Medtronic ($MDT) has wrapped up a deal that gives it a 26.4% stake in China's LifeTech Scientific, putting up $66.2 million to buy into the country's growing market for cardiovascular devices.
The Minnesota device giant paid $46.5 million for a 19% equity interest in the LifeTech and bought a $19.6 million convertible note for an additional 7.4%, giving Medtronic the right to sell LifeTech products around the globe and an opportunity to buy more of the company depending on sales and developmental milestones.
Medtronic has stressed the importance of entering China with a partner, not barging in assuming what works abroad will cut it in the swelling market, and the LifeTech deal gives the company just what it needs to capitalize on China's aging patient population, Vascular President Mike Coyle has said.
The same thinking motivated Medtronic's $816 million acquisition of Kanghui Holdings last year, a deal that brings Medtronic one of China's largest trauma, spine and joint-reconstruction device manufacturers. CEO Omar Ishrak has long said the company wants to get 20% of its revenue from emerging markets by 2016, and buying big into China is a step in that direction.
China is rapidly revamping its healthcare system, and it boasts a huge and aging population in need of orthopedic and vascular products. Add that to the fact that the country's incoming government has emphasized the importance of in-country R&D, and it's not hard to see why devicemakers like Medtronic, Stryker ($SYK) and Johnson & Johnson ($JNJ) have been buying up Chinese firms at hefty price tags over the past year.
- read Medtronic's statement
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