St. Jude Medical adds more heart devices in $3.4B buy
Updated 5 p.m. | Posted 12:41 p.m.
St. Jude Medical will spend $3.4 billion in cash to acquire Thoratec, further bulking up its array of devices that are used to treat heart conditions.
Heart failure devices have become pivotal for the St. Paul company since the Food and Drug Administration approved its remote patient monitoring system CardioMems HF last year.
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Thoratec's key product is an implantable device that helps patients' hearts pump more blood.
About 5.8 million people in the U.S. have heart failure, in which the heart cannot pump enough blood to meet the body's oxygen needs, and St. Jude is positioning itself to satisfy the need for better technology.
St. Jude will pay $63.50 for Thoratec Corp., a 30 percent premium to its closing price on Tuesday. The deal is expected to close in the fourth quarter and includes a go-shop period, during which the Pleasanton, Calif., company will solicit other proposals through Aug. 20.
Thoratec Corp. will be required to pay a termination fee of about $30 million if it backs out of the deal during the go-shop period, and about $111 million if it backs out after Aug. 20.
The deal allows St. Jude Medical Inc. access to new markets totaling more than $1 billion that are expected to grow about 10 percent annually, the company said.
St. Jude is also touting the strong relationships both companies have with heart failure physicians and cardiac surgeons as key benefit to selling Thoratec's new heart pump, the HeartMate PHP.
Health care providers prefer suppliers that can provide lots of products while helping control costs.
The Thoratec deal reflects that bigger-is-better industry trend, said Debbie Wang, an analyst with the investment research firm Morningstar.
"Management has broadened its thinking on what it's going to take to survive as we move forward in this post-Affordable Care Act world," Wang said. "That means you have to think about how to add value to hospital clients across the board."
Medtronic made a huge move down that road earlier this year with its nearly $50 billion acquisition of medical products maker Covidien.
Thoratec positions St. Jude to serve some of the sickest heart patients by providing a heart pump as a possible alternative to a transplant, but it's also paying a rich price for a technology still in its relatively early stages of clinical development, said Brooks West, an analyst with the investment firm Piper Jaffray.
"It's an interesting deal for St. Jude," he added, "but also one that brings quite a bit of risk."
MPR News reporter Martin Moylan contributed to this report.