A Medical Device Daily

Covidien (Hamilton, Bermuda) reported that one of its subsidiaries has completed the previously disclosed acquisition of VNUS Medical Technologies (San Jose, California) for about $440 million, net of cash and investments acquired. The deal was first reported last month (Medical Device Daily, May 11, 2009).

The company said that 13,998,147 shares of VNUS had been validly tendered and not withdrawn, representing roughly 86% of the outstanding VNUS common shares. Covidien said an additional 955,552 shares, or about 6% of the outstanding VNUS shares, had been tendered according to notices of guaranteed delivery.

The company said its subsidiary exercised its option to purchase newly issued shares from VNUS at the tender offer price. This permitted the subsidiary to acquire sufficient shares to effect a short-form merger with and into VNUS, which then became a wholly owned subsidiary of Covidien.

"The acquisition of VNUS will expand our vascular product line and is consistent with our strategy of becoming a leading partner with interventional radiologists and vascular surgeons," said Joe Almeida, president of medical devices at Covidien. "VNUS will be an important addition to our portfolio of vascular intervention products and we are pleased to have the VNUS employees joining Covidien as part of our new Vascular Therapies global business unit."

Covidien manufactures product lines in four segments: medical devices, imaging solutions, pharmaceutical products and medical supplies.

In other dealmaking activity:

• HealthTronics (Austin, Texas) and Endocare (Irvine, California) reported that HealthTronics has commenced an exchange offer for all of the outstanding shares of Endocare common stock in accordance with the agreement reported last week (MDD, June 9, 2009).

Subject to the terms and conditions of the exchange offer, Endocare stockholders who validly tender their shares may elect to receive for each share of Endocare common stock they tender in the exchange offer either: $1.35 in cash, without interest, provided that the cash consideration does not exceed 50% of the total consideration; or 0.7764 of a share of common stock of HealthTronics, provided that the stock consideration does not exceed 75% of the total consideration, subject to adjustment and proration. The exchange offer is scheduled to expire at 5 p.m. ET on July 21, unless extended.

In the meantime, Endocare is facing a lawsuit arising out of its alleged breach of the merger agreement it had with Galil Medical (Yokneam, Israel) (MDD, June 15, 2009). Earlier this week William Chandler III, chancellor for the State of Delaware, granted Galil's motion for an expedited trial in the suit (MDD, June 17, 2009).

The chancellor ordered that a two-day trail would be held on July 9-10 in Chancery Court in Georgetown, Delaware. Chandler further indicated that he expected to issue a judgment in the suit by July 13. Endocare is required to submit its answer to Galil's complaint by today.

The merger agreement between Galil and Endocare was first disclosed in November (MDD, Nov. 14, 2008).

• HLTH (Elmwood Park, New Jersey) and its subsidiary, WebMD Health (New York) reported a definitive merger agreement. HLTH will merge into WebMD in a tax-free, all-stock transaction and WebMD will be the surviving company.

Martin Wygod will serve as chairman of the board and Wayne Gattinella will serve as president/CEO of the combined company.

HLTH currently owns 48.1 million shares of WebMD Class B common stock, which represents about 80% of WebMD's equity, after giving effect to the net shares relating to WebMD's outstanding options and restricted stock. The merger will eliminate both HLTH's controlling interest in WebMD and WebMD's existing dual-class stock structure. In the merger, the WebMD Class B shares will be retired and each outstanding share of HLTH common stock will convert into 0.4444 shares of WebMD Class A common stock. HLTH currently has 102.8 million shares of its common stock outstanding.

Holders of HLTH common stock will receive an aggregate ownership interest in the combined company that is substantially equal to HLTH's existing ownership interest in WebMD after giving effect to the net shares relating to each of HLTH's and WebMD's outstanding options and restricted stock. Shares of WebMD Class A common stock currently outstanding will be unchanged in the merger, and similarly, their ownership percentage will be substantially unchanged by the merger, the company said.

WebMD will assume the obligations of HLTH's 3-1/8% convertible notes and HLTH's 1.75% convertible subordinated notes and the notes will become convertible into WebMD common stock, with the respective conversion rates to be adjusted based on the exchange ratio for the merger. There are currently $250 million principal amount outstanding of the 3-1/8% convertible notes and $265 million principal amount outstanding of the 1.75% convertible subordinated notes. Based on the exchange ratio for the merger, the 3-1/8% convertible notes would have a conversion price of roughly $35.03 a share of WebMD common stock and the 1.75% convertible subordinated notes would have a conversion price of about $34.63 a share of WebMD common stock.

HLTH and WebMD currently have in excess of $800 million in cash and investments in the aggregate and no long-term debt other than HLTH's convertible notes. The combined company will retain its net operating loss carryforwards, which totaled nearly $800 million at Dec. 31.

HLTH said it would continue its sales process for Porex with potential buyers and is aiming to conclude that process as quickly as possible. Porex is currently reflected as discontinued operations in HLTH's financial statements.

Completion of the merger is subject to HLTH and WebMD receiving required shareholder approvals, the company noted. HLTH has agreed to vote its shares of WebMD in favor of the merger. HLTH's ownership of the WebMD Class B common stock represents about 96% of the outstanding WebMD voting interest. The transaction is expected to close in the third or fourth quarter of 2009.

• Acacia Research (Newport Beach, California) said that its Thermal Scalpel subsidiary has entered into a license agreement with Medtronic (Minneapolis) covering patents relating to surgical devices. The agreement resolves litigation that was pending in the U.S. District Court for the Eastern District of Texas with respect to certain Medtronic products.