising our sales guidance in order to demonstrate our strong outlook for the remainder of the year,” chairman, president & CEO Daniel Starks said in prepared remarks.

News of the Thoratec buyout overshadowed the strong results, propelling STJ shares to a year-long high of $80.84 apiece yesterday. The stock was trading at $77.25 per share in mid-morning trading today, up 0.7%.

Terms of the deal call for St. Jude to pay $63.50 in cash for each share of Pleasanton, Calif.-based Thoratec, funded using term loans and senior unsecured debt, Little Canada, Minn.-based St. Jude said.

The deal also includes a “go shop” provision allowing Thoratec to pursue other acquirers until August 20. If another deal does come through during that time, Thoratec would have to pony up a $30 million termination fee. That fee rises to $111 million should a deal arise after the go-shop period, St. Jude said. The acquisition is expected to close during the 4th quarter.

Leerink Partners analyst Danielle Antalffy said it’s possible that another bidder will step in during the go-shop term, naming Medtronic (NYSE:MDT), Abbott (NYSE:ABT) or Johnson & Johnson (NYSE:JNJ) as “potential dark horses.”

“If another bidder steps in, we think THOR could secure a 7x EV/2016E sales multiple,” Antalffy wrote this morning in a note to investors.

For its part, St. Jude expressed optimism about the rest of 2015, raising its earnings guidance to $3.96 to $4.00 from prior guidance of $3.92 to $3.97, and boosting the top end of its constant-currency sales growth guidance from 4% to 5% to 4% to 6%.

St. Jude pegged 3rd-quarter adjusted EPS at 96¢ to 98¢ on constant-currency sales growth of 5% to 7%.

Thoratec got its own boost today after reporting preliminary sales numbers well ahead of The Street’s forecast for a $115.5 million top line, saying it expects to report revenues of $128 million to $129 million when it posts its results August 4. THOR shares were up 9.6% to $63.08 each today in mid-morning trading.

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