, seeking to expand its medical technology business, agreed to buy catheter maker
in a $2 billion deal.
Teleflex, a diversified manufacturer, will pay $45.50 a share for Arrow. The price represents a 20% premium over Arrow's closing price Friday.
Shares of Arrow were soaring $6.41, or 17%, to $44.20 in early trading Monday. Teleflex shares were adding $3.30, or 3.9%, to $88.60.
"With the execution of this merger agreement, Teleflex is redefining its portfolio and its Medical Segment by creating a $1.4 billion medical technology business that will be the largest source of the company's revenues and profitability," said Jeffrey Black, chairman and CEO of Teleflex.
Arrow makes disposable catheter products for critical care, specialty medicine and surgeries. Teleflex expects the deal to give its medical segment revenue of about $1.5 billion by 2008, and be "meaningfully accretive" to earnings by 2009.
In conjunction with the deal, Teleflex has hired Goldman Sachs to help it explore strategic alternatives for its commercial segment.
"We see significant opportunity to continue to increase overall operating margins, reduce cyclicality and position Teleflex for future growth," Black said. "While we remain committed to diversification, we are continuing to redefine our portfolio to focus on those businesses that best provide future value for our customers and shareholders."
Teleflex reiterated that it expects earnings of $4.05 to $4.25 a share for 2007 before one-time items. The company, however, expects the Arrow purchase to hurt its bottom line for the year.