‘Go-shop’ lapses without new rival for St. Jude’s $3B Thoratec buy

A 30-day “go-shop” period in St. Jude Medical‘s (NYSE:STJ) pending, $3.4 billion acquisition of Thoratec (NSDQ:THOR) lapsed last week without a 2nd suitor emerging, sending the companies’ stock prices down slightly last Friday.

The merger, medtech’s latest multi-billion union, calls 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.

The deal also includes a “go shop” provision that allowed Thoratec to pursue other acquirers until August 20. If another deal had come through during that time, Thoratec would have to pony up a $30 million termination fee to Little Canada, Minn.-based St. Jude. That fee rises to $111 million should a deal arise now that the go-shop period is over.

The acquisition is expected to close during the 4th quarter.

THOR shares closed down 0.3% August 21, at $62.55 per share. STJ shares also dipped 3.2% Friday, closing at $62.08 each.

Medtronic (NYSE:MDT), Abbott (NYSE:ABT) or Johnson & Johnson (NYSE:JNJ) could have been “potential dark horses” for a competing bid for Thoratec, Leerink Partners analyst Danielle Antalffy wrote last month. Today Antalffy said the presumed closing of the St. Jude buyout would give that company a full suite of heart failure products, ranging from its CardioMEMS implantable heart monitor, to its bread-and-butter cardiac rhythm management franchise, and now to end-stage heart failure with the Thoratec line of implantable heart pumps.

“And we’d expect global LVAD market growth to accelerate to at least low double digits as: (1) STJ drives increasing referrals downstream; and (2) Next-gen products – including THOR’s HeartMate III – continue to reduce adverse events and improve outcomes,” Antalffy wrote. “Based on our very early ‘rough-cut’ analysis, THOR can add nearly a dime to our current $4.40 2016 STJ EPS estimate and ramping incrementally from there in the outer years.”

Last month St. Jude raised its 2015 outlook, saying it expects to post earnings of $3.96 to $4.00, up from prior guidance of $3.92 to $3.97, and boosted the top end of its constant-currency sales growth outlook from 4% to 5% to 4% to 6%.

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