A Diagnostics & Imaging Week
In describing a recent deal AngioDynamics (Queensbury, New York) signed to acquire Rita Medical Systems (Fremont, California) for about $220 million plus the assumption of roughly $3.3 million in net debt, company officials couldn't seem to get enough of the word "synergetic."
"Strategically the [merging of the] two companies is definitely going to be synergetic," Joe Girardi, chief financial officer for AngioDynamics, told Diagnostics & Imaging Week. "It all makes sense."
Among the several aspects of the deal that make sense, according to AngioDynamics, is Rita's established position in vascular access ports which AngioDynamics sees as an ideal sales fit with its Morpheus CT PICC and the vascular access port technology it bought from Medron (Salt Lake City) last May. AngioDynamics also says its recently acquired irreversible electroporation (IRE) soft tissue ablation technology, which it expects to commercialize in mid-2008, will compliment Rita's local oncology therapies.
Excluding transaction-related and one-time integration expenses, AngioDynamics expects the acquisition to be neutral to its fiscal year 2007 (ending June 2, 2007) earnings and to add about 5 cents per share to its fiscal year 2008 (ending May 31, 2008) diluted GAAP EPS assuming 25.8 million weighted average diluted shares outstanding. The acquisition is anticipated to close by the end of the first calendar quarter of 2007, subject to regulatory review, the approval of each company's respective shareholders and other customary closing conditions.
Girardi said another advantage of the deal is being able to strip out all duplicate public company costs that small companies tend to be burdened with, he said, such as certain corporate and trade-show expenses. AngioDynamics expects to save at least $9 million a year by eliminating duplicate costs.
"The management at AngioDynamics is really excited about this acquisition and our shareholders should be too because the return on this investment is going to be quite substantial," Girardi said.
During a teleconference about the acquisition Tuesday, Eamonn Hobbs, president/CEO of AngioDynamics, told listeners the transaction is about growth, leadership and long-term value creation.
"It also represents a text-book example of strategic tactical and financial synergies and let me emphasize that point again — the synergies we face as a combined company are maximized beginning immediately and continuing for years to come," Hobbs said.
As an example, Hobbs said, the two companies sell to the same customer base yet they have virtually no product overlap.
"Also, the customers we serve face excellent growth prospects particularly in interventional oncology," Hobbs said. "We have complimentary products and technologies whether it's Rita's access ports and AngioDynamic's Morpheus product-line and our Medron technology or Rita's diverse offering of local oncology therapies and AngioDynamic's electroporation technology."
Joseph DeVivo, president/CEO of Rita, agreed.
"It makes financial sense today and financial sense for tomorrow. More importantly, the combination of our two companies is an excellent strategic fit," DeVivo said during Tuesday's teleconference.
With respect to financial performance, for the 52-weeks ended Aug. 31, 2006, the two organizations recognized more than $132 million in combined performance revenues, Hobbs said.
He said AngioDynamics also expects to receive cash tax benefits exceeding $30 million in aggregate over the next 16 years from the utilization of Rita's federal net operating loss carry-forwards.
"We expect this cash tax benefit to be about $1.8 million for the fiscal year ending June 2, 2007, $7.1 million for the fiscal year ending May 31, 2008 and $7.1 million for the fiscal year ending May 30, 2009.
Each common share of Rita will be exchanged for 0.1722 of an AngioDynamics common share and a specified amount of cash based on AngioDynamics' average closing stock price for the 10-day period ending three business days prior to the date of the shareholder meetings. Based on the exchange ratio, AngioDynamics expects to issue about 7.86 million common shares in the transaction and to issue roughly 1.91 million additional common shares upon exercise of Rita options and warrants. Rita security holders are expected to own about 34.5% of AngioDynamics on a fully diluted treasury stock method basis. AngioDynamics said the transaction is intended to qualify as a tax-free reorganization.
AngioDynamics makes therapeutic and diagnostic devices designed to enable interventional physicians, such as interventional radiologists, vascular surgeons and others, to treat peripheral vascular diseases and other non-coronary diseases. Rita makes products that provide local oncology therapy options for cancer patients including radiofrequency ablation (RFA) systems and embolization products for treating cancerous tumors, as well as percutaneous vascular and spinal access systems for systemic treatments.
Zila (Phoenix) has completed the acquisition of Professional Dental Technologies (Pro-Dentec; Batesville, Arkansas) a privately held dental products company, in a $34 million cash transaction.
"With the acquisition of Pro-Dentec, we have completed a remarkable transformation of Zila into a cancer detection company. Pro-Dentec provides us the means to distribute our oral cancer detection products directly to dental professionals through a highly-regarded national sales force that is already profitably selling complementary Soft Tissue Management products," said Douglas Burkett, PhD, chairman, CEO and president of Zila.
To facilitate the acquisition of Pro-Dentec, the company completed two tranches of a $40 million private placement of equity and debt through its financial advisor and placement agent, Roth Capital Partners, with the final $16 million tranche for future working capital scheduled to fund this past Wednesday.
Zila is a cancer diagnostic company initially focused on oral cancer.