Ev3 to settle shareholder lawsuits over Covidien buyout

July 8, 2010 By MassDevice staff Leave a Comment

ev3 Inc. (NSDQ:EVVV) agreed to settle a group of lawsuits filed by shareholders looking to block its $2.6 billion buyout by Covidien plc (NYSE:COV).

The lawsuits, filed in the Hennepin County District Court for Minnesota and Delaware’s Court of Chancery, accused the Plymouth, Minn.-based company’s board of breaching its fiduciary duties in giving a green light to the merger and of failing to disclose how it evaluated the offer from Covidien, according to regulatory filings.

The settlements call for ev3 to disclose additional information about the run-up to the $22.50-per-share offer, including how the company it hired to evaluate potential acquirers — J.P. Morgan Securities Inc. — went about evaluating the deal, according to a filing with the federal Securities & Exchange Commission. The tender offer is set to expire at midnight Eastern time July 9. Ev3 and the members of its management team named in the suits deny any wrongdoing and agreed to settle "solely because it will eliminate the burden and expense of further litigation," according to the filing.

Ev3’s board met Feb. 10 to discuss "acquisitions of certain tuck-in products or technologies that might optimize or extend ev3’s product portfolio and more transformational acquisitions," according to the filing. Over the next five weeks, J.P. Morgan contacted nine companies deemed to be potential strategic fits for a buyout, including Covidien, with four declining to pursue a merger, according to the filing.

The company decided not to pursue a financial buyer, believing that a strategic buyer would pay more for ev3 and that, "based in part on advice from JP Morgan, that the synergies between ev3 and a strategic buyer would likely lead to a higher price," according to the filing.

Mansfield, Mass.-based Covidien plans to finance the merger, announced June 1, partly through a $1.5 billion offering of senior debt notes, partly with cash and partly though a bridge loan. The debt, issued in a series of three offerings, consists of $500 million worth of 1.875 percent notes due in 2013; $400 million worth of 2.8 percent notes due in 2015; and $600 million worth of 4.2 percent notes due in 2020.

Shortly after word of the deal broke, the Food & Drug Administration granted an expedited review of ev3’s Pipeline embolization treatment for cerebral aneurysms. The company said the FDA agreed to hasten its consideration of the pre-market approval application it filed May 18 for the device, which is designed to treat large, giant and wide-necked brain aneurysms.

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