Why Intersect ENT Shot 12% Higher on Friday

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What happened

Intersect ENT (NASDAQ:XENT), a medical device maker specializing in technology for the ear, nose, and throat segment, had a memorable Friday. On the same day it delivered its latest quarterly results, a peer announced it was acquiring the company.

So what

That peer is medical device giant Medtronic (NYSE:MDT), which has signed a definitive agreement to purchase Intersect ENT for $28.25 per share in a deal with an enterprise value estimated at around $1.1 billion. The news comes less than a month after it was revealed that Medtronic had made a formal buyout offer.

That per-share price is 15% higher than Intersect ENT’s closing level on Thursday, hence Friday’s price leap. 

The deal is subject to approval by Intersect ENT shareholders. Given the stock price premium and the company’s absorption into a device segment leader, it’s hard to imagine there will be much objection. Medtronic said that if approved, the acquisition should close by the end of its current fiscal year.

Piggy bank with stethoscope.

Image source: Getty Images.

Meanwhile, for its Q2, Intersect ENT’s revenue came in at $27.3 million, which was 180% higher year over year. The non-GAAP (adjusted) net loss was $16.6 million ($0.49 per share), narrower than the $21 million the company lost in the year-ago quarter.

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On average, analysts tracking the stock were modeling a top-line figure of just over $28 million, and an adjusted net loss of $0.43 per share.

Now what

While there have been higher premiums in the recent history of healthcare industry buyouts, this one is fairly generous given Intersect ENT’s habitual bottom-line losses. Investors should unhesitatingly vote in favor of this deal.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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