- Medtronic on Friday announced it entered into a pact to buy Intersect ENT, a Menlo Park, Calif.-based medtech focused on treatments for chronic rhinosinusitis, in a cash deal valued at $1.1 billion. Shares of Intersect ENT were up more than 12% in Friday morning trading.
- The move is aimed at broadening Medtronic's product portfolio for ear, nose, and throat procedures while specifically targeting the chronic rhinosinusitis market, a condition that affects 35 million adults in the U.S. and often requires a combination of medical and surgical therapy. Intersect ENT's steroid-releasing implants are designed to open sinus passageways.
- The deal, expected to close toward the end of Medtronic's current fiscal year in April 2022, is not a surprise. Bloomberg reported in July 2020 that Medtronic made an offer to acquire Intersect ENT and that the two companies were in early discussions. Evercore ISI analysts in a Friday note called the acquisition a "smart tuck-in" with "reasonable valuation" that will be accretive to the medtech giant's top line.
Medtronic has again demonstrated the company's focus on tuck-in acquisitions with the news it'll acquire all outstanding shares of Intersect ENT for $28.25 per share in an all-cash transaction.
The buy is expected to be accretive to Medtronic's weighted average market growth rate and will be neutral to its adjusted earnings per share in the first 12 months and accretive after. A J.P. Morgan analyst in a Friday note wrote that the medtech giant is paying a 15% premium to yesterday's close and that the financials are right in the average range of past medtech acquisitions.
The analyst further commented that "there's not much to dislike about the deal from a Medtronic point of view" with the acquisition adding a "promising suite" of ear, nose, and throat products that should benefit from the medtech giant's scale in terms of a larger sales force and global presence.
Evercore ISI analysts similarly wrote that the acquisition "checks all the boxes" and makes both financial and strategic sense, adding that under Medtronic's ownership the business should sustain "teens" compound annual growth rate.
Needham analysts said they expect to see Medtronic pursue additional tuck-in acquisitions similar to the Intersect ENT deal over the next few years.
Last year was busy on the M&A front for the medtech giant with a flurry deals including dialysis access medtech Avenu Medical, connected insulin pen maker Companion Medical, spinal surgery specialist Medicrea, distal blood flow monitoring device maker Laser Associated Sciences, OR tech company Digital Surgery and spinal cord stimulation waveform developer Stimgenics.
CEO Geoff Martha referred during a May 2021 earnings call said these kinds of acquisitions are still the focus of its M&A strategy, adding the "tuck-in deals could be up to several billion dollars."
Medtronic on Aug. 24 will announce its financial results for the first quarter of fiscal year 2022.