Medtronic to Acquire Kyphon for $3.9 Billion(Graphic: Business Wire)
July 27 2007 - 6:30AM
Business Wire
Medtronic, Inc. (NYSE:MDT) and Kyphon (NASDAQ:KYPH) today announced
that the companies have signed a definitive merger agreement under
which Medtronic will acquire all of the outstanding shares of
Kyphon for $71 per share in cash. The transaction, which was
unanimously approved by the boards of directors of both companies,
is valued at approximately $3.9 billion. This excludes $320 million
in payments associated with the St. Francis Medical Technologies,
Inc. and Disc-O-Tech Medical Technologies, Ltd. transactions. The
acquisition price represents a 32% premium over Kyphon�s closing
stock price on July 26, 2007 of $53.68 and a 35% premium over
Kyphon�s 30-day average trading price of $52.76 per share. The
transaction, which is anticipated to close in the first calendar
quarter of 2008, is expected to be neutral to Medtronic earnings in
the first full fiscal year after closing and accretive thereafter.
Medtronic expects the merger to yield significant revenue, cost and
tax synergies. �We expect our combination with Kyphon to help
accelerate the growth of Medtronic�s existing spinal business by
extending our product offerings into some of the fastest growing
product segments and enabling us to provide physicians with a
broader range of therapies for use at all stages of the care
continuum,� said Art Collins, chairman and chief executive officer
of Medtronic. �Importantly, the combination will also enable more
patients of all ages to receive the benefits of modern, minimally
invasive spinal treatments earlier in their care, with life-style
friendly options that are simpler, faster and less invasive than
many traditional surgical treatments. �We have great respect for
Rich Mott and his team and look forward to Kyphon�s employees
joining Medtronic at the close of the transaction. Kyphon�s
world-class, global sales force will play a central role in the
continued development of our spinal business,� Collins concluded.
�We are very enthusiastic about the opportunity to deliver
outstanding value for our shareholders that fully reflects Kyphon�s
innovation and growth potential. This merger also combines two
recognized industry leaders in spinal treatments,� said Richard
Mott, president and chief executive officer of Kyphon. �By merging
our complementary strengths and collective resources into one
organization, we will meaningfully increase our ability to ensure
we meet the needs of our clinician customers around the world and
the patients they serve. This combination also offers our employees
the opportunity to become part of an organization with a shared
vision and the depth of resources that are increasingly beneficial
for sustained success in our industry. We look forward to working
with Medtronic to complete the transaction quickly and seamlessly.
Our board of directors believes that this acquisition is in the
best interests of our shareholders, employees and other
stakeholders and has unanimously voted to recommend that Kyphon
shareholders vote in favor of it.� The two companies� product lines
and geographic presence are highly complementary. While both
companies have expertise in minimally invasive, highly effective
treatments, Medtronic�s spinal surgery focus has been on providing
treatment options for younger patients who are suffering from
scoliosis and degenerative disc disease in the cervical and lumbar
spine. Kyphon�s focus has been on treating older patients suffering
from vertebral compression fractures and spinal stenosis. Together,
the combined entity will be able to leverage its knowledge of
modern fusion, dynamic stabilization, artificial disc replacement,
biologics, vertebral augmentation, interspinous process
decompression, disc disease diagnosis, navigation and minimally
invasive techniques to serve patients with a broader variety of
spinal disorders in order to alleviate pain and restore health for
more patients. The combined entity will also have a larger and
expanded base of customers than Medtronic serves alone. Medtronic
primarily serves orthopaedic and neurological surgeons who
specialize in spinal surgery. Kyphon serves these same physicians
and also has a significant customer base with interventional
radiologists and interventional neuroradiologists. The transaction
will be financed by a combination of cash on the balance sheet and
debt. The transaction is subject to customary closing conditions,
including approval by antitrust regulators as well as Kyphon
shareholders. Cleary Gottlieb Steen & Hamilton LLP is acting as
legal advisor to Medtronic and Goldman, Sachs & Co. and Piper
Jaffray are acting as financial advisors. Latham & Watkins LLP
is acting as legal advisor to Kyphon and JPMorgan is acting as
financial advisor. Analyst Conference Call/Webcast Medtronic and
Kyphon will host an investor conference call (612-332-1210) later
this morning at 7:30 a.m. central time (5:30 a.m. pacific time) to
discuss the Kyphon acquisition. For complete instructions on how to
participate in the conference call, or to listen to the live audio
webcast or a replay of the webcast, please refer to the Investor
Relations sections at http://www.medtronic.com or
http://www.kyphon.com. ABOUT MEDTRONIC Medtronic, Inc.
