Angiotech to Buy Medical Devices Company

$785-million (U.S.) deal for Illinois firm

By Leonard Zehr
The Globe and Mail 
February 1, 2006

Breaking out of its research and development mould, Angiotech Pharmaceuticals Inc. announced Wednesday that it is buying a major American medical devices company for about $900-million in a move that will transform it into a global manufacturer.

The friendly deal to buy American Medical Instruments Holdings Inc. will also diversify Angiotech's revenue base and give the Vancouver-based company a commercial platform for its product pipeline. And perhaps most importantly, it will get sales and marketing teams, which it doesn't have at present.

Angiotech shares jumped $1.89 or 13.3 per cent to $16.09 in early Toronto trading.

The transaction, seen closing in the second quarter of this year, is expected to immediately boost Angiotech's 2006 and 2007 earnings.

"The acquisition of AMI represents a transformational event for Angiotech," said president and chief executive officer Dr. William Hunter.

Angiotech is best known for developing the Taxus drug-coated stent, which is used to prop open clogged heart arteries.

The device is sold by Boston Scientific Inc. and commands a 54-per-cent share of a $5-billion-a-year industry. Angiotech is also developing a series of new biomaterial devices as a revenue source when new competitors surface in the drug-coated stent sector in several years.

Dr. Hunter said the Angiotech-AMI combination has the potential to develop and commercialize the next generation of medical devices and biomaterials.

Lake Forest, Ill.-based AMI has 12 plants, with 1,400 employees.

It has significant operations in Illinois, Pennsylvania, New York, Florida, Puerto Rico, Denmark and Britain. AMI also has two specialty worldwide sales forces that sell surgical products for general, plastic, ophthalmic and vascular procedures, and radiology and tumour biopsy.

Angiotech said these sales forces could potentially sell its Lifespan vascular graft products, and its drug-coated vascular wrap, surgical sealants and central venous catheters, as well as other new products.

"The combination of [Angiotech's] various biomaterials and drug technologies with AMI's devices will provide for numerous new product opportunities," the company said, adding that many of these new products have the potential to be rapidly developed.

"We've been working on this type of deal for the better part of a year and a half, and with AMI since November," Dr. Hunter said.

Closely held AMI is expected to post revenue of about $174-million (U.S.) for 2005 and earnings of $50-million before interest, taxes, depreciation and amortization.

Angiotech predicted the acquisition will add to its per-share profit in 2006. It expects to finance the deal with $200-million of cash on hand and borrowings, with closing set for the end of the first quarter. Merrill Lynch & Co. and Credit Suisse First Boston provided financing commitments to complete the transaction.

AMI was created in 2003 through the purchase of several health care companies by RoundTable Healthcare Partners from Marmon Group, which have equity positions of 65 and 35 per cent, respectively, in AMI. Marmon Group is the primary holding company for Chicago's wealthy Pritzker family.