Plymouth-based ev3 sold for $2.6Bby Martin Moylan, Minnesota Public Radio
St. Paul, Minn. (AP) — Another Minnesota medical device company has been snapped up.
ev3 is headquartered in Plymouth, where more than half of its some 1,350 employees work. In Plymouth, the company makes stents and other products that help physicians clear blockages in blood vessels of the leg.
In a conference call this morning, Covidien CEO Richard Meelia said ev3 will give his company a big boost.
"ev3 will accelerate our growth, improve our gross margins, deliver innovative new products and give us a major market opportunity in the vascular space," Meelia said.
Covidien says it has no plans to move any of ev3's operations out of Minnesota, and Meelia indicated there won't be a lot of job cuts with the deal.
"As there is virtually no product overlap, we foresee a very straight-forward integration plan," he said. "ev3 has a strong management team, which we hope to retain, and a dedicated selling organization with broad product knowledge."
Covidien gets most of its revenue from medical devices. In addition to vascular devices, those products include surgical instruments, tissue grafts, monitoring devices and ventilators. It also sells brand-name and generic drugs and drug ingredients, and medical supplies.
The company used to be part of Tyco, the conglomerate run by Dennis Koslowski, who's now in prison for grand larceny, securities fraud and falsifying business records.
Last September, Covidien began remaking itself through a series of deals, saying it wanted to focus on faster-growing and more profitable businesses.
The deal follow the sale of ATS Medical to Medtronic for $370 million and Virtual Radiologic to an investment group for more than $290 million.
Local medical technology industry observers say the purchase of ev3 and other Minnesota-based med-tech firms by out-of-state buyers is generally a good thing.
Peter McNerny, a venture capitalist who has invested in area med-tech companies for about 20 years, says the sale of prominent local medical technology firms is an affirmation their value and what's going on locally.
"There's an awful lot of hard work and effort by a lot of people involved in these companies. Management, investors, etc. And it's always a good thing when it creates value that's attractive to these large corporations.">
McNerny says multi-billion dollar deals like the one for ev3 can inspire investors to put money into small start-ups, hoping that one day they'll get acquired.
"Investors, they get encouraged by this kind of outcome. It makes them more likely to invest in new ideas for the future," he said. "ATS was a start-up at one point. So was ev3. And they've managed to create this kind of value, which is great."
Of course, when a prominent local firm is acquired, there's a chance its operations -- and jobs -- could move elsewhere.
But Peter Bianco, director of life-science business development at Nilan Johnson Lewis, says that's unlikely in this case.
"Moving them would be probably the wrong thing to do," Bianco said.
Bianco says it makes sense not to uproot large, well-established firms that rely heavily on the skills of their scientists, technicians and other knowledge workers.
"Once a company reaches a certain stage they are hard to move. You don't want to move them from where they grew up and where they have roots, because it's not just about taking the products and moving them to another state," he said. "There's people. There's a culture. There's facilities. There's a deep investment."
Bianco expects firms like ev3 will grow much stronger as divisions of larger companies. And that would be good for the Twin Cities med-tech community and the state's economy. The companies say the ev3 deal should be complete by July 31, assuming regulators approve it.
Covidien shares fell 94 cents, or 2.2 percent, to $41.45.
- All Things Considered, 06/01/2010, 5:50 p.m.