Philips buys US-based Spectranetics for $2.2bn
The deal adds to the Dutch company’s position in the heart disease therapy
1 July, 2017
A Spectranetics research and development chemist performs quality control tests at the company’s Maple Grove site.
Dutch healthcare company Philips has agreed to buy US-based Spectranetics, a maker of devices to treat heart disease, for €1.9bn ($2.16bn) including debt, as it expands its image-guided therapy business. Spectranetics uses techniques including lasers and tiny drug-covered balloons to clean the insides of veins and arteries that have become clogged due to heart disease. Philips will pay Spectranetics shareholders $38.50 per share, a 27% premium to their closing price on 27 June.
The board of directors of Spectranetics has approved the transaction and recommends the offer to its shareholders. The transaction is expected to close in the third quarter of 2017.
Philips Chief Executive Frans van Houten has transformed the former conglomerate into a focused maker of healthcare equipment over the past five years, spinning off its lighting division and selling most of its remaining consumer products business. Philips said Spectranetics, which expects sales of around $300m this year, will continue to grow revenues at double-digit rates and will begin adding to Philips' earnings in 2018. The deal strengthens Philips' position in heart disease therapy, following its acquisition of vascular imaging company Volcano in early 2015, Van Houten told reporters. After the acquisition, "we will have quite a nice lineup of devices for both heart, coronary, peripheral, vascular therapies," he said. "In combination with our image-guided systems which enable doctors to see inside the body and use these tools, we have a very compelling market position."
Spectranetics' device portfolio includes a range of laser atherectomy catheters for treatment of blockages, the AngioSculpt scoring balloon, the AngioSculptX scoring balloon, and the Stellarex drug-coated balloon. All of these market segments exhibit high growth rates. The Stellarex drug-coated balloon is a key growth driver in Spectranetics' portfolio. Stellarex already is CE-marked, and under review by the FDA for premarket approval in the US.
Philips shares dipped 1.35% to €32.1 in 28 June morning trading in Amsterdam. Analysts from Berenburg, which rates the shares 'Hold', said the acquisition was a good strategic fit but would not increase Philips' return on invested capital for five years.
"In our view, this is a nice technology-rich company and adds scale and breadth to Philips’ existing portfolio of mechanical atherectomy and intravascular ultrasound—but clearly this is a punchy price to pay," they said in a note, Reuters reporded.
Separately last Wednesday, Philips announced a new €1.5bn share buyback program that will begin in the third quarter and run for two years.
CEO van Houten denied that the company had acted under pressure from activist US hedge fund Third Point, which has recently acquired a stake in Philips below the three percent threshold that would require disclosure under Dutch securities law. Van Houten said he has not had any communication with Third Point.