St. Jude Medical Inc. is set to acquire Pleasanton-based and HeartMate maker Thoratec Corp. in a transaction valued at approximately $3.4 billion, or $63.50 per share.
The boards of directors of both companies announced Friday that they have unanimously approved a definitive agreement under which St. Jude Medical will acquire all of the outstanding shares of Thoratec in an all-cash transaction. It represents a premium of 40.1% compared to Thoratec's trading price of to $45.34 for the 30 trading day period ending July 17.
The transaction is expected to be completed in this year's fourth quarter.
Thoratec is a leader in mechanical circulatory support technology for the treatment of advanced heart failure, which includes ventricular assist devices that are used for both chronic and acute patient support. The combination of complementary product lines of St. Jude Medical and Thoratec is seen as offering a comprehensive portfolio of products for the management and treatment of heart failure.
"Thoratec's strong core business and rich portfolio of new products complement St. Jude Medical's innovation-based growth strategy and will benefit patients, customers, employees and shareholders of both companies," said Daniel J. Starks, chairman, president and Chief Executive Officer of St. Jude Medical.
"The addition of Thoratec's leading ventricular assist device portfolio expands and enhances St. Jude Medical's established presence in heart failure therapies," he added. "We look forward to welcoming Thoratec employees to our company at such an exciting time in our history."
Starks explained that the transaction accelerates St. Jude Medical's growth strategy by adding Thoratec's complementary products and technologies to St. Jude Medical's heart failure portfolio that includes its quadripolar cardiac resynchronization therapy, remote monitoring capabilities and CardioMEMS HF System.
He added that together, the combined organization will offer physicians and their patients innovative solutions across the heart failure care continuum.
"Thoratec is pleased to join St. Jude Medical as we create a company that's uniquely positioned to advance treatment options for patients living with heart failure," said D. Keith Grossman, Thoratec's president and chief executive officer. "By combining the capabilities and leading technologies of both companies, we will be able to expand access, reduce costs and advance heart failure therapies on a global basis."
He added: "Our employees and customers have worked together tirelessly over many years to create the market leader Thoratec has become. It is gratifying to see the creation of a combined product platform and capability with St. Jude Medical that will fulfill the promise of our products to many, many more patients in the years to come."
St. Jude Medical's strength in heart failure solutions is based on its portfolio of innovative solutions that are proven to improve outcomes and reduce costs, including its Quadripolar CRT-D and CRT-P technologies, MultiPoint Pacing CRT technology, remote monitoring capabilities and the CardioMEMS HF System.
Thoratec adds HeartMate II®, a widely used and extensively studied left ventricular assist device, as well as the next generation HeartMate 3 and HeartMate PHP and other complementary products to St. Jude Medical's portfolio.
Thoratec is the global leader in the VAD market, which is currently estimated to be approximately $750 million, and recently announced CE Mark approval of its percutaneous heart pump, allowing Thoratec to enter a global market expected to exceed $300 million in 2016.
This acquisition positions St. Jude Medical to enter new markets totaling more than $1 billion that are expected to grow approximately 10 % annually, benefitting St. Jude Medical's sales growth profile beginning in 2016.
Both companies have strong relationships with heart failure physicians and cardiac surgeons. St. Jude Medical's interventional cardiology relationships will be an important benefit to commercialize Thoratec's new percutaneous heart pump, HeartMate PHP, used in high risk percutaneous coronary intervention procedures.
In addition, analysts believe St. Jude Medical's global presence can further strengthen and enhance Thoratec's international growth as only approximately 20% of Thoratec's sales currently come from outside of the U.S.
Under the terms of the merger agreement, Thoratec shareholders will receive $63.50 in cash, without interest, for each share of Thoratec common stock they own. The transaction is conditioned upon, among other things, Thoratec shareholder approval, regulatory approvals and other customary closing conditions.
The transaction is not conditioned on financing. St. Jude Medical intends to fund the transaction through proceeds from additional bank term loan debt and senior unsecured notes.
The merger agreement includes a "go-shop" period, during which Thoratec will actively solicit alternative proposals from third parties for the next 30 days continuing through August 20.
The merger agreement provides for Thoratec to pay a termination fee of approximately $30 million to St. Jude Medical if Thoratec terminates the merger agreement in connection with a superior proposal that arose during the go-shop period and a termination fee of approximately $111 million if Thoratec terminates the merger agreement in connection with a superior proposal that arose following the go-shop period.
Bank of America Merrill Lynch is acting as financial advisor to St. Jude Medical and has also provided fully committed financing. Gibson, Dunn & Crutcher LLP is serving as legal counsel to St. Jude Medical. Guggenheim Securities is acting as financial advisor to Thoratec, and Latham & Watkins LLP is serving as legal counsel. Centerview Partners provided a fairness opinion to the Thoratec board of directors in connection with the transaction.
St. Jude Medical is headquartered in St. Paul, Minn. Thoratec's headquarters are at 6035 Stoneridge Dr. in Pleasanton.