02.26.15
Houston, Texas-based Cyberonics Inc., one of the industry’s early pioneers in the neuromodulation technology sector is buying Milan, Italy-based cardiovascular company Sorin SpA.
The merged company—which will be based in London, the United Kingdom, will have a combined equity value of approximately $2.7 billion based on the closing price of Sorin and Cyberonics shares on Feb. 25. The all-stock deal values Sorin at about $1.4 billion, a 14.2 percent premium to the company’s market capitalization before the deal was announced.
Cyberonics will hold a 54 percent stake in the new company and Sorin the rest. The business will apply for dual listing on Nasdaq and the London Stock Exchange. The transaction was approved by both companies’ boards of directors.
Under the terms of the transaction, Sorin and Cyberonics will combine under a newly formed holding company called NewCo. Each Cyberonics stockholder will receive one ordinary share of NewCo for every share of Cyberonics owned. Each Sorin shareholder will receive a fixed ratio of 0.0472 ordinary shares of NewCo for every Sorin share owned.
NewCo will operate as three business units: Cardiac Surgery, Cardiac Rhythm Management and Neuromodulation, with operating headquarters in Mirandola, Italy; Clamart, France; and Houston, Texas, respectively. The combined company will have a strategic presence in more than 100 countries, with approximately 4,500 employees.
While executives at both companies claim the move to merger was driven by strategic interests rather than tax motivations, the move to London indeed will help the new company cut its tax bill substantially. Corporate tax in the United Kingdom is 21 percent compared with 35 percent in the United States.
The proposed transaction will bring together global leaders in cardiac surgery and neuromodulation, and the combined company will also be a major player in cardiac rhythm management, especially in Europe and Japan. NewCo will have several promising opportunities focused on multi-billion-dollar markets, including complementary research programs addressing heart failure, with an initial commercial launch in Europe anticipated in the coming weeks. Both companies bring minority equity investments that are complementary in different forms of sleep apnea. Sorin, in addition, has opportunities that address mitral valve regurgitation.
André-Michel Ballester, CEO of Sorin, will serve as CEO of NewCo. Dan Moore, CEO of Cyberonics, will become nonexecutive chairman.
“As one company we will be able to leverage our combined strengths, capture new opportunities and create new solutions to benefit patients and healthcare professionals alike,” said Ballester. “This is particularly exciting for our employees, who will be able to share technical expertise and innovate faster, ensuring that we serve our customers by remaining at the forefront of new product development which continues to be the foundation of our success.”
Cyberonics recently received CE mark approval of its Vitaria device delivering autonomic regulation therapy for the treatment of chronic heart failure and will commence a limited market launch in Europe in the coming weeks. Recently, Sorin announced the first successful implants of its Equilia vagus nerve stimulation system for heart failure patients. NewCo is expected to benefit from the developing market for active implantable treatments for sleep apnea with investments aimed at the under-addressed obstructive sleep apnea market, and also in central sleep apnea, recently launched in selected European countries. In addition, NewCo is expected to have new percutaneous mitral valve replacement/repair products with estimated initial market entry in 2017.
“This transformational transaction maximizes both companies’ strengths and leadership positions for the benefit of patients and our shareholders,” said Moore. “Sorin is an ideal partner, given its heart failure programs and the ability to combine Vagus Nerve stimulation with cardiac rhythm management technology. Sorin’s well-established international operations are expected to accelerate our epilepsy growth strategy by enabling us to reach a larger number of potential new patients in the underpenetrated markets outside the U.S. while integrating Sorin’s technology expertise into future neuromodulation products. While each company has a strong track record of execution on its own, the geographic diversification, benefits of scale and strong financial profile of the combined company will create tremendous new opportunities to drive growth and build significant shareholder value.”
Cyberonics and Sorin currently have different fiscal year ends and report under different accounting standards and currencies. After the closing of the transaction, NewCo is expected to report on a calendar year basis, with reporting in U.S. dollars and on U.S. Generally Accepted Accounting Principles.
Upon closing of the transaction, the board of directors of NewCo will be equally divided between Sorin and Cyberonics, with four directors designated by Sorin and four by Cyberonics. One additional board member will be jointly selected.
The transaction is expected to close by the end of September.
The merged company—which will be based in London, the United Kingdom, will have a combined equity value of approximately $2.7 billion based on the closing price of Sorin and Cyberonics shares on Feb. 25. The all-stock deal values Sorin at about $1.4 billion, a 14.2 percent premium to the company’s market capitalization before the deal was announced.
Cyberonics will hold a 54 percent stake in the new company and Sorin the rest. The business will apply for dual listing on Nasdaq and the London Stock Exchange. The transaction was approved by both companies’ boards of directors.
Under the terms of the transaction, Sorin and Cyberonics will combine under a newly formed holding company called NewCo. Each Cyberonics stockholder will receive one ordinary share of NewCo for every share of Cyberonics owned. Each Sorin shareholder will receive a fixed ratio of 0.0472 ordinary shares of NewCo for every Sorin share owned.
NewCo will operate as three business units: Cardiac Surgery, Cardiac Rhythm Management and Neuromodulation, with operating headquarters in Mirandola, Italy; Clamart, France; and Houston, Texas, respectively. The combined company will have a strategic presence in more than 100 countries, with approximately 4,500 employees.
While executives at both companies claim the move to merger was driven by strategic interests rather than tax motivations, the move to London indeed will help the new company cut its tax bill substantially. Corporate tax in the United Kingdom is 21 percent compared with 35 percent in the United States.
The proposed transaction will bring together global leaders in cardiac surgery and neuromodulation, and the combined company will also be a major player in cardiac rhythm management, especially in Europe and Japan. NewCo will have several promising opportunities focused on multi-billion-dollar markets, including complementary research programs addressing heart failure, with an initial commercial launch in Europe anticipated in the coming weeks. Both companies bring minority equity investments that are complementary in different forms of sleep apnea. Sorin, in addition, has opportunities that address mitral valve regurgitation.
André-Michel Ballester, CEO of Sorin, will serve as CEO of NewCo. Dan Moore, CEO of Cyberonics, will become nonexecutive chairman.
“As one company we will be able to leverage our combined strengths, capture new opportunities and create new solutions to benefit patients and healthcare professionals alike,” said Ballester. “This is particularly exciting for our employees, who will be able to share technical expertise and innovate faster, ensuring that we serve our customers by remaining at the forefront of new product development which continues to be the foundation of our success.”
Cyberonics recently received CE mark approval of its Vitaria device delivering autonomic regulation therapy for the treatment of chronic heart failure and will commence a limited market launch in Europe in the coming weeks. Recently, Sorin announced the first successful implants of its Equilia vagus nerve stimulation system for heart failure patients. NewCo is expected to benefit from the developing market for active implantable treatments for sleep apnea with investments aimed at the under-addressed obstructive sleep apnea market, and also in central sleep apnea, recently launched in selected European countries. In addition, NewCo is expected to have new percutaneous mitral valve replacement/repair products with estimated initial market entry in 2017.
“This transformational transaction maximizes both companies’ strengths and leadership positions for the benefit of patients and our shareholders,” said Moore. “Sorin is an ideal partner, given its heart failure programs and the ability to combine Vagus Nerve stimulation with cardiac rhythm management technology. Sorin’s well-established international operations are expected to accelerate our epilepsy growth strategy by enabling us to reach a larger number of potential new patients in the underpenetrated markets outside the U.S. while integrating Sorin’s technology expertise into future neuromodulation products. While each company has a strong track record of execution on its own, the geographic diversification, benefits of scale and strong financial profile of the combined company will create tremendous new opportunities to drive growth and build significant shareholder value.”
Cyberonics and Sorin currently have different fiscal year ends and report under different accounting standards and currencies. After the closing of the transaction, NewCo is expected to report on a calendar year basis, with reporting in U.S. dollars and on U.S. Generally Accepted Accounting Principles.
Upon closing of the transaction, the board of directors of NewCo will be equally divided between Sorin and Cyberonics, with four directors designated by Sorin and four by Cyberonics. One additional board member will be jointly selected.
The transaction is expected to close by the end of September.