St. Jude Medical Inc. said Monday it will boost its cardiovascular business by buying rival heart device maker AGA Medical Holdings Inc. for $1.04 billion.
The $20.80-per-share cash and stock deal offers a premium of 41 percent to AGA's latest closing price. St. Jude is also taking on $225 million in debt held by AGA. St. Jude said the deal should close by year-end and add to its profit starting in 2011.
St. Jude plans to start a tender offer for AGA shares in the next few days. Shareholders who own about 63 percent of AGA stock have said they will tender their shares in support of St. Jude's offer, and the boards of both companies have approved the deal.
The St. Paul, Minn., company is one of the world's biggest heart device makers. It said AGA will become part of its cardiovascular business, which makes vascular closure and heart valve products and reported $323 million in sales in 2009. That's less than 10 percent of St. Jude's total revenue.
AGA makes devices used to repair structural heart defects and treat vascular diseases. Its products are primarily used to treat heart problems in children, but AGA also is trying to get some of its products approved to treat strokes or aneurysms caused by different heart defects. If it is successful, it believes sales could rise into the billions.
The company reported $199 million in revenue in 2009 and expects $217 million to $226 million in 2010.
St. Jude's largest business sells heart rhythm management devices like pacemakers and implantable defibrillators. Another St. Jude business makes devices that treat atrial fibrillation, a condition that makes the upper chambers of the heart contract irregularly, potentially causing strokes.
The company reported a total of $4.68 billion in revenue in 2009, little changed from 2008. Of the total, it posted $1.58 billion in heart rhythm device sales and $628 million in atrial fibrillation device sales. St. Jude expects its revenue to grow more than 10 percent in 2011.
St. Jude said the deal will be evenly divided between cash and stock, and said it will fund the purchase with cash on hand. It also said its board approved the repurchase of $600 million of its own stock. The company will take a one-time charge in the fourth quarter to cover acquisition-related expenses.
Shares of AGA surged Monday, rising $5.99, or 40.7 percent, to close at $20.70. They previously had traded between $11.61 and $18.95 since the company went public in October 2009. The Plymouth, Minn., company had 50.2 million shares on the market as of Aug. 3.
In afternoon trading, St. Jude shares rose 73 cents to close at $40.63.