Business

Medtronic expands spinal business with acquisition of Kyphon for US$3.9bn

3 August 2007

Minneapolis, USA. Medtronic, Inc. (NYSE: MDT) is strengthening its spinal business with the acquisition of Kyphon (NASDAQ: KYPH) for US$3.9 billion in a move seen as complementary in product range and geographical markets. The price represents a 32% premium over Kyphon's closing share price on July 26.

"We expect our combination with Kyphon to help accelerate the growth of Medtronic's existing spinal business by extending our product offerings into some of the fastest growing product segments and enabling us to provide physicians with a broader range of therapies for use at all stages of the care continuum," said Art Collins, chairman and chief executive officer of Medtronic.

"Importantly, the combination will also enable more patients of all ages to receive the benefits of modern, minimally invasive spinal treatments earlier in their care, with life-style friendly options that are simpler, faster and less invasive than many traditional surgical treatments.

"We are very enthusiastic about the opportunity to deliver outstanding value for our shareholders that fully reflects Kyphon's innovation and growth potential. This merger also combines two recognized industry leaders in spinal treatments," said Richard Mott, president and chief executive officer of Kyphon. "By merging our complementary strengths and collective resources into one organization, we will meaningfully increase our ability to ensure we meet the needs of our clinician customers around the world and the patients they serve."

The two companies' product lines and geographic presence are highly complementary. While both companies have expertise in minimally invasive, highly effective treatments, Medtronic's spinal surgery focus has been on providing treatment options for younger patients who are suffering from scoliosis and degenerative disc disease in the cervical and lumbar spine.

Kyphon's focus has been on treating older patients suffering from vertebral compression fractures and spinal stenosis. Together, the combined entity will be able to leverage its knowledge of modern fusion, dynamic stabilization, artificial disc replacement, biologics, vertebral augmentation, interspinous process decompression, disc disease diagnosis, navigation and minimally invasive techniques to serve patients with a broader variety of spinal disorders in order to alleviate pain and restore health for more patients.

The combined entity will also have a larger and expanded base of customers than Medtronic serves alone. Medtronic primarily serves orthopaedic and neurological surgeons who specialize in spinal surgery. Kyphon serves these same physicians and also has a significant customer base with interventional radiologists and interventional neuroradiologists.

The transaction, which is anticipated to close in the first calendar quarter of 2008, is expected to be neutral to Medtronic earnings in the first full fiscal year after closing and accretive thereafter. Medtronic expects the merger to yield significant revenue, cost and tax synergies.

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