Cynosure Inc (CYNO.O) agreed to buy Palomar Medical Technologies Inc PMTI.O for $294 million to expand its portfolio of light-based devices that are used to treat scars and wrinkles.
The deal comes at a time when the market for non-invasive or minimally invasive cosmetic procedures is recovering after years of slow growth as the economic downturn forced people to put off elective procedures.
About 73 percent of surgical procedures in 2012 were cosmetic, rather than reconstructive procedures, according to data from the American Academy of Facial Plastic and Reconstructive Surgery. (link.reuters.com/tug76t)
Palomar shareholders will get $13.65 per share — $6.825 per share in cash and $6.825 in stock.
The deal price represents an 8 percent premium to Palomar's Friday close. Shares of Palomar rose to $13.30 by midday on the Nasdaq.
Leerink Swann analyst Richard Newitter said Palomar's technologies would be leveraged better through Cynosure's world-wide marketing and distribution network.
"The company had mentioned intense pulsed light (IPL) technology as an area in which it would be interested, and given Palomar's technology expertise in this segment, we view it as a solid choice," he wrote in a note to clients.
Palomar's intense pulsed light (IPL) systems use many wavelengths of light to treat skin conditions without affecting the top layer of skin.
Cynosure said it would issue about 5.2 million shares for the deal and fund about $147 million through existing cash.
Palomar Chief Executive Joseph Caruso will join the Cynosure board as vice-chairman and serve as president of the company.
Cynosure said it plans to relocate its headquarters from Westford, Massachusetts to Palomar's facility, 15 miles away in Burlington.
The deal, which is expected to close in the third quarter of 2013, has been approved by the boards of both companies.
Leerink Swann was Cynosure's financial adviser on the deal, and Hinckley, Allen & Snyder was legal counsel. Canaccord Genuity advised Palomar, while WilmerHale served as legal counsel.
Cynosure shares were down 4 percent at $27.29 on the Nasdaq.
(Reporting By Vrinda Manocha in Bangalore; Editing by Joyjeet Das and Roshni Menon)