Edward Lifesciences (EW) To Buy Israel's Valtech Cardio
Zacks Investment Research | Nov 28, 2016 09:03PM ET
Edward Lifesciences Corporation (NYSE:EW) , a major player in patient-focused innovation for structural heart diseases and critical care monitoring, recently announced that it has agreed to buy Israel-based Valtech Cardio Ltd. The privately-held company is engaged in the development of the Cardioband System for transcatheter repair of the mitral and tricuspid valves.
Over the last five months, Edward Lifesciences has been outperforming the broader industry until it released a disappointing third-quarter performance. Immediately after the results, the stock nosedived to a negative 15.4% on Nov 29 compared to the broader industry loss of 5.7%. In the quarter, the company’s earnings were in line with the Zacks Consensus Estimate while revenues missed the mark. However, full-year earnings estimates revision trend over the last two months has been favorable with six estimates moving north while none moved lower, indicating a bullish trend. We believe the aforementioned buyout will add momentum to the company’s price movement.
Coming back to the deal, the Valtech acquisition has been priced at $340 million in stock and cash at closing, with the potential for up to $350 million in additional pre-specified milestone-driven payments over the next 10 years. The transaction is expected to close in early 2017, subject to customary closing conditions. Prior to it, Valtech will spin off its early-stage transseptal mitral valve replacement technology program. EdwardsLifescienceswill also keep an option to acquire that program and its associated intellectual property.
Meanwhile, Edwards Lifesciences' board of directors authorized a new share repurchase program to acquire up to an additional $1 billion of the company's outstanding common shares. The company also has $277 million remaining under its current $750 million share repurchase program, which was authorized in Jul 2014. This agreement allows the company to buy back shares to offset the dilution of the Valtech transaction.
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