Boston Scientific To Buy Endo's AMS Urology Portfolio For Up To $1.65 Bln

(RTTNews) - Medical device maker Boston Scientific Corp. (BSX) said Monday that it has agreed to acquire Endo International plc's (ENDP, ENL.TO) American Medical Systems or AMS urology portfolio for up to $1.65 billion, with $1.6 billion in cash payable at closing and a potential additional milestone of $50 million based on 2016 sales.

Endo International is an Ireland-based specialty healthcare company. The portfolio being sold by Endo International includes the Men's Health and Prostate Health businesses, which will become part of Boston Scientific Urology and Women's Health. However, the transaction does not include the AMS women's health business for treating pelvic organ prolapse and female stress urinary incontinence.

Endo International also reported a loss for the fourth quarter that narrowed from last year on double-digit revenue growth. Both revenue and adjusted earnings for the quarter beat analysts' expectations. However, the company forecast financial results for fiscal 2015 below analysts' estimates.

Marlborough, Massachusetts-based Boston Scientific said that the acquisition of the urology portfolio is being structured as an asset purchase for tax purposes. The company plans to finance the acquisition through a combination of existing and newly committed credit facilities.

The acquisition encompasses the AMS product portfolio for treating urologic conditions, including benign prostatic hyperplasia or BPH, male stress urinary incontinence, and erectile dysfunction.

Boston Scientific noted that these technologies complement its own kidney stone, pelvic organ prolapse, female stress urinary incontinence and abnormal uterine bleeding treatment portfolios.

Mike Mahoney, president and chief executive officer of Boston Scientific said, "The combination of Boston Scientific's Urology and Women's Health and AMS' urology portfolios will create a business with nearly $1 billion in annual sales and enable significant synergies and strong future growth prospects through portfolio innovation and international market expansion."

Minnetonka, Minnesotta-based AMS Men's Health and Prostate Health businesses, which includes about 800 employees worldwide, generated 2014 sales of about $400 million and adjusted operating income of about $130 million, excluding amortization and certain allocated expenses.

Boston Scientific expects to close the transaction in the third quarter of 2015.

Upon closing, the company will acquire a portfolio that includes the minimally invasive GreenLight XPS and HPS Laser Therapy Systems for treating BPH, the AMS 800 Urinary Control System for treating stress urinary incontinence, and the AMS 700 Inflatable Penile Prosthesis for treating erectile dysfunction.

On an adjusted basis, Boston Scientific expects the transaction to be breakeven to its adjusted earnings per share in 2015, accretive by at least 3 cents in 2016, by about 7 cents in 2017, and increasingly accretive thereafter.

However, the company expects the transaction to be less accretive or dilutive, as the case may be, on a reported basis from 2015 through 2017, due to amortization expense as well as transaction and integration costs.

Boston Scientific expects the acquisition to result in annual pre-tax synergies of more than $50 million by the end of 2018.

J.P. Morgan Securities LLC acted as financial advisor to Boston Scientific.

In a separate statement, Endo International said it is currently evaluating strategic alternatives for the AMS Women's Health business.

Rajiv De Silva, President and CEO of Endo International said, "The divestiture of AMS marks the continued execution of our business strategy and furthers the transformation of Endo into a leading global specialty pharmaceutical company. This transaction provides us with greater financial flexibility and better positions the Company to take advantage of value-creating M&A opportunities for our pharmaceuticals businesses."

Endo International said it will classify and report the results of AMS as discontinued operations. The company added that it will provide fiscal 2015 guidance on a continuing operations basis.

BofA Merrill Lynch is serving as financial advisor to Endo, while Skadden, Arps, Slate, Meagher & Flom LLP is serving as its legal advisor.

Endo International's net loss for the fourth quarter was $53.48 million or $0.35 per share, narrower than loss of $775.91 million or $6.74 per share in the comparable quarter last year.

Adjusted net income for the quarter was $184.88 million or $1.16 per share, compared to $123.70 million or $0.96 per share in the prior-year period. On average, 19 analysts polled by Thomson Reuters expected the company to earn $1.12 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 37 percent to $799.96 million from $584.95 million in the year-ago quarter. Analysts estimated revenues of $780.44 million for the quarter.

Looking ahead to fiscal 2015, at current exchange rates, Endo International forecast earnings from continuing operations between $2.73 and $2.93 per share, adjusted earnings from continuing operations of $4.35 to $4.55 per share, and total revenue in a range of $2.90 billion and $3.00 billion. The Street expects the company to report earnings of $4.88 per share for the year on revenues of $3.47 billion.

BSX closed Friday's trading at $16.90. In Monday's pre-market trades, the stock is up $0.20 or 1.18 percent to $17.10.

ENDP closed Friday's trading at $85.60. In Monday's pre-market activity, the stock is adding $0.90 or 1.05 percent to $86.50.