Medtronic Plans ATS Medical Buyout

Expansion through strategic acquisition is the name of the game for Medtronic Inc. The company’s most recent target is Plymouth, Minn.-based ATS Medical Inc., for a price tag of $370 million in cash and debt.

The purchase is part of a calculated market growth plan, increasing the medical device giant’s reach into products for structural heart disease.
Minneapolis, Minn.-based Medtronic will pay $4 for each share of ATS Medical. The company’s per-share price hasn’t risen much above $4 during the last five years. The 52-week range as of press time was $2.25-$4.13.

“The acquisition of ATS Medical will further strengthen our cardiovascular business,” Scott Ward, Medtronic senior vice president and president of the firm’s cardiovascular business, said in a statement. “ATS is an innovative and successful company that is well respected by cardiac surgeons throughout the world.”

In February last year, Medtronic spent more than $1 billion to acquire CoreValve Inc. of Irvine, Calif., and Ventor Technologies Ltd. of Israel. Both companies develop methods to implant replacement heart valves via catheter rather than open-heart surgery. In 2008, Medtronic acquired CryoCath Technologies Inc. for about $380 million, a Canadian firm that also makes catheter-based cardiovascular technology.

ATS Medical will add its Open Pivot bi-leaflet mechanical and 3f pericardial valve technology, in addition to its CryoMaze line of ablation products (similar to CryoCath products) to Medtronic’s device roster.

Medtronic officials claim the combined market size for heart valves and atrial fibrillation to be $4 billion.

Last year, ATS Medical’s revenue from heart valve therapies grew 17.7 percent to $56 million. Revenue from its cryo-ablation products increased 11.8 percent to $18.9 million. Despite the growth, however, the company has struggled to generate profits. It was $6.3 million in the red last year, which is an improvement compared to 2008 when it lost $19.3 million. ATS Medical officials expect 2010 sales will grow 7-8 percent, roughly half its growth rate from last year.

Cardiovascular technology, including replacement heart valves and atrial fibrillation therapies, have performed well for Medtronic. In fiscal 2009, cardiovascular revenue rose 15 percent to $2.44 billion from the previous year.

“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,” said Michael Dale, chairman, president and CEO of ATS Medical.“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.”