Medtronic said it would buy HeartWare International for about $1.1bn, bulking up its portfolio of devices for treating heart diseases and pushing deeper into the market for less-invasive surgical products.
HeartWare shares rose as much as 92% to $57.58 in morning trading yesterday, just below the offer price of $58 per share in cash.
Medtronic shares fell about 2%.
HeartWare’s flagship product, the HVAD System, is placed in the body through a less-invasive surgery and assists with blood flow when the heart is unable to pump blood efficiently.
The company, which had a market value of $525.87mn as of Friday, is also developing MVAD System — a next-generation heart pump that is 40% smaller than the HVAD System.
However, MVAD has been facing issues such as clotting-related side effects in trials, pulling down HeartWare’s stock by 61% in the year to Friday’s close.
“Medtronic is catching HeartWare at a near bottom which makes the acquisition premium more palatable,” Cowen and Co analysts wrote in a note.
HeartWare is the second biggest player in the US heart pumps market with a 40% share.
St Jude Medical Inc’s Thoratec unit leads the market with a 60% share.
Medtronic said the global heart pump market was estimated at about $800mn.
The market is expected to grow in mid to high single digit in percentage terms in 2016 and 2017, and in high-single or low-double digits thereafter.
The deal comes a couple of months after AbbVie Inc said it would buy lung cancer drug developer Stemcentrx and France’s Sanofi offered to acquire cancer drug maker Medivation.
The offers led to expectations that there could be more deals in the sector as a drop in biotech stocks this year pushes down the valuations of companies, setting the stage for offers at premiums as high as 50-100%.
Medtronic said the HeartWare acquisition was expected to close during its second quarter, which ends on October
28.
Last month, the company bought a stake in Israel’s Mazor Robotics Ltd and acquired Smith & Nephew’s gynecology unit.
J.P. Morgan Securities is Medtronic’s financial adviser for the transaction and Ropes & Gray is its legal counsel.
Perella Weinberg Partners and Shearman & Sterling are advising HeartWare.