Medtronic buys Plymouth-based ATS Medical for $370M

Medtronic headquarters
Medtronic is headquartered in the Twin Cities.
MPR Photo/Tom Crann

Medtronic Inc. said Thursday that it will acquire ATS Medical Inc. for $370 million in cash and debt, a move that further expands the medical device maker's foray into the fast growing market for products that treat structural heart disease.

Medtronic, based in Fridley, Minn., will pay $4 for each share of ATS Medical, headquartered in Plymouth, Minn.

"The acquisition of ATS Medical will further strengthen our CardioVascular business," Scott Ward, Medtronic senior vice president who runs that business, said in a statement. "ATS is an innovative and successful company that is well respected by cardiac surgeons throughout the world."

Cardiovascular technology, including replacement heart valves and therapies to unusual heart quivering, has been one of Medtronic's fastest growing business segments. In fiscal year 2009, cardiovascular revenue jumped 15 percent to $2.44 billion from the previous year.

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The company has also aggressively pursued the market through acquisitions. Last year, Medtronic spent more than $1 billion to acquire CoreValve Inc. in Irvine, California and Ventor Technologies Ltd., in Israel. Both companies are developing ways to implant replacement heart valves through tubes snaked up through an artery instead of cracking open the chest in major surgery.

In 2008, Medtronic acquired CryoCath Technologies Inc. for about $380 million. The Canadian company makes catheters that can deliver subzero temperatures to the heart. The technology restores normal electric signals by freezing the tissue or pathways behind the irregular quivering.

Last month, Medtronic said the first results from its clinical trials of CyroCath technology showed the therapy was far more effective at treating atrial fibrillation than drugs.

With ATS Medical, Medtronic will acquire more heart valve and fibrillation technoligies similar to CyroCath's products.

The combined market size for heart valves and atrial fibrillation treatment is estimated at $4 billion.

Last year, ATS Medical's heart valve therapy revenue grew 17.7 percent to $56 million from $47.6 million in 2008. Revenue from its CryoMaze cryoablation products increased 11.8 percent to $18.9 million.

ATS Medical, however, has struggled to generate profits. The company lost $6.3 million last year, a significant improvement over 2008 when it lost $19.3 million. ATS Medical said 2010 sales will grow seven to eight percent, about half its growth rate last year. The company's stock hasn't hit $4 a share in more than five years.

"Medtronic's complementary mission and leadership in treatments for structural heart disease represents the best possible opportunity for bringing ATS Medical's innovative cardiac surgery technologies to more surgeons and patients," Michael Dale, chairman, president and CEO of ATS Medical, said in a statement. "We are very proud of the business that ATS Medical's past and present employees have built while maintaining an unwavering focus on innovation and, above all, delivering products that provide superior clinical outcomes."

In late morning trading, shares of Medtronic were up $0.75 to $44.09, an increase of 1.7 percent. ATS Medical's share price was up $1.37 to $3.96, a jump of 52.9 percent.