Philips To Buy Spectranetics, Eyes Image Business Growth

Maintaining its buyout spree, Koninklijke Philips N.V. (NYSE:PHG) recently announced a definitive merger agreement to take over U.S.-based medical devices maker, Spectranetics Corporation (NASDAQ:SPNC) , for €1.9 billion ($2.16 billion). Philips believes that this acquisition will boost its stronghold in the image-guided therapy market, which is valued at over €6 billion.

Over the past two years, Philips has successfully morphed into a healthcare technology provider. To expand its presence in the domain, the company is increasingly turning to bolt-on acquisitions. The recent buyout marks the company’s fourth acquisition in the calendar year. The others include deals to buy Australian Pharmacy Sleep Services, Respiratory Technologies and Electrical Geodesics.

A Premium Price Offer

The Spectranetics acquisition, which has already got the nod from the board, is expected to close by the end of third-quarter 2017. Amsterdam-based Philips has offered to pay $38.50 per share for the deal, which represents a 26.6% premium on Spectranetics’ closing share price on Tuesday. The transaction, which is to be paid in cash upon completion, includes Spectranetics’ cash and debt.

Following the merger agreement, the transaction is subject to fulfillment of customary closing conditions, including certain regulatory clearances. Philips plans to finance the acquisition through a combination of cash on hand and the issuance of debt.

Spectranetics’ Growth Prospects

Spectranetics is considered to be a premium provider of vascular intervention and lead management solutions. The company is currently witnessing solid prospects in its end markets. It is growing double digits and expects 2017 sales to lie in the band of $293–$306 million. Post the completion of the transaction, more than 900 of the company’s employees will be absorbed in Philips’ Image-Guided Therapy Business.

Drug-coated balloons procedure is one of the fastest growing ones in peripheral vascular diagnostics, and Spectranetics enjoys a dominant position in this space. As a matter of fact, the company’s Stellarex drug-coated balloon has acted as one of its major profit churners in recent times and has already earned a CE-mark. It is currently inching toward premarket approval in the U.S., after it clears the review process from FDA.

Boosting the Image-Guided Therapy Business

Shares of Philips have returned 21.4% in the last six months, outperforming the Zacks categorized Original post

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Written By: Zacks Investment Research