HeartWare International Inc. has announced it is backing out of a $929 million dollar purchase of Israeli company Valtech Cardio to concentrate on its core ventricular assist device business.
The company with 585 employees had announced the purchase of the cardiology implant maker in September, when its shares were trading at a high of $68. However, HeartWare shares have since dropped below $40. President and CEO Doug Godshall cited “a different set of circumstances than when we first entered into the agreement” as the reason for terminating the takeover, alluding to both the stock prices and activist investor Engaged Capital, LLC that had been pushing for the company to concentrate on its core product.
“By stepping away from the acquisition, all of our resources will be dedicated to strengthening our existing business to put the company in the best position to take advantage of the significant opportunities within our ventricular assist device (VAD) portfolio,” he said in a release. “We recognize from our discussions with shareholders over the past several weeks that they, too, share our enthusiasm for the strength of our core VAD franchise, and we look forward to realizing this value together.”
As a result of dropping the acquisition, HeartWare has come to an agreement with Engaged Capital that will have the two organizations jointly select an independent director for HeartWare’s board. HeartWare will also establish a business strategy committee, consisting of five directors, including the newly appointed director, the company announced.
As part of the agreement, Engaged Capital has agreed to withdraw its previously nominated slate of directors for election at the annual meeting.
“We believe HeartWare’s VAD franchise is significantly undervalued and that additional objective, financial perspectives represented on the Board can help support HeartWare’s efforts to drive growth and enhance shareholder value,” Glenn W. Welling, principal and CIO of Engaged Capital, said in a statement.
As a result of the termination of the acquisition, HeartWare will make a $30 million loan to Valtech in the form of a convertible promissory note.
