Endologix off more than 25% on planned $211M merger with TriVascular

Endologix CEO John McDermott

A proposed merger of Endologix ($ELGX) and TriVascular Technologies is designed to create an abdominal aortic aneurysm powerhouse. But Wall Street wasn't convinced, causing Endologix shares to plunge by more than 25% in early trading.

The deal is a stock and cash transaction; it valued each TriVascular share at $9.10 based on Endologix's closing Oct. 23 share price of $13.81. That gives it a deal value of about $211 million.

But even if some investors object, Endologix already has agreements with TriVascular investors that hold roughly one-third of the company. If the deal goes through, Endologix shareholders would own about 84% of the resulting company with TriVascular shareholders having about 16%. The deal is slated to close in January 2016.

"This merger enhances the near and long-term growth potential of our business by bringing together two of the most innovative companies in the field of endovascular abdominal aortic aneurysm (AAA) treatment," said Endologix chairman and CEO John McDermott in a statement. "We believe the combined company will be uniquely positioned to provide physicians with three complementary products to treat a wide range of patient anatomies." The devices include the AFX, Ovation and Nellix systems.

The combined company would also have a clinical device pipeline, including the AFX2 and Ovation iX systems--both of which are slated to hit the market in the first quarter of 2016. It also plans to launch Nellix in the U.S. after an anticipated PMA approval that's anticipated by the end of 2016.

"Endologix and TriVascular are two entrepreneurial companies that share a strong strategic focus on providing physicians with innovative and less invasive technologies to make endovascular aortic repair safer and available to more patients, including the significant number of patients with challenging aortoiliac anatomy," said TriVascular President and CEO Christopher Chavez.

The combined company is expected to realize more than $30 million in synergies in 2017, with the deal being accretive to earnings in 2018, McDermott said on an Oct. 26 earnings call that addressed the merger. It's expected to grow sales in the mid-teens in 2016, with 20% growth in 2017 following the launch of Nellix in the U.S.

TriVascular shareholders embraced the deal, sending its shares up 35% to about $6.80, as Endologix shareholders recoiled, driving it down 28% to around $10.

- here is the announcement
- and here is the Oct. 26 earnings call transcript

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