Utah's Merit Medical Systems Inc. is poised to make the largest acquisition in its 23-year history.
The South Jordan-based manufacturer of medical catheters and radiological and cardiological products has signed an agreement to acquire BioSphere Medical Inc. in an all cash transaction. The deal is valued at approximately $96 million.
BioSphere, based in Rockland, Mass., markets "embolotherapy" products that use bioengineered microscopic spheres to deliver drugs into a patient's system and to block blood vessels that feed uterine fibroid and other tumors.
"The acquisition ... represents a truly strategic investment for Merit," Fred Lampropoulos, the company's chairman and CEO said during a conference call Thursday afternoon with investors and securities analysts.
He called BioSphere's products the "best in class" and added that its technology can be used as a platform by Merit to develop other therapeutic products.
The agreement calls for Merit to pay approximately $4.38 a share for BioSphere's common stock, which represents a premium of 54 percent over the company's closing share price on Wednesday, which was $2.84. The stock closed up 16 cents at $3 on Thursday.
The transaction is expected to close in the third quarter of this year, Lampropoulos said.
Securities analyst Shawn Fitz of Stephens Inc. in Little Rock, Ark., termed the acquisition a "shrewd move." "It moves Merit up the technological food chain, which is something they've been striving [to do] for a long time."
Lampropoulos said Merit will be able to leverage its sales force to expand the distribution of its newly acquired BioSphere products, something that BioSphere had a difficult time doing with a sales staff of just 22.
Merit is anticipating that the acquisition will reduce its earnings slightly this year, but that it will increase earnings 4 cents to 5 cents per share in 2011, 7 cents in 2012, 13 cents in 2013 and 21 cents in 2014.
"We're taking great products [from BioSphere] and putting them into a great business model," Lampropoulos said, noting the acquisition will be paid for by 2014 entirely out of Merit's own cash flow.
Biosphere's executives could not be reached for comment.
But in a statement released late Thursday, the company's Chairman David Southwell said Merit's reputation and experience along with its worldwide distribution network make it a good fit for BioSphere.
"This transaction achieves significant value for our shareholders," he said. "Furthermore, through Merit, more women suffering from uterine fibroids will benefit from the less-invasive treatment solution offered by embolotherapy."
Merit reported revenue of $67.4 million for the first quarter of its 2010 fiscal year -- a 16 percent increase over its sales of $58.4 million in last year's first quarter.
Net income for the first quarter that ended on March 31 was $4.5 million, or 16 cents per share, compared to net income of $5.5 million, or 19 cents per share, for the year-ago quarter.
BioSphere reported revenue for the first quarter of 2010 was $7.12 million, a decline 2 percent from the $7.28 million recorded in the first quarter of 2009. The loss for the first quarter was $1.23 million, or 7 cents per share while a year earlier the company posted a loss of $1.79 million or 10 cents per share.