Medtronic to put up $1.1B for HeartWare

Medtronic (NYSE:MDT) said today that it agreed to put up $1.1 billion for implantable cardiac pump maker HeartWare International (NSDQ:HTWR).

The $58-per-share deal, which represents a 93.4% premium over HeartWare’s $29.98 closing price June 24, is slated to close by Oct. 28 (the end of Medtronic’s fiscal 2nd quarter). HeartWare’s 30-day closing average as of June 24 was $30.20 per share.

The deal clears the field of the 2 major cardiac assist device makers, after Medtronic’s cross-town rival, St. Jude Medical (NYSE:STJ), paid $3 billion for Thoratec in October 2015.

“The addition of HeartWare’s innovative portfolio adds to our expanding portfolio of diagnostics, therapeutics and services that address heart failure patients,” Medtronic cardiac & vascular president Mike Coyle said in prepared remarks. “The team at HeartWare has established excellent relationships with its hospital customers and built a strong position and reputation in the marketplace. This transaction, once closed, will be a further, important step toward Medtronic offering a complete suite of solutions to address patient needs across the heart failure care continuum.”

“Medtronic is the worldwide leader in cardiovascular device technologies. Its expansive expertise in the development of implantable systems and battery technologies, patient monitoring, manufacturing, global regulatory policy and commercialization should help accelerate the development and introduction of our innovative pipeline products, and will expand access to our therapies and offerings to the sizable heart failure population,” added HeartWare president & CEO Doug Godshall. “Combining the unique capabilities of the HeartWare team, which has been entirely focused on mechanical support technologies, with the broad strength of the Medtronic organization provides a unique opportunity to enhance growth in the mechanical circulatory support market. All of our stakeholders, including customers, employees, shareholders, and most importantly, patients, will benefit meaningfully from this complementary combination.”

HeartWare’s implantable left ventricular assist devices are designed for end-stage heart failure patients, either as a destination therapy until death or as a bridge to heart transplantation.

“HeartWare’s HVAD system enhances the portfolio of our cardiac & vascular group, a team with a proven track record of executing and a demonstrated ability to scale early stage concepts into large, sustainable end markets,” Medtronic chairman & CEO Omar Ishrak said in a press release. “In addition, from a financial perspective, we are pleased to reach an agreement that meets our acquisition criteria of adding minimal to no net EPS dilution in the near-term, while at the same time creating strong, long-term expected returns for our shareholders.”

Medtronic said that although it’s not changing its guidance as a result of the acquisition, “it is expected to provide increased confidence in the company’s ability to deliver on its FY17 revenue growth outlook.” HeartWare’s effect on earnings per share is expected to be zero to minimal for the 1st 2 years and accretive after that, the company said.

J.P. Morgan Securities advised Medtronic on the deal, with Ropes & Gray as legal advisor. HeartWare’s financial advisor was Perella Weinberg Partners, with Shearman & Sterling as legal advisor.

HTWR shares closed down -9.6% at $29.98 June 24, as investors reacted to the U.K.’s decision to leave the European Union, but the stock jumped 66.6% to $49.95 per share in pre-market trading on news of the merger. 

MDT shares closed down -2.9% at $83.26 apiece last week.

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