Mindray Medical International (Shenshen, China) said it has agreed to acquire Datascope’s (Montvale, New Jersey) patient monitoring business for $202 million in cash, funded through Mindray’s internal cash and planned third-party borrowings. Datascope will retain about $38 million of receivables generated by the business.

During a Tuesday morning conference call to discuss the acquisition, Xu Hang, Mindray’s co-CEO and chairman called it a “landmark deal,” allowing Mindray to “overnight, dramatically, expand our on-the-ground presence in the U.S. and Europe.”

Hang said the acquisition would create the third-largest player in the global patient monitoring device industry.

Datascope’s patient monitoring business brought in revenues of $161.3 million in 2007, roughly the same revenues generated from Mindray’s home China market, the company noted.

The deal has been approved by the boards of both companies and is expected to close in 2Q08. UBS Investment Bank acted as financial advisor and O’Melveny & Myers acted as legal advisor to Mindray.

The transaction is expected to be accretive to Mindray’s earnings per share on a non-GAAP basis starting in 2009, the company said.

“We are confident that this deal will create excellent value for our shareholders, the customers of both companies, and the patients who will ultimately benefit from greater access to the highest quality, most affordable, medical devices anywhere,” Hang said.

During the call, Mindray’s CFO, Joyce I-Yin Hsu, told listeners the deal includes Datascope’s patient monitoring business, its manufacturing facility in Mahway, New Jersey, trademarks, its global technology services business associated with the patient monitoring business, its direct sales force, intellectual property, and its Netherlands warehouse facility.

In addition to broadening Mindray’s international presence and increasing its U.S. operational footprint, Hsu said the deal is expected to increase Mindray’s 2007 revenue base by more than 50%.

“We have acquired a strong and well-known brand name in the U.S. and Europe,” she said. “Under the current licensing deal we can continue to use [Datascope’s] brand until 2015.”

Hsu added that Mindray expects to achieve about $30 million in “run rate synergies” within three years of the acquisition. She also told listeners that the companies have a five-year history of working together.

“This is a market that in the U.S. is growing about 2% to 3% a year. Datascope, however, has been growing at much faster rates, given that it has a very strong representation in the higher-growth areas such as the 300-bed and below, small hospital and surgery centers.” Hsu said. “It also has a very strong business and high-growth in central monitoring systems, which is one of the strengths that we currently do not have, and with the transaction we would be better positioned to tap into the central monitoring business.”

Li Xiting, Mindray’s president/co-CEO, told call listeners, as translated by Hsu, that the company does not have any plans to move the manufacturing to Asia.

“The current manufacturing base which we will be purchasing as part of this transaction in Mahway, New Jersey is going to be a very important strategic base for our global business going forward,” he said.

David Gibson, Datascope’s VP and president of its patient monitoring and technology services divisions, will serve as the president of Mindray’s Datascope patient monitoring business unit. The existing management team is expected to continue post-closing without significant changes along with the rest of the patient monitoring division staff, Mindray noted.

Currently, the majority of Datascope’s patient monitoring revenue is generated from sales in North America, with the remainder from markets largely in Europe, according to the company.

“This is an exceptional fit of complementary assets in the patient monitoring industry. Datascope’s strength in direct sales to under-300 bed hospitals, its leading market share in key niche areas, and direct sales and service team in the United States and Europe offer immediate cross-selling opportunities for Mindray’s high performance-to-price medical imaging systems,” Xiting said. “Also, by leveraging Mindray’s China-based R&D, we are positioned to tailor existing Datascope models for new markets and enhance product functionality. With our common culture of performance and dedication to meeting customer needs, I am very optimistic for the future of the combined business.”

With the acquisition, Mindray will have about 4,100 employees, including about 440 Datascope employees.