Medtronic 2011 Annual Report Download - page 65

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61
Medtronic, Inc.
4. Acquisitions and Acquisition-Related Items
The Company had various acquisitions and other acquisition-
related activity during fiscal years 2011, 2010, and 2009. Certain
acquisitions were accounted for as business combinations as
noted below. In accordance with authoritative guidance on
business combination accounting, the assets and liabilities of the
company acquired were recorded as of the acquisition date, at
their respective fair values, and consolidated with the Company.
The purchase price allocation is based on estimates of the fair
value of assets acquired and liabilities assumed. The pro forma
impact of these acquisitions was not significant, individually or in
the aggregate, to the results of the Company for the fiscal years
ended April 29, 2011, April 30, 2010, or April 24, 2009. The results
of operations related to each company acquired have been
included in the Company’s consolidated statements of earnings
since the date each company was acquired.
Fiscal Year 2011
Jolife AB On February 25, 2011, the Company acquired Jolife AB
(Jolife), a privately-held company. Jolife develops, manufactures,
and markets the LUCAS Chest Compression System together
with complementary technologies. Prior to the acquisition, the
Company distributed a large portion of Jolife’s product. Total
consideration for the transaction was approximately $53 million.
In connection with the acquisition of Jolife, the Company acquired
$46 million of technology-based intangible assets that had an
estimated useful life of 10 years at the time of acquisition, $11
million of net tangible liabilities, and $18 million of goodwill. The
goodwill is not deductible for tax purposes. The Company has
accounted for the acquisition of Jolife as a business combination.
Ardian, Inc. On January 13, 2011, the Company acquired Ardian,
Inc. (Ardian), a privately-held company. The Company had
previously invested in Ardian and held an 11.3 percent ownership
position prior to the acquisition. Ardian develops catheter-based
therapies to treat uncontrolled hypertension and related
conditions. Total consideration for the transaction was $1.020
billion, which includes the estimated fair value of revenue-based
contingent consideration of $212 million. The terms of the
transaction included an up-front cash payment of $717 million,
excluding the Company’s pro-rata share in Ardian, plus potential
future commercial milestone payments equal to the annual
revenue growth beginning in fiscal year 2012 through the end
of the Company’s fiscal year 2015. Based upon the acquisition
valuation, the Company acquired $55 million of technology-based
intangible assets that had an estimated useful life of 12 years at
the time of acquisition, $191 million of IPR&D, $33 million of net
liabilities, and $807 million of goodwill. The value attributable to
IPR&D has been capitalized as an indefinite-lived intangible asset.
The IPR&D primarily relates to the future launch of Ardian’s
Simplicity Catheter System into the U.S. and Japan markets.
Development costs needed to complete the project, estimated to
be approximately $50 million, will be expensed as incurred. The
goodwill is not deductible for tax purposes.
The Company has accounted for the acquisition of Ardian as
a business combination. The purchase price has been allocated
as follows:
(in millions)
Current assets $ 12
Property, plant, and equipment 1
IPR&D 191
Other intangible assets 55
Goodwill 807
Total assets acquired 1,066
Current liabilities 10
Long-term deferred tax liabilities, net 36
Total liabilities assumed 46
Net assets acquired $ 1 ,020
Osteotech, Inc. On November 16, 2010, the Company acquired
Osteotech, Inc. (Osteotech). Osteotech develops innovative
biologic products for regenerative medicine. Under the terms of
the agreement, Osteotech shareholders received $6.50 per share
in cash for each share of Osteotech common stock that they
owned. Total consideration for the transaction was $123 million.
Based upon the acquisition valuation, the Company acquired
$46 million of technology-based intangible assets that had an
estimated useful life of nine years at the time of acquisition, $1
million of IPR&D, $57 million of net tangible assets, and $19 million
of goodwill. The value attributable to IPR&D has been capitalized
as an indefinite-lived intangible asset. The goodwill is not
deductible for tax purposes.