Cash-rich Medtronic on acquisition spree

September 15, 2010 by MedCity News

"Opportunistic" Medtronic Inc. taking advantage of the weakened U.S. economy to acquire companies on the cheap.

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When you're the richest kid on the block, it's easy to make friends.

For Medtronic Inc. (NYSE:MDT), those friends happen to be investment bankers and venture capitalists.

The world's largest medical device maker has been on an acquisition tear of late, using its considerable cash hoard to buy nine companies since 2009, including ATS Medical Inc. and CoreValve Inc. Medtronic also holds minority stakes in 60 companies, a total investment of $360 million.

Feeding the Fridley, Minn.-based company's appetite is a weak economy that has depressed company valuations and laid waste to demand for initial public offerings. As a result, Medtronic is winning some attractive deals from investors looking hard to find exits.

"It's a time for Medtronic to be opportunistic," said vice president of corporate development Chad Cornell, who oversees the company's acquisition and investment portfolio. "There are a lot of economic factors weighing on valuations. We're in the fortunate position of having a strong balance sheet," he said.

For example, Medtronic recently paid $370 million, or $4 a share, to acquire heart valve maker ATS Medical (NSDQ:ATSI), whose share price hadn't topped $4 in five years. Last month, Medtronic said it would pay $123 million or $6.50 a share to buy biologics maker Osteotech Inc. (NSDQ:OSTE). Prior to the deal, Osteotech's shares were off 20 percent since September 2009.

Medtronic is hardly alone in its shopping spree. Deep pocketed Minnesota companies like 3M Co. (NYSE:MMM) and UnitedHealth Group Inc. (NYSE:UNH) have made several acquisitions this year. St. Jude Medical Inc. (NYSE:STJ) paid $90 million to purchase LightLab Imaging Inc. Earlier this month, St. Jude said it will spend $60 million to acquire a 19-percent stake in CardioMEMS, a company developing wireless heart monitoring technology for heart failure.