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Cyberonics, Italy’s Sorin Merge to Create Medical Technology Leader

Italian medical device maker Sorin and its smaller U.S. peer Cyberonics Inc (CYBX.O) announced a merger on Thursday to create a global leader in cardiac surgery and neuromodulation with an equity value of $2.7 billion.

The all-stock deal values the Italian company at about $1.4 billion, a 14.2 percent premium to its market capitalization before the deal was announced.

Cyberonics will hold a 54 percent stake in the new company and Sorin the rest. The business will be based in Britain and apply for dual-listing on Nasdaq and the London Stock Exchange.

Sorin’s boss Andre-Michel Ballester will become chief executive and the board will be equally balanced between Sorin and Cyberonics.

At Wednesday’s closing price, Cyberonics had a market value of $1.6 billion, or $400 million more than Sorin. The difference is due to better growth prospects, said Martin Brunninger, an analyst at broker Jefferies, although Sorin’s shares soared more than 25 percent on Thursday.

Sorin’s sales account for over 60 percent of the combined entity’s total sales.

Cyberonics had around $290 million in 2014 revenues, two production facilities and 650 employees, compared to Sorin’s sales of nearly $1 billion, 10 manufacturing sites and 3,900 workers.

The deal is expected to boost earnings per share from next year and pre-tax cost synergies between the two companies are estimated to total $80 million by the end of 2018.

Brunninger said the deal gives the new company a critical mass to maintain and win large tender-driven hospital accounts.

“Beyond operational synergies, we see strong R&D overlaps, which makes the NewCo an interesting medical technology play in an otherwise commoditizing industry,” he said, adding the new group could become a takeover target.

The deal brings together two market leaders in cardiac surgery and neuromodulation, or stimulation of the vagus nerve, a superhighway connecting the brain to the rest of the body.

The combined company will also be a major player in cardiac rhythm management and research programs addressing heart failure, “with an initial commercial launch in Europe anticipated in coming weeks,” the companies said in a joint statement.

Cyberonics shareholders will receive one share of the new company for every share held, while Sorin shareholders will receive 0.0472 of a share for each Sorin share owned. Sorin was advised by Rothschild.

The exchange ratio implies a premium of 14.2 percent to Sorin’s closing share price on Feb. 25. Shares in Sorin were halted from trading for excessive gains on Thursday and were indicated 27 percent higher at 2.79 euros by 1123 GMT (0623 ET).

The deal was approved by the board of the two companies. Cyberonics shares will cease trading on the Nasdaq and Sorin shares will stop trading on the Milan exchange.


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