Covidien Announces Definitive Agreement to Acquire VNUS Medical Technologies
News May 11, 2009
Covidien and VNUS Medical Technologies, Inc. announced that Covidien has reached a definitive agreement to acquire VNUS, a developer of medical devices for minimally invasive treatment of venous reflux disease.
VNUS had 2008 revenues of $101 million and is based in San Jose, CA. The Boards of Directors of both companies have unanimously approved the transaction, pursuant to which a wholly owned subsidiary of Covidien will pay $29.00 in cash per VNUS share for a total of approximately $440 million, net of cash acquired. The transaction, which will take the form of an all cash tender offer followed by a second-step merger, is subject to customary closing conditions, including receipt of certain regulatory approvals, and is expected to be completed by June 30, 2009.
Venous reflux disease is an underlying cause of varicose veins that can result in symptoms including leg pain, swelling, fatigue and skin ulcers. VNUS’s proprietary products include the VNUS Closure® system, which employs a disposable radiofrequency catheter that controllably heats and closes diseased veins.
VNUS claims that in a randomized clinical trial, the system was proven to be as effective as vein stripping, an open surgical procedure that has been the historical standard for treatment for venous reflux disease, but with fewer side effects and faster recovery.
“The acquisition of VNUS will allow Covidien to expand its presence in the vascular market and is in line with our strategy of becoming a leading partner with vascular surgeons and interventional radiologists,” said Joe Almeida, President, Medical Devices, Covidien. “The VNUS product line will be an important addition to our innovative portfolio of vascular intervention products.”
“By joining Covidien, VNUS gains access to extended global resources to further drive the growth of VNUS products around the world,” said Brian Farley, President and Chief Executive Officer, VNUS. “To date, approximately 500,000 patients suffering from painful varicose veins and venous reflux have been treated with the VNUS Closure catheter, and we look forward to seeing this transaction facilitate expanding the access to this beneficial therapy for many more patients.”
Assuming a second calendar quarter closing, Covidien expects this transaction to dilute fiscal 2009 GAAP earnings per share, primarily due to a one-time charge for in-process research and development (IPR&D). On a non-GAAP basis, excluding IPR&D, the transaction is expected to be slightly dilutive to 2009 earnings per share; however, the underlying strength of Covidien’s existing businesses is expected to offset this dilution. As a result, Covidien does not anticipate this transaction will have a material impact on its fiscal 2009 sales or operating margin outlook.
Once the transaction has been completed, Covidien will report the VNUS business as part of its Vascular product line in the Medical Devices segment.