Covidien (Dublin, Ireland and Mansfield, Massachusetts) has agreed to pay roughly $210 million to acquire Aspect Medical Systems (Norwood, Massachusetts), a company that develops brain-monitoring technology.
The boards of both companies have approved the deal. A Covidien subsidiary will pay $12 a share in cash for a total of about $210 million, net of cash and short-term investments acquired. The transaction, which will take the form of an all-cash tender offer followed by a second-step merger, is subject to customary closing conditions and the companies expect to complete the deal by the end of the year.
Aspect recorded 2008 revenues of $99 million. Its flagship product, Bispectral Index (BIS) technology, became the first clinically proven and commercially available direct measure of the effects of anesthetics and sedatives on the brain, according to the companies. BIS technology is designed to allow medical professionals to gauge the precise amount of anesthetic medication required by each patient, resulting in better overall patient care.
Bruce Farmer, a Covidien spokesman, told Medical Device Daily the BIS technology is what attracted Covidien to Aspect.
"We have a number of monitoring products of our own ... Aspect really brings a broader opportunity to bring our technology together with theirs and expands our presence in the operating room because right now our products are not used in the operating room," Farmer said.
According to the company, Aspect's BIS technology has been used to assess roughly 34 million patients and has been the subject of more than 3,300 published articles and abstracts.
"One of our strategies has been, broadly speaking, to look at adjacent product lines ... this is just another example of that. Aspect's product is in the monitoring space where we have a fairly significant business already," Farmer said.
Once the transaction has been completed, Covidien will report the Aspect business as part of its Oximetry and Monitoring product line in the Medical Devices segment.
"The acquisition of Aspect will allow Covidien to broaden its product offerings and add a market leading brain monitoring technology to its portfolio," said Pete Wehrly, president of Respiratory & Monitoring Solutions at Covidien. "Aspect will bring us enhanced clinical expertise, a strong research & development organization and expand our presence in the operating room. The acquisition is consistent with our strategy of expanding into adjacent market segments and will help us achieve our mission of enhancing the quality of life for patients and improving outcomes for our customers."
Assuming a Dec. 31 closing, Covidien said it expects this transaction to dilute fiscal 2010 GAAP earnings per share, primarily due to a one-time charge for restructuring. On a non-GAAP basis, excluding the restructuring charge, the transaction is expected to be slightly dilutive to 2010 earnings per share; however, the underlying strength of Covidien's existing businesses is expected to offset this dilution, the company said. As a result, Covidien said it does not anticipate this deal will have a material impact on its fiscal 2010 sales or operating margin outlook.
"Joining Covidien provides Aspect with the scale and resources to accelerate growth of BIS and other Aspect products, to continue to invest in outcomes research, comparative effectiveness and innovation, and to support the strategy of providing products that are designed to improve patient outcomes," said Nassib Chamoun, president/CEO of Aspect. "Above all, we are pleased to become part of a company that shares our commitment to evidence-based medicine and the development of products that help clinicians cost-effectively deliver better care."
In other dealmaking activity:
• Abbott (Abbott Park, Illinois) reported a definitive agreement with the Solvay Group (Brussels, Belgium) to acquire Solvay's pharmaceuticals business for 14.5 billion ($6.6 billion) in cash. Abbott said the deal will provide it with a large and complementary portfolio of pharmaceutical products and a significant presence in key global emerging markets. The acquisition also includes full global rights to the fenofibrate franchise. Currently, Abbott has U.S. rights to fenofibrate and pays royalties to Solvay.
Solvay Pharmaceuticals will add more than $3 billion in annual sales, the majority outside the U.S. Solvay has significant presence and infrastructure in key high-growth emerging markets, including Eastern Europe and Asia, Abbott noted.
The company said the acquisition will also add about $500 million to its annual pharmaceutical R&D investment, providing it with the opportunity to further accelerate near and long-term pharmaceutical growth.
"The acquisition of Solvay Pharmaceuticals further diversifies our pharmaceutical portfolio, expands our presence in key high-growth emerging markets, enhances our investment in R&D and accelerates our long-term earnings-per-share growth outlook," said Miles White, CEO and chairman of Abbott.
"In anticipation of future market needs, we are ensuring we have the technologies, products, infrastructure and reach to serve patients globally and continue to deliver sustainable industry-leading growth. This acquisition, as well as the others we've announced this year, all contribute to achieving that long-term goal," White said.
Christian Jourquin, CEO of Solvay, said that with this transaction "Solvay Pharmaceuticals has found a new strong home, within a respected company with a solid and committed position in the industry."
The acquisition also includes Solvay's vaccines business. Solvay has a small molecular diagnostics unit that will become part of Abbott's diagnostics organization upon closing, the company noted.
Abbott says it plans to fund the transaction with cash currently on the balance sheet.
The deal is subject to customary closing conditions and regulatory approvals and is expected to close in the first quarter of 2010. As a result, Abbott said the deal would have no impact on 2009 ongoing earnings per share. The boards of both companies have approved the proposed acquisition. Barclays Capital served as an exclusive financial advisor to Abbott on this deal.
• Sleep HealthCenters (Brighton, Massachusetts) and REM Medical (Seattle) have merged. According to the companies, the union provides a "bi-coastal presence of leading, accredited, comprehensive centers for the diagnosis and treatment of sleep disorders." At a single site, patients can receive specialized physician evaluation and consultation, in-laboratory or at-home diagnostic testing, initiation of treatment including positive airway pressure devices, and long-term follow-up and case management, the company said.
Sleep HealthCenters said it was supported in this transaction by its investment advisors, Covington Associates, and the law firm of Nutter, McClennen & Fish.
Amanda Pedersen, 229-471-4212;