UPDATE 3-St Jude to pay more than $1 bln to buy AGA Medical

* At $20.80, deal is at 41 percent premium

* Deal helps St Jude diversify line of heart products

* AGA Medical went public last October

* St Jude shares up slightly
(Adds deal details, background, analyst comments, bylines,
CHICAGO to dateline)

By Susan Kelly and Lewis Krauskopf

CHICAGO/NEW YORK, Oct 18 (BestGrowthStock) – St Jude Medical Inc
(STJ.N: ) will buy AGA Medical Holdings Inc (AGAM.O: ), a maker of
devices for structural heart defects and vascular problems, for
more than $1 billion in cash and stock, the companies said on
Monday.

The acquisition is expected to help St Jude diversify into
faster-growth treatment areas beyond its core heart rhythm
management line of implantable cardioverter defibrillators and
pacemakers.

“In the case of St Jude, it’s a nice fit,” said Jefferies &
Co analyst Raj Denhoy. “It will help them build out their
presence with interventional cardiologists in the cath lab.”

At $20.80 per share, the deal values AGA Medical shares at
a 41 percent premium to Friday’s closing price. The companies
valued the deal at about $1.3 billion, including the assumption
of about $225 million in debt.

Shares of AGA climbed $5.96, or 41 percent, to $20.67 on
Nasdaq. Shares of St Jude rose 16 cents, or 0.4 percent, to
$40.06 in on the New York Stock Exchange.

While St Jude’s maturing ICD and pacemaker markets are
facing slower demand and increasing pricing pressures, analysts
see AGA’s markets for devices to address structural heart
defects as offering several $1 billion-plus opportunities that
are in the early stages of development.

AGA sells a closure device for atrial septal defect, which
is a hole in the wall that separates the heart’s upper
chambers. It also sells vascular plugs that are used to block
blood flow to diseased peripheral vessels and tumors.

“This deal is a positive for St. Jude and represents an
opportunity for market expansion with AGA’s products and should
provide incremental growth drivers for the company’s atrial
fibrillation and structural heart programs,” said William Blair
& Co analyst Ben Andrew.

AGA posted sales of nearly $200 million in 2009. But the
biggest potential for growth is expected to come from areas
where the company hopes to gain expanded indications for its
products.

AGA’s closure device is in clinical trials where it is
being tested for the treatment of patent foramen ovale, or PFO,
another type of hole between the heart’s upper chambers that
may be linked to stroke or migraine headaches.

The company is also testing a left atrial appendage closure
device, which has potential to reduce the risk of stroke in
patients with atrial fibrillation.

Big device makers including St Jude and rivals Medtronic
Inc (MDT.N: ) and Boston Scientific Corp (BSX.N: ) have been buying
up smaller companies with promising new technologies for
treating a range of cardiovascular problems as the markets for
more established heart devices such as stents and ICDs slow.

AGA Medical went public last October at $14.50 per share.
Its major shareholders include those affiliated with private
equity firm Welsh, Carson, Anderson & Stowe, and AGA Medical’s
co-founder Franck Gougeon.

The deal involves an even split between cash and stock. The
exchange ratio for the stock component will be determined by
the average closing price of St. Jude stock over 10 trading
days, ending two days before the close of the exchange offer.

St Jude said it expects the transaction to close by year’s
end and it does not affect its earnings outlook for 2010.

AGA, in a regulatory filing, said it agreed to pay a
breakup fee ranging from about $21.7 million to $32.5 million
if it were to terminate the merger agreement with St Jude.

(Reporting by Lewis Krauskopf and Susan Kelly, editing by
Maureen Bavdek, Dave Zimmerman)

UPDATE 3-St Jude to pay more than $1 bln to buy AGA Medical