Medtronic can buy Kyphon

Deal gets U.S. approval, faces foreign, shareholder scrutiny

The Commercial Appeal
September 12, 2007
By Daniel Connolly

Federal antitrust authorities have approved medical device maker Medtronic's proposed takeover of Sunnyvale, Calif.-based spine surgery firm Kyphon Inc., the companies said. However, the deal still faces scrutiny from foreign regulators and Kyphon shareholders.

Medtronic said in July that it planned to buy Kyphon for 71 cents per share, or roughly $3.9 billion. That's a 32 percent premium over Kyphon's $53.68 closing price the day before the announcement.

The companies said Tuesday that federal authorities had agreed to the early end of a waiting period required under antitrust law. Such a decision usually means the agency won't block a deal, said Federal Trade Commission spokesman Frank Dorman, who wasn't familiar with the Medtronic matter.

Kyphon is slated to keep its California facilities, but the purchase could mean some new jobs in Memphis, where Medtronic employs roughly 1,550 people in its fast-growing spinal surgery unit.

Medtronic spokesman Bert Kelly said Medtronic may need new people in sales, marketing and other positions, but that plans aren't final.

The Kyphon purchase would let Medtronic expand its offerings in the treatment of spinal compression fractures, painful injuries that often occur in elderly people with osteoporosis, a bone-weakening condition.

Kyphon's best-known surgical technique is called kyphoplasty, which involves the use of a surgical balloon and bone cement. The company says the technique can give rapid pain relief to patients and correct back deformities related to the compression fractures.

Medtronic hasn't been able to invent surgical tools that are as good as Kyphon's at healing these fractures, which are hard to treat with the rods and screws of traditional spinal surgery because the patients' bones are so weak.

Currently, doctors often treat the fractures through bed rest, and analysts say surgical treatment of these fractures represents a big untapped market that is expected to grow as the population ages.

Kyphon stockholders are scheduled to vote on Medtronic's offer at a special meeting on Oct. 16, the companies said.

Also, Kyphon said in a regulatory filing that it is pursuing approval of the takeover plan in countries that include Austria, Cyprus, Germany, Greece, Portugal, Spain and Turkey.

-- Daniel Connolly: 529-5296