St. Jude's Bid for ANS Opens Doors
Diversification through acquisition is not a new strategy for the device industry. But St. Jude Medical (St. Paul, MN) broke a few molds when it acquired Advanced Neuromodulation Systems (ANS) in October 2005. One of the leaders in the cardio market, St. Jude surprised many people with its bid for Plano, TX–based ANS. For a company whose core business is cardiovascular, neurostimulation does not immediately seem like an obvious way to go.
Perhaps not obvious, but certainly advantageous, says Thomas Gunderson, managing director and senior research analyst with Piper Jaffray (Minneapolis), the firm that represented ANS in the acquisition. “St. Jude has made no secret of the fact that it wants to grow and become a larger company,” says Gunderson.
Gunderson says St. Jude has taken some major steps this year to do so. “It went from being a sort of one-trick pony to a leader in [cardiac rhythm management], and now it has demonstrated that it has visions of being an even bigger player in the market.”
ANS is already a strong company with a good reputation. Its Axxess neurostimulation leads won a gold award in the 2005 Medical Design Excellence Awards. But even a successful company has its limitations. “Without exception, small companies have difficulty moving into the world market,” Gunderson explains.
Small companies do not have the infrastructure or the resources to make their presence felt globally. Usually, Gunderson says, these companies have to strike a compromise and do only a little in the world market, or concentrate solely on the United States. “The merger provides ANS with the resources and infrastructure to have both.” Before the acquisition, ANS had a presence in about 30 countries. St. Jude, by contrast, sells products in about 130 countries.
CEO Chavez will continue to run ANS as a division of St. Jude Medical.
In 2006, the two companies will explore how to expand ANS's global presence, says Angela Craig, St. Jude's corporate relations vice president.
Technology sharing also played a role in the merger. “St. Jude is manufacturing a good impulse generator, and as ANS grows, it will probably benefit from that expertise,” says Gunderson. Craig points out that both companies have similar technologies, as well as “a shared culture of innovation.”
The assimilation of ANS into St. Jude will be unorthodox by device industry standards. “It was part of the deal that [ANS CEO] Chris Chavez and his team would remain to operate ANS as a division of St. Jude Medical,” says Craig.
“ANS is a freestanding, fully functional company,” Gunderson says. “And it seems that it is going to stay that way, but still have the increased resources. That is fairly unusual for the M&A business.”
The tender offer, a method that was done for expediency, was finalized in November 2005.
St. Jude Medical has a strong history of acquisitions, says Craig. She indicates that the company will continue with that plan and continue strengthening its core technologies, such as atrial fibrillation. —Heather Thompson