After first exploring other options, Lifecore Biomedical (Chaska, Minnesota) said it has agreed to be bought by private equity firm Warburg Pincus through a tender offer, followed by a merger, for $17 a share in cash, or about $239 million.

Lifecore said the deal could close by the end of 1Q08. The company’s board approved the agreement and recommends shareholders tender their shares in connection with the offer.

The deal represents about a 30% premium over the average price of Lifecore shares over the last 30 days. Lifecore makes biomaterials and devices through its two divisions: dental and hyaluronan.

During a Tuesday morning conference call, Dennis Allingham, president/CEO of Lifecore, told listeners the company had explored alternative options for maximizing shareholder value, before negotiating a deal with Warburg.

“We looked at stock buybacks, we looked at the competition on the dental side of the business for potential acquisitions, all as ways or means to deploy our cash that would provide long-term growth the company,” Allingham said. “Of all the options considered, none of them delivered the significant all-cash reward for our shareholders that this opportunity affords, while eliminating the valuation risks associated with further investment into the future.”

Among those other options, Allingham said the key thing Lifecore considered was “what is out there that we could acquire to really, truly, help drive the growth of either of our business segments?” The difficulty with that option, he said, is that there really wasn’t anything that Lifecore could see that would fit.

Allingham said the deal with Warburg “appropriately recognizes” the value of the company, and he believes it is good for shareholders, employees and customers. As a private company, he said Lifecore would have “greater flexibility to focus on its long-term strategic direction.”

“If we look at the present state of the company, we know that Lifecore’s future earnings growth would be compromised in order to meet the investment necessary to achieve continued success. And as I’m sure you know, inconsistent earning patterns are not typically rewarded on Wall Street.”

Lifecore has 30 days to solicit superior proposals from third parties. If the company accepts another offer, it would have to pay a $1.5 million break-up fee to Warburg. If Lifecore accepts another offer after the 30-day go-shop period ends, there is a $3 million break-up fee.

Piper Jaffray is acting as financial advisor and Dorsey & Whitney is acting as legal counsel to Lifecore. Willkie Farr & Gallagher is acting as legal advisor to Warburg.

Lifecore’s dental division conducts its dental surgery business through direct sales and marketing in the U.S., France, Germany, Italy and Sweden and through distributors in 49 other countries. The hyaluronan division conducts its business through OEM and contract manufacturing alliances in the ophthalmic, orthopedic and veterinary surgical fields.

Warburg has about $20 billion of assets under management with an additional $10 billion available for investment. Since its inception, the firm says it has invested $29 billion in 585 companies in 30 countries and across a range of sectors including $6.2 billion in healthcare companies.

Notable medical device investments Warburg has made include: American Medical Systems (Minnetonka, Minnesota), Baush & Lomb (B&L; Rochester, New York), ev3 (Plymouth, Minnesota), Kyphon (Sunnyvale, California), Tornier (Eden Prairie, Minnesota), and Wright Medical Group (Arlington, Tennessee). Medtronic (Minneapolis) acquired Kyphon late last year (Medical Device Daily, Nov. 7, 2007).

In October Warburg bought B&L for $4.5 billion, including about $830 million of debt (MDD, Oct. 29, 2007). In May, B&L agreed to the transaction, which valued the company’s stock at $65-a-share in cash (MDD, May 25, 2007). Rival ophthalmology company AMO (Santa Ana, California) had made a late play for the company, offering $4.2 billion, with a $75-a-share offer comprised of $45 in cash and $30 in AMO stock. B&L’s board did not support that offer, and AMO withdrew from the bidding in August (MDD, Aug. 2, 2007).

In other dealmaking news:

• Healthnostics (New York), a medical and biotech analytics company, reported the acquisition of MedTrec, a pharmacy data collection firm. Financial terms were not disclosed.

Healthnostics said it would merge its MedGuardian hospital systems development and marketing operations into MedTrec, using its PharmaX pharmacy data collection system. MedTrec will operate as a subsidiary of Healthnostics.

MedTrec’s lead product, PharmaX, is designed to provide clinical level accuracy. It is interactive, real-time and tracks medications provided to patients in clinical and non-clinical settings, the company noted.

Healthnostics provides patient clinical monitoring and risk management systems to acute care hospitals, and uses its Internet portals to deliver medical and biotechnology resource information to industry professionals as well as to the general public.

• Acacia Research (North Beach, California) reported that its subsidiary, Acacia Patent Acquisition (also North Beach), has acquired a patent relating to surgical catheter technology. Financial terms were not disclosed.

“Acacia continues to grow its base of future revenues by adding new patent portfolios,” commented Paul Ryan, Acacia CEO and chairman. “As our licensing success grows, more companies are selecting us as their partner for the licensing of their patented technologies,” concluded Ryan.

The patented technology relates to surgical devices, such as percutaneously insertable catheters and cannulas used to access the circulatory system. These devices can be used in cardiology and other surgical procedures.

Acacia’s subsidiaries develop, acquire and license patented technologies.