(Reuters) - St. Jude Medical Inc STJ.N agreed to buy smaller rival Thoratec Corp (THOR.O) for about $3.4 billion, giving it more devices for patients with the highest risk of heart failure.
St. Jude said on Wednesday it would offer $63.50 per Thoratec share, which represents a premium of about 10 percent to the stock’s Tuesday close.
Thoratec’s shares closed up 18 percent on Tuesday after Bloomberg reported that St. Jude was in talks to buy the company.
Thoratec’s shares rose 10 percent to a record high of $63.15. St. Jude’s stock was up about 1 percent at $77.34.
Rival HeartWare International Inc’s HTWR.O shares rise 3.5 percent at $87.37.
Medical device makers are consolidating to offset pricing pressure in the United States as hospitals cut costs with patients reducing doctor visits due to rising out-of-pocket costs for care.
“This acquisition helps accelerate development of our heart failure franchise, led by the upside on CardioMEMS,” St. Jude Chief Executive Daniel Starks said on a conference call.
St. Jude’s CardioMEMS heart failure (HF) monitor, the only FDA-approved heart failure monitor, is used to treat slightly less sick, or class III, patients.
Thoratec’s devices, including HeartMate Left Ventricular Assist Systems and Thoratec VAD, are used for mechanical circulatory support to treat heart failure. HeartMate II is approved for use in patients with the highest risk of heart failure.
St. Jude also said the deal helps enter markets totaling more than $1 billion that are expected to grow about 10 percent annually.
The company, which also makes neurological products, said it expects the deal to add to adjusted earnings in 2016.
The deal, expected to close in the fourth quarter, is net of cash, the companies said.
Pleasanton, California-based Thoratec can solicit rival offers for the next 30 days.
Bank of America Merrill Lynch is acting as financial adviser to St. Jude and has also provided financing. Gibson, Dunn & Crutcher LLP is serving as legal counsel.
Guggenheim Securities is acting as financial adviser to Thoratec and Latham & Watkins LLP is serving as legal counsel.
Additional reporting by Vidya L Nathan and Ankur Banerjee in Bengaluru; Editing by Sriraj Kalluvila