(www.medtronic.com), headquartered in Minneapolis, is the global
leader in medical technology � alleviating pain, restoring health,
and extending life for millions of people around the world. ABOUT
KYPHON INC. Kyphon develops and markets medical devices designed to
restore and preserve spinal function and diagnose the source of low
back pain using minimally invasive technologies. The company�s
products are used in balloon kyphoplasty for the treatment of
spinal compression fractures caused by osteoporosis or cancer, in
the Functional Anaesthetic Discography� (F.A.D.�) procedure for
diagnosing the source of low back pain, and in the Interspinous
Process Decompression (IPD�) procedure for treating the symptoms of
lumbar spinal stenosis. More information about the company and its
products can be found at www.kyphon.com and its patient education
Web site, www.spinalfracture.com. FORWARD-LOOKING STATEMENTS This
press release contains forward-looking statements, which involve a
number of risks and uncertainties. Medtronic and Kyphon caution
readers that any forward-looking information is not a guarantee of
future performance and that actual results could differ materially
from those contained in the forward-looking information.
Forward-looking statements include, but are not limited to,
statements about the benefits of the business combination
transaction involving Medtronic and Kyphon, including future
financial and operating results, post-acquisition plans,
objectives, expectations and intentions and other statements that
are not historical facts. The following factors, among others,
could cause actual results to differ from those set forth in the
forward-looking statements: the ability to obtain regulatory
approvals of the proposed merger on the proposed terms and
schedule; the failure of Kyphon stockholders to approve the
transaction; the risk that the businesses will not be integrated
successfully; the risk that the cost savings and any other
synergies from the transaction may not be fully realized or may
take longer to realize than expected; disruption from the
transaction making it more difficult to maintain relationships with
customers, employees or suppliers; and competition and its effect
on pricing, spending, third-party relationships and revenues.
Additional factors that may affect future results are contained in
Medtronic�s and Kyphon�s filings with the Securities and Exchange
Commission (the �SEC�), which are available at the SEC�s web site
http://www.sec.gov. Medtronic and Kyphon disclaim any obligation to
update and revise statements contained in these materials based on
new information or otherwise. ADDITIONAL INFORMATION ABOUT THIS
TRANSACTION Kyphon will file with the SEC and mail to its
stockholders a proxy statement that will contain important
information about Kyphon, the proposed merger and related matters.
Stockholders are urged to read the proxy statement regarding the
proposed merger when it becomes available because it will contain
important information that stockholders should consider before
making a decision about the merger. You may obtain a free copy of
the proxy statement (when available) and other related documents
filed by Medtronic and Kyphon with the SEC at the SEC�s website at
www.sec.gov. The proxy statement (when it is available) and the
other documents may also be obtained for free by accessing Kyphon�s
website at www.kyphon.com by clicking on the �Investors� link and
then clicking on the �Financial Information� heading and the
�SEC�Filings� heading, by writing to Kyphon at 1221 Crossman
Avenue, Sunnyvale, CA 94089-2450, Attention: Julie Tracy, or by
emailing jtracy@kyphon.com. Medtronic, Kyphon and their respective
directors, executive officers and certain other members of
management and employees may be soliciting proxies from Kyphon
stockholders in favor of the merger. Information regarding the
persons who may, under the rules of the SEC, be considered
participants in the solicitation of the Kyphon stockholders in
connection with the proposed merger will be set forth in the proxy
statement when it is filed with the SEC. You can find information
about Medtronic�s executive officers and directors in its
definitive proxy statement filed with the SEC on July 20, 2007. You
can find information about Kyphon�s executive officers and
directors in its definitive proxy statement filed with the SEC on
April 30, 2007. You can obtain free copies of these documents from
Medtronic and Kyphon using the contact information above.
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