said Wednesday that it would acquire
, a medical device maker, in an all-stock deal valued at $4.2 billion.
Under the terms of the deal, which was announced after the stock market closed, Tyco, a diversified manufacturer, would exchange stock valued at $47.50 a share for each Mallinckrodt share. That represents a 50% premium over Mallinckrodt's closing price Wednesday, which was up 2 5/8 at 31 3/8. Mallinckrodt shares surged in after-hours trading, jumping 15 1/2, or 55%, to 44 5/8, according to
Tyco's shares fell 1 in regular trading, closing at 46 5/16; the stock fell another 1 1/16 in after-hours trading, to 45 1/4.
"Mallinckrodt provides an excellent strategic fit with Tyco Healthcare, with complementary products, services and geographic reach, as well as platforms for future growth," L. Dennis Kozlowski, Tyco's chairman and chief executive, said in a statement. The acquisition will immediately add to Tyco's earnings, Kozlowski added.
Tyco, which is based in Bermuda, makes everything from electronics components to fire-protection systems to disposable medical supplies. In the last six years, Tyco has acquired more than 120 companies for more than $30 billion.
The deal to acquire Mallinckrodt is in line with Tyco's overall acquisition strategy over the last several years, said Edward Wheeler, analyst with
Buckingham Research Group
in New York. Mallinckrodt has been underperforming and its stock price has been lower, and Tyco has demonstrated that it "knows how to add value" to these kinds of companies, Wheeler said.
"On paper, it looks good," said Wheeