What: Shares of the medical device-maker for heart failure Thoratec (NASDAQ: THOR) rose by 10% today on exceptional volume after the company announced that it has agreed to a $3.4 billion buyout offer from St. Jude Medical (STJ +0.00%). Digging into the details, St. Jude is offering $63.50 per share for Thoratec, representing a 10% premium over the company's share price at yesterday's close. The agreement has a built in 30 day "Go Shop" period that allows Thoratec to solicit other offers. If Thoratec doesn't find another suitor, however, this deal is expected to close sometime in the fourth-quarter of this year.
So what: This buyout further bolsters St. Jude's growing heart failure business, which has recently become a key market for the company after its acquisition of CardioMEMS last year. What's key to understand in the wake of this deal is that the Street expects Thoratec's cardiac products to post an average annual sales growth rate of around 10% for the next five years running. If that line holds true, St. Jude should see about $700 million in revenue emanating from this acquisition by 2020.
Now what: Although Thoratec can solicit offers from other suitors until late August, it'll probably be hard to find anyone willing to pay more than the 7 times 12-month, trailing revenues that St. Jude is offering per this deal. In short, this buyout is more than likely a done deal at this point.
