Covidien to Acquire ev3 Inc for $2.6 billion

Chandrasekhar Atreya
02 Jun, 2010
New York City

Medical equipment company Covidien Plc, has signed a definitive agreement with ev3 Inc to acquire all of its outstanding shares for $22.50 per share for a total of $2.6 billion.

[R]Medical equipment company Covidien Plc, has signed a definitive agreement with ev3 Inc to acquire all of its outstanding shares for $22.50 per share for a total of $2.6 billion.[/R]

Covidien Plc, the medical equipment company spun off from Tyco International Ltd, and EV3 Inc announced that they have signed a definitive merger agreement under which Covidien will acquire all of the outstanding shares of ev3 Inc for $22.50 per share in cash for a total of $2.6 billion net of cash acquired.

“Ev3 significantly expands our presence in the $3 billion peripheral vascular market and gives us a strong entry point into the $1 billion neurovascular market and as there are virtually no product overlaps, the integration should be very straightforward,” said Covidien’s CEO Richard Meelia in a conference call.

The transaction will be done by a wholly-owned subsidiary of Covidien, followed by a second-step merger subject to customary closing conditions including receipt of certain regulatory approvals. The deal is expected to be completed by July 31, 2010.

The boards of directors of both companies have unanimously approved the transaction. All the directors and executives of ev3 have confirmed their intention to tender all shares held by them into the offer, and certain stockholders affiliated with Warburg Pincus Equity Partners LP, holding approximately 24% of ev3’s outstanding shares have entered into agreements with Covidien to tender their shares.

Once the deal is completed Covidien will report ev3 as part of its Vascular Products line in the Medical Devices business segment.

Covidien intends to finance the transaction through a combination of cash on hand, commercial paper, and a fully committed bridge facility.

Since its founding in 2000, ev3 has been dedicated to developing breakthrough and clinically proven technologies for the endovascular treatment of peripheral vascular and neurovascular diseases.

Covidien said it has no plans to move any of ev3’s operations and 1,350 employees out of Minnesota.

Shares of Covidien fell 2.7% or $1.15 to $41.24 in NYSE, while ev3 rose 17% or $3.30 to $22.22. Shares of ev3 have risen 67% this year.

The purchase will reduce Covidien’s earnings per share this year and the next, as per statement made by Covidien in its conference call.