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Medtronic's HeartWare Takeover Complete for $1.1 Billion
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Medical technology giant Medtronic plc (MDT - Free Report) recently completed the acquisition of HeartWare International, Inc. – a global medical device manufacturer dedicated to serve patients with advanced heart failure -- in time with management’s expectation. Earlier in late Jun 2016, Medtronic sealed the deal for a value of $1.1 billion.
As per the terms of the deal, each shareholder of HeartWare will receive $58.00 in cash, without interest; against each outstanding common stock of the company.
What Can Medtronic Expect from This Deal?
HeartWare’s innovative technologies include miniaturized version of ventricular assist devices (VAD), simply known as implantable heart pumps, which facilitate less invasive surgical procedures in treating advanced heart failure patients. Notably this company’s flagship product – HVAD system – is the world’s smallest full-support VAD and has been implanted in more than 10,000 patients across 47 countries globally.
Indisputably this indicates the rapid popularity this device has already gained among global cardiologists, post obtaining CE Mark approval in 2009 and the subsequent FDA nod in 2012.
Accordingly, management at Medtronic believes the HeartWare acquisition will expand the former’s leadership across the heart failure continuum. This deal is also expected to aid Medtronic in offering much more advanced less-invasive heart pumps. We believe this in turn will expand the company’s customer base apart from providing better patient outcome.
Financial Terms of the Deal
The HeartWare takeover will increase the overall headcount of Medtronic by 600. With respect to financial gains expected from this deal, Medtronic projects this merger to meet the company’s long-term metrics for acquisitions.
As far as the company’s fiscal year 2017 operating results are concerned, this buyout is expected to bring in no alterations. However, management expects this deal to offer increased confidence in Medtronic’s ability to deliver on its fiscal year 2017 revenue growth outlook.
Medtronic also projects minimal to no net EPS dilution from this merger for the first two years as management intends to offset the expected dilutive impact. The deal will be earnings accretive in the third year.
Our View
Heart failure, a common yet a potentially fatal medical condition, currently is the leading cause of hospitalization and death in the U.S.; with aged people being more at risk of heart failure. In the U.S. alone, healthcare expenditures on heart failure are estimated to be approximately $39 billion per year, making it one of the largest expenses to the healthcare system. With the aging of the population, Medtronic estimates that the number of heart failure patients might exceed 8 million by 2030.
That said, it is reasonable to assert that medical device manufacturers like Medtronic must be engrossed in offering products that will not only offer a better patient outcome but at a reduced cost. No doubt the addition of HeartWare’s unique HVAD system to Medtronic’s ever expanding CRT portfolio will keep the later one step ahead, as this device’s less extensive incision offers reduced hospital stays and quick recovery; compared to other heart pumps.
Additionally, the global VAD market is currently valued at $800 million, which is estimated to grow in the mid-to-high single digits for calendar years 2016-17 and then to high-single/low-double digits beyond calendar year 2017. Considering this, we believe that with HeartWare in its kitty, Medtronic will now gracefully lead the global VAD market.
Zacks Rank
Medtronic currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical sector are GW Pharmaceuticals plc , NuVasive, Inc. and Quidel Corp. (QDEL - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
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Medtronic's HeartWare Takeover Complete for $1.1 Billion
Medical technology giant Medtronic plc (MDT - Free Report) recently completed the acquisition of HeartWare International, Inc. – a global medical device manufacturer dedicated to serve patients with advanced heart failure -- in time with management’s expectation. Earlier in late Jun 2016, Medtronic sealed the deal for a value of $1.1 billion.
As per the terms of the deal, each shareholder of HeartWare will receive $58.00 in cash, without interest; against each outstanding common stock of the company.
What Can Medtronic Expect from This Deal?
HeartWare’s innovative technologies include miniaturized version of ventricular assist devices (VAD), simply known as implantable heart pumps, which facilitate less invasive surgical procedures in treating advanced heart failure patients. Notably this company’s flagship product – HVAD system – is the world’s smallest full-support VAD and has been implanted in more than 10,000 patients across 47 countries globally.
Indisputably this indicates the rapid popularity this device has already gained among global cardiologists, post obtaining CE Mark approval in 2009 and the subsequent FDA nod in 2012.
Accordingly, management at Medtronic believes the HeartWare acquisition will expand the former’s leadership across the heart failure continuum. This deal is also expected to aid Medtronic in offering much more advanced less-invasive heart pumps. We believe this in turn will expand the company’s customer base apart from providing better patient outcome.
Financial Terms of the Deal
The HeartWare takeover will increase the overall headcount of Medtronic by 600. With respect to financial gains expected from this deal, Medtronic projects this merger to meet the company’s long-term metrics for acquisitions.
As far as the company’s fiscal year 2017 operating results are concerned, this buyout is expected to bring in no alterations. However, management expects this deal to offer increased confidence in Medtronic’s ability to deliver on its fiscal year 2017 revenue growth outlook.
Medtronic also projects minimal to no net EPS dilution from this merger for the first two years as management intends to offset the expected dilutive impact. The deal will be earnings accretive in the third year.
Our View
Heart failure, a common yet a potentially fatal medical condition, currently is the leading cause of hospitalization and death in the U.S.; with aged people being more at risk of heart failure. In the U.S. alone, healthcare expenditures on heart failure are estimated to be approximately $39 billion per year, making it one of the largest expenses to the healthcare system. With the aging of the population, Medtronic estimates that the number of heart failure patients might exceed 8 million by 2030.
That said, it is reasonable to assert that medical device manufacturers like Medtronic must be engrossed in offering products that will not only offer a better patient outcome but at a reduced cost. No doubt the addition of HeartWare’s unique HVAD system to Medtronic’s ever expanding CRT portfolio will keep the later one step ahead, as this device’s less extensive incision offers reduced hospital stays and quick recovery; compared to other heart pumps.
Additionally, the global VAD market is currently valued at $800 million, which is estimated to grow in the mid-to-high single digits for calendar years 2016-17 and then to high-single/low-double digits beyond calendar year 2017. Considering this, we believe that with HeartWare in its kitty, Medtronic will now gracefully lead the global VAD market.
Zacks Rank
Medtronic currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical sector are GW Pharmaceuticals plc , NuVasive, Inc. and Quidel Corp. (QDEL - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>