The Sorin Group's shares plummeted by 12% over the weekend on the Milan Stock Exchange after the Italian government sought to enjoin its merger with Houston's Cyberonics ($CYBX). The companies said they will mount a legal challenge to the Italian State's Attorney allegations.
The State's Attorney believes the proposed merger is meant to protect Sorin from from environmental litigation against Sorin's previous parent company, SNIA S.p.A., the companies said in a release.
"After reviewing the allegation, Sorin and Cyberonics believe the Italian State's Attorney fundamentally misunderstands and misconstrues the structure and goals of the Transaction, as well as Italian and European laws and regulations governing these types of transactions," the companies say, adding that they indent to contest the claim in the Civil Court of Milan.
Sorin CEO André-Michel Ballester told Bloomberg he still expects the all-stock transaction to close by September. "We're working to ensure this technicality doesn't slow down our plans," he said in the article. "Our lawyers are confident that we will convince the judge to lift this claim and let the process move forward."
"Our base case remains that the deal will proceed as planned, however, there is now a heightened likelihood that Sorin will look to settle the ongoing claim with the state to facilitate a speedy conclusion," analysts at Berenberg Bank, wrote in a research note, according to Bloomberg. "Even considering this scenario, we believe it is now possible, if not likely, that deal closure would be delayed a few months."
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| An illustration of the VNS Therapy System--Courtesy of Cyberonics |
Ballester will be the CEO of the combined company, which will be worth about $2.7 billion, have annual revenues of about $1.3 billion and employ about 4,500 people in more than 100 countries. The new holding company, LivaNova PLC, will be based in the U.K., where the corporate tax rate is lower than the U.S.
The duo will aim to leverage their combined expertise if and when the transaction closes. Sorin focuses on artificial heart valves implanted via open heart surgery, as well as cardiac rhythm devices like pacemakers and defibrillators. Neuromodulation specialist Cyberonics makes the FDA-approved Vagus Nerve Therapy System to treat epilepsy and depression, and the CE-marked Vitaria System, which deploys vagus nerve stimulation to treat heart failure.
- read the release (PDF)
- here's Bloomberg's take
Special Report: So far, just 4 companies have a shot at winning the neuromodulation race - Cyberonics - Small, growing and all about neuromodulation