Royal Philips (NYSE:PHG) and Spectranetics (NSDQ:SPNC) said today that they agreed to a deal worth more than $2 billion that will see the Dutch healthcare giant take over the U.S. medical device maker.
The $38.50-per-share deal values Spectranetics at $2.16 billion (€1.9 billion), including cash and debt, and is a 27% premium on SPNC’s $30.40 closing price yesterday. The stock was up today in pre-market trading, rising 26.6% to meet Philips’ offering price exactly. Philips, which also announced a two-year, $1.71 billion (€1.5 billion) share buyback plan, saw PHG shares dip -0.1% to $36.58 before the market opened in New York.
“Today’s exciting announcement follows a series of bolt-on acquisitions to strengthen our portfolio across the health continuum,” Philips CEO Frans van Houten said in prepared remarks. “Building on the successful integration of the Volcano acquisition in early 2015, we are now accelerating our strategic expansion into therapy devices with the agreement to acquire Spectranetics. This transaction is expected to be revenue growth and profit accretive by 2018, given the projected revenue and productivity synergies. Spectranetics’ highly competitive product range, integrated with our portfolio of interventional imaging systems, devices, software and services will enable clinicians to decide, guide, treat and confirm the appropriate cardiac and peripheral vascular treatment to deliver enhanced care for patients with better outcomes, as well as significantly boost recurring revenue streams for Philips.”
“We are pleased to announce this agreement with Philips, which will deliver significant value to our shareholders,” added Spectranetics president & CEO Scott Drake. “Combining Philips’ innovations in image-guided therapy with Spectranetics’ portfolio and expertise in the therapeutic device space will create exciting opportunities and allow us to accelerate growth. As part of Philips, we will have the scale and resources to expand Spectranetics’ portfolio of highly differentiated products, our robust innovation pipeline, and our clinical data compendium. This transaction is a testament to the hard work and dedication of Spectranetics’ talented teammates. We have tremendous respect for Philips, as our two companies have a shared view on the importance of culture, values, and innovation, as well as a shared focus on improving patients’ lives around the world. We look forward to a smooth transition.”
The deal, expected to close during the third quarter, will see Spectranetics’ roughly 900 workers folded into the image-guided therapy business at Philips. Spectranetics is projected to put up sales of $293 million to $306 million this year, meaning the combined Volcano-Spectranetics operation could see revenues reach $1 billion by 2020, Philips said.
Berenburg analysts said the acquisition was a good strategic fit but would not increase Philips’ return on invested capital for five years.
“In our view, this is a nice technology-rich company and adds scale and breadth to Philips’ existing portfolio of mechanical atherectomy and intravascular ultrasound – but clearly this is a punchy price to pay,” they wrote today in a note to investors.
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Material from Reuters was used in this report.