Kyphon (MM) (NASDAQ:KYPH)
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Medtronic, Inc. (NYSE:MDT) and Kyphon (NASDAQ:KYPH) today announced that
the companies have signed a definitive merger agreement under which
Medtronic will acquire all of the outstanding shares of Kyphon for $71
per share in cash. The transaction, which was unanimously approved by
the boards of directors of both companies, is valued at approximately
$3.9 billion. This excludes $320 million in payments associated with the
St. Francis Medical Technologies, Inc. and Disc-O-Tech Medical
Technologies, Ltd. transactions.
The acquisition price represents a 32% premium over Kyphon’s
closing stock price on July 26, 2007 of $53.68 and a 35% premium over
Kyphon’s 30-day average trading price of
$52.76 per share. The transaction, which is anticipated to close in the
first calendar quarter of 2008, is expected to be neutral to Medtronic
earnings in the first full fiscal year after closing and accretive
thereafter. Medtronic expects the merger to yield significant revenue,
cost and tax synergies.
“We expect our combination with Kyphon to help
accelerate the growth of Medtronic’s existing
spinal business by extending our product offerings into some of the
fastest growing product segments and enabling us to provide physicians
with a broader range of therapies for use at all stages of the care
continuum,” said Art Collins, chairman and
chief executive officer of Medtronic. “Importantly,
the combination will also enable more patients of all ages to receive
the benefits of modern, minimally invasive spinal treatments earlier in
their care, with life-style friendly options that are simpler, faster
and less invasive than many traditional surgical treatments.
“We have great respect for Rich Mott and his
team and look forward to Kyphon’s employees
joining Medtronic at the close of the transaction. Kyphon’s
world-class, global sales force will play a central role in the
continued development of our spinal business,”
Collins concluded.
“We are very enthusiastic about the
opportunity to deliver outstanding value for our shareholders that fully
reflects Kyphon’s innovation and growth
potential. This merger also combines two recognized industry leaders in
spinal treatments,” said Richard Mott,
president and chief executive officer of Kyphon. “By
merging our complementary strengths and collective resources into one
organization, we will meaningfully increase our ability to ensure we
meet the needs of our clinician customers around the world and the
patients they serve. This combination also offers our employees the
opportunity to become part of an organization with a shared vision and
the depth of resources that are increasingly beneficial for sustained
success in our industry. We look forward to working with Medtronic to
complete the transaction quickly and seamlessly. Our board of directors
believes that this acquisition is in the best interests of our
shareholders, employees and other stakeholders and has unanimously voted
to recommend that Kyphon shareholders vote in favor of it.”
The two companies’ product lines and
geographic presence are highly complementary. While both companies have
expertise in minimally invasive, highly effective treatments, Medtronic’s
spinal surgery focus has been on providing treatment options for younger
patients who are suffering from scoliosis and degenerative disc disease
in the cervical and lumbar spine. Kyphon’s
focus has been on treating older patients suffering from vertebral
compression fractures and spinal stenosis. Together, the combined entity
will be able to leverage its knowledge of modern fusion, dynamic
stabilization, artificial disc replacement, biologics, vertebral
augmentation, interspinous process decompression, disc disease
diagnosis, navigation and minimally invasive techniques to serve
patients with a broader variety of spinal disorders in order to
alleviate pain and restore health for more patients.
The combined entity will also have a larger and expanded base of
customers than Medtronic serves alone. Medtronic primarily serves
orthopaedic and neurological surgeons who specialize in spinal surgery.
Kyphon serves these same physicians and also has a significant customer
base with interventional radiologists and interventional
neuroradiologists.
The transaction will be financed by a combination of cash on the balance
sheet and debt.
The transaction is subject to customary closing conditions, including
approval by antitrust regulators as well as Kyphon shareholders.
Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor to
Medtronic and Goldman, Sachs & Co. and Piper Jaffray are acting as
financial advisors. Latham & Watkins LLP is acting as legal advisor to
Kyphon and JPMorgan is acting as financial advisor.
Analyst Conference Call/Webcast
Medtronic and Kyphon will host an investor conference call
(612-332-1210) later this morning at 7:30 a.m. central time (5:30 a.m.
pacific time) to discuss the Kyphon acquisition. For complete
instructions on how to participate in the conference call, or to listen
to the live audio webcast or a replay of the webcast, please refer to
the Investor Relations sections at http://www.medtronic.com
or http://www.kyphon.com.
ABOUT MEDTRONIC
Medtronic, Inc. (www.medtronic.com),
headquartered in Minneapolis, is the global leader in medical technology –
alleviating pain, restoring health, and extending life for millions of
people around the world.
ABOUT KYPHON INC.
Kyphon develops and markets medical devices designed to restore and
preserve spinal function and diagnose the source of low back pain using
minimally invasive technologies. The company’s
products are used in balloon kyphoplasty for the treatment of spinal
compression fractures caused by osteoporosis or cancer, in the Functional
Anaesthetic Discography™ (F.A.D.™)
procedure for diagnosing the source of low back pain, and in the
Interspinous Process Decompression (IPD®)
procedure for treating the symptoms of lumbar spinal stenosis. More
information about the company and its products can be found at www.kyphon.com
and its patient education Web site, www.spinalfracture.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements, which involve a
number of risks and uncertainties. Medtronic and Kyphon caution readers
that any forward-looking information is not a guarantee of future
performance and that actual results could differ materially from those
contained in the forward-looking information. Forward looking statements
include, but are not limited to, statements about the benefits of the
business combination transaction involving Medtronic and Kyphon,
including future financial and operating results, post-acquisition
plans, objectives, expectations and intentions and other statements that
are not historical facts.
The following factors, among others, could cause actual results to
differ from those set forth in the forward-looking statements: the
ability to obtain regulatory approvals of the proposed merger on the
proposed terms and schedule; the failure of Kyphon stockholders to
approve the transaction; the risk that the businesses will not be
integrated successfully; the risk that the cost savings and any other
synergies from the transaction may not be fully realized or may take
longer to realize than expected; disruption from the transaction making
it more difficult to maintain relationships with customers, employees or
suppliers; and competition and its effect on pricing, spending,
third-party relationships and revenues. Additional factors that may
affect future results are contained in Medtronic’s
and Kyphon’s filings with the Securities and
Exchange Commission (the “SEC”),
which are available at the SEC’s web site http://www.sec.gov.
Medtronic and Kyphon disclaim any obligation to update and revise
statements contained in these materials based on new information or
otherwise.
ADDITIONAL INFORMATION ABOUT THIS TRANSACTION
Kyphon will file with the SEC and mail to its stockholders a proxy
statement that will contain important information about Kyphon, the
proposed merger and related matters. Stockholders are urged to read the
proxy statement regarding the proposed merger when it becomes available
because it will contain important information that stockholders should
consider before making a decision about the merger. You may obtain a
free copy of the proxy statement (when available) and other related
documents filed by Medtronic and Kyphon with the SEC at the SEC’s
website at www.sec.gov. The proxy
statement (when it is available) and the other documents may also be
obtained for free by accessing Kyphon’s
website at www.kyphon.com by
clicking on the “Investors”
link and then clicking on the “Financial
Information” heading and the “SEC Filings”
heading, by writing to Kyphon at 1221 Crossman Avenue, Sunnyvale, CA
94089-2450, Attention: Julie Tracy, or by emailing jtracy@kyphon.com.
Medtronic, Kyphon and their respective directors, executive officers and
certain other members of management and employees may be soliciting
proxies from Kyphon stockholders in favor of the merger. Information
regarding the persons who may, under the rules of the SEC, be considered
participants in the solicitation of the Kyphon stockholders in
connection with the proposed merger will be set forth in the proxy
statement when it is filed with the SEC. You can find information about
Medtronic’s executive officers and directors
in its definitive proxy statement filed with the SEC on July 20, 2007.
You can find information about Kyphon’s
executive officers and directors in its definitive proxy statement filed
with the SEC on April 30, 2007. You can obtain free copies of these
documents from Medtronic and Kyphon using the contact information above.