Medtronic 2009 Annual Report Download - page 70

66 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
The pro forma impact of the above acquisitions was not
significant, individually or in the aggregate, to the results of the
Company for the fiscal years ended April 24, 2009 and April 25,
2008. The results of operations related to each company have
been included in the Company’s consolidated statements of
earnings since the date each company was acquired.
Other Acquisitions and IPR&D Charges In February 2009, the
Company recorded an IPR&D charge of $307 million related to the
acquisition of privately held Ventor Technologies Ltd. (Ventor),
a development stage company focused on transcatheter heart
valve technologies for the treatment of aortic valve disease. This
acquisition adds two technologies to the Company’s transcatheter
valve portfolio: a minimally invasive, surgical transapical
technology and a next generation percutaneous, transfemoral
technology. Total consideration for the transaction, net of cash
acquired, was approximately $308 million. Of the $308 million,
$307 million was expensed as IPR&D since technological feasibility
of the underlying project had not yet been reached and such
technology has no future alternative use and $1 million related to
other net assets acquired.
During the second and fourth quarters of fiscal year 2009, the
Company recorded IPR&D charges of $22 million related to the
purchase of certain intellectual property for use in the Spinal
and Diabetes businesses. These payments were expensed as
IPR&D since technological feasibility of the underlying product
had not yet been reached and such technology has no future
alternative use.
Fiscal Year 2008
Kyphon Acquisition In November 2007, the Company acquired
Kyphon Inc. (Kyphon) and it became a wholly owned subsidiary
of the Company. Kyphon develops and markets medical devices
designed to restore and preserve spinal function using minimally
invasive technology. Kyphon’s primary products are used in
balloon kyphoplasty for the treatment of spinal compression
fractures caused by osteoporosis or cancer, and in the interspinous
process decompression procedure for treating the symptoms of
lumbar spinal stenosis. It is expected that the acquisition of
Kyphon will add to the growth of the Company’s existing Spinal
business by extending its product offerings and enabling the
Company to provide physicians with a broader range of therapies
for use at all stages of the care continuum.
Under the terms of the agreement announced in July 2007,
Kyphon shareholders received $71 per share in cash for each
share of Kyphon common stock they owned. Total consideration
for the transaction was approximately $4.203 billion, which
includes payments to Kyphon shareholders for the cancellation of
outstanding shares, the assumption and settlement of existing
Kyphon debt and payment of direct acquisition costs. Total debt
assumed relates to Kyphon’s obligations under existing credit and
term loan facilities and outstanding senior convertible notes.
In addition, the total consideration includes the proceeds of
unwinding the related convertible note hedges and cancellation
and payment of the warrants to the hedge participants that were
originally issued by Kyphon in February 2007. The transaction was
financed through a combination of approximately $3.303 billion
cash on hand, the issuance of $600 million short-term commercial
paper and borrowing $300 million through a new long-term
unsecured revolving credit facility.
The Company has accounted for the acquisition of Kyphon as a
business combination. Under business combination accounting,
the assets and liabilities of Kyphon were recorded as of the
acquisition date, at their respective fair values, and consolidated
with the Company. The breakdown of the purchase price of
Kyphon is as follows:
(in millions)
Cash acquisition of Kyphon outstanding common stock $ 3,300
Cash settlement of vested stock-based awards 218
Debt assumed and settled 570
Cash settlement of convertible debt warrants, net of proceeds
from convertible note hedges 87
Direct acquisition costs 28
Total purchase price $ 4,203
The purchase price allocation is based on estimates of the fair
value of assets acquired and liabilities assumed. The purchase
price has been allocated as follows:
(in millions)
Current assets $ 379
Property, plant and equipment 39
IPR&D 290
Other intangible assets 996
Goodwill 3,148
Other long-term assets 10
Total assets acquired 4,862
Current liabilities 344
Deferred tax liabilities 282
Other long-term liabilities 33
Total liabilities assumed 659
Net assets acquired $ 4,203