Philips the healthcare company based in the Netherlands agreed on Wednesday to acquire Spectranetics a U.S. based company that makes devices that treat heart disease. The deal is for €1.9 billion equal to approximately $2.16 billion and includes debt.
Spectranetics uses different techniques including tiny balloons covered in drugs and lasers to clean the insides of arteries and veins that are clogged from heart disease.
Shareholders of Spectranetics will be paid by Philips $38.50 for each share, which represents a premium of 27% to the closing price of June 27.
Philips CEO Frans van Houten is transforming the former huge conglomerate into a healthcare equipment maker. The transformation has been taking place during the last five years, as van Houten has spun off the company’s lighting division and sold most of the remaining consumer products arm.
Philips said that Spectranetics, which is expecting sales in 2017 of close to $300 million, will continue growing revenue at the rate of double digits and will start adding to earnings at Philips during 2018.
The deal also gives more strength to Philips in heart disease therapy after its acquisition in 2015 of Volcano the company that specializes in vascular imaging, said van Houten.
Van Houten said that following this acquisition, Philips will have a strong lineup of devices for the heart, coronary, vascular, peripheral and coronary therapies.
In addition, with its image-guided systems that enable doctors to view inside the patient’s body and use the tools the company has makes for a compelling market position, added van Houten.
Shares of Philips were down 1.35% in Wednesday early trading in Amsterdam. One analyst in Europe that has Philips as a “hold” said that this latest acquisition was a solid strategic fit but would not increase the return on invested capital at Philips for at least five years.
The analyst in a note to his clients said in his view the company was a strong company rich in technology and adds breadth and scale to Philips’ current portfolio of intravascular ultrasound and mechanical atherectomy, but this clearly is a high price that it paid.
On Wednesday, in a separate announcement, Philips said that it was starting a new program of €1.5 billion to buyback shares that would start during this year’s third quarter and run for the next two years.
Van Houten said that company did not act under pressure from Third Point LLC an activist hedge fund investor which recently took a stake in the company of less than 3%.