When St. Jude Medical Inc. (NYSE:STJ) completes its $1.3 billion acquisition of AGA Medical Holdings Inc. (NSDQ:AGAM) at the end of the year, it just might be the quickest exit in Wall Street history.
St. Jude’s $20.80-a-share cash/stock offer for AGA Medical comes three days before the one-year anniversary of AGA’s initial public offering. Experts point to the usual suspects to explain the rapid turnaround: A weak economy, low valuations, problems with risk-averse regulators at the Food & Drug Administration.
Charles Haff, an analyst with Minneapolis-based investment bank Dougherty & Co., suspects AGA’s problems in gaining FDA approval for its Amplatzer PFO occluder and cardiac plugs — devices used to treat structural defects in the heart — pushed the company to a sale.
“This appears to be a good deal for AGAM shareholders because we have long suspected that there may have been problems with AGAM getting a ‘timely’ approval for their Amplatzer PFO occluder (aka RESPECT clinical trial),” Haff wrote.
“Also, AGAM had been expected to receive FDA approval for their Amplatzer AVP IV cardiac plug in the U.S. by now,” he wrote. “Management had been stating that they expected approval in the second quarter of 2010, but so far they still do not have the approval. Since that still has not occurred, we believe that it is putting pressure on their revenue growth in the U.S.”
With its deeper pockets, St. Jude Medical presumably has the financial resources to finish the last leg of the regulatory marathon. (Ironically, St. Jude’s offer is the price AGA unsuccessfully sought for its IPO in 2009. The company initially had priced its stock between $19 and $21 a share, and then lowered its forecast to $15 to $16 a share before settling on $14.50.)
AGA’s top investor certainly wasn’t happy with that IPO price. When AGA officially went public in October 2009, private equity firm Welsh, Carson, Anderson & Stowe didn’t sell a single share of its 26-million-share, 52 percent stake in AGAM.
That move will pay off if the merger is consummated; Welsh, Carson Anderson stands to make $447.2 million from St. Jude’s offer.
AGA co-founder and second-largest investor, Franck Gougeon, sold 6.7 million of the 17.3 million shares he owned before the IPO, netting $51 million, according to documents filed with the federal Securities & Exchange Commission. Gougeon co-founded AGA with University of Minnesota scientist and medical device pioneer Dr. Kurt Amplatz — his onetime father-in-law. (Gougeon’s marriage o Caroline Amplatz ended in divorce.)
In February 2009 — 10 months before AGA’s IPO — Caroline Amplatz pledged $50 million (almost the same amount Gougeon received for selling his shares) for the university’s new children’s hospital, which the school named for Dr. Amplatz.
“Caroline Amplatz declined to identify the source of the funds for her donation. She has two foundations of her own, one to support education in Latin America and one to support Twin Cities children in the performing arts,” according to the Minneapolis Star Tribune. “Her father, however, was not at the news conference ‘because he is skiing in Aspen,’ she said. ‘He always goes at this time.’ Speaking after the news conference Tuesday, Caroline Amplatz said the donation was her decision, not her father’s. She said she had told her father about it, but doesn’t know what he thinks of it. ‘He’s keeping his thoughts to himself,’ she added with a smile.”
Gougeon stands to make $209.8 million from the St. Jude deal.