Medtronic Makes Latest Acquisition Official

ATS Medical Inc. is now officially part of the Medtronic family.

After a three-month courtship, the two Minnesota companies have merged in a deal that further bolsters Medtronic Inc.’s cardiovascular division, which generated $2.4 billion in sales last year. The purchase of ATS Medical is the latest in a string of acquisitions that Medtronic has pursued to strengthen and diversify its overall product portfolio, which includes heart stents, pacemakers, implantable cardioverter-defibrillators, cardiac resynchronization therapy devices, and monitoring systems.

Earlier this month, shareholders of Plymouth, Minn.-based ATS Medical approved the acquisition by a wide margin, enabling Medtronic to complete the deal for $4 for each share of ATS stock and assumption of net debt. The acquisition is worth about $370 million.

“Our completed purchase of ATS Medical immediately expands Medtronic’s product offerings and pipeline of surgical valves, repair products and surgical ablation technologies,” John Liddicoat, M.D., vice president and general manager of Medtronic’s Structural Heart business, said in a statement.

ATS Medical was launched as a mechanical heart valve company in 1991 by medtech veteran Manny Villafana, who served as the company’s first chief executive. When contacted after the acquisition was first announced in late April, Villafana said the deal would be good for Medtronic. “They [ATS] make a great valve,” he told The Star Tribune of Minneapolis, Minn.

One of those “great” valves is the Open Pivot, which arguably has become the company’s signature product. Implanted in more than 200,000 patients, the Open Pivot mechanical heart valve is a bi-leaflet device that helps regulate blood flow in the heart. Before the acquisition, Medtronic was considering abandoning the mechanical heart valve market because it could not compete with ATS’ bi-leaflet technology. The purchase, however, should solve that conundrum.

ATS has a conundrum of its own that should be solved with the Medtronic alignment. Though its annual revenue is around $76 million, the company has struggled to establish a global distribution channel. With mechanical heart valve sales strong in such emerging markets as India and China, ATS likely will benefit from Medtronic’s sales prowess and marketing reach. “ATS Medical is a well-managed company that has developed some outstanding products,” Scott Ward, president of Medtronic’s cardiovascular business, told The Star Tribune. “But it is an expensive and difficult proposition to build a global distribution channel to sell medical devices.”

Besides giving Medtronic a strong presence in the mechanical heart valve market, the acquisition of ATS Medical complements the offerings of two other companies the device giant purchased last year for about $1 billion—CoreValve Inc. and Ventor Technologies Ltd. Both firms are developing new, minimally invasive technologies to replace malfunctioning heart valves in patients.

Medtronic also has acquired Invatec, a Danish company that is developing technologies to treat coronary artery and peripheral vascular disease. Medtronic finalized that $350 million deal in April.