Medtronic agrees to acquire HeartWare International Inc. to expand its heart failure business

Medtronic agreed to acquire HeartWare International Inc. on June 27 for approximately $1.1 billion.

Medtronic said in a news release that it would purchase all outstanding shares of HeartWare’s common stock at $58 per share. The price is more than 90 percent higher than the $29.98 closing price of HeartWare’s stock on June 24.

As of 11:30 a.m. (EST) on June 27, HeartWare's shares were trading at $57.53 per share. Meanwhile, Medtronic's shares were down 1.86 percent to $81.71 per share.

The transaction is subject to customary closing conditions, but Medtronic expects it to close during its second fiscal quarter, which ends on Oct. 28.

The deal, which has been approved by both companies’ boards of directors, will expand Medtronic’s offerings for patients with heart failure. HeartWare manufactures the HVAD System, a small, less invasive ventricular assist device.

In June 2015, the FDA announced a Class I recall of 1,763 HeartWare devices, the latest in a series of voluntary recalls during a two-year period.

Medtronic, though, said that the HeartWare would provide the company with a device in the $800 million global ventricular assist device market, which it expects to grow in the mid-to-high single digits in 2016-17 and in the high-single digit to low-double digit range after 2017.

HeartWare International is also developing technologies to offer less invasive mechanical circulatory support options for patients with end-stage heart failure. 

Medtronic said it does not expect to change its fiscal year 2017 revenue or earnings per share projections. The company added that there would be minimal or no net earnings per share dilution during the first two years after the deal is compete. By year three, Medtronic anticipates the HeartWare acquisition will increase the company’s earnings.

HeartWare International will be part of Medtronic’s cardiac rhythm and heart failure division within the company’s cardiac and vascular group. In the fourth quarter of fiscal year 2016, Medtronic reported revenue growth of 8 percent in its cardiac and vascular group, including a 9 percent increase in the cardiac rhythm and heart failure division.