Shares of Intersect ENT (XENT) were skyrocketing 29.6% higher as of 11:13 a.m. EDT on Wednesday. The big jump came after Bloomberg reported that medical device giant Medtronic (MDT -0.14%) made an offer to acquire Intersect.
No terms of the potential acquisition were disclosed in the Bloomberg article. However, for any deal to be approved by Intersect's board and shareholders, Medtronic would likely have to offer a significant premium to Intersect's recent trading price.
Investors' excitement about a possible acquisition makes sense. Intersect's revenue fell in the first quarter from the prior-year period. This decline stemmed from hospitals delaying elective surgical procedures and from lower ENT (ear, nose, and throat) office visits because of the COVID-19 pandemic. As a result, Intersect lost more than half of its valuation earlier this year. The reported acquisition offer is the best news for Intersect in quite a while.
It also makes sense why Medtronic would be interested in Intersect ENT. The smaller company markets products for ear, nose, and throat conditions, which presents a new market opportunity for Medtronic.
The price tag, whatever it might be, shouldn't be a problem for Medtronic, either. The company had more than $4 billion in cash as of April 24, 2020. Even after today's big gain, Intersect's market cap is only around $600 million.
Keep in mind that the deal isn't done yet. Intersect's board of directors is reportedly reviewing Medtronic's offer with advisors. It's also possible that the transaction will fall through. Depending on what happens, Intersect's shares could rise even more -- or the healthcare stock could sink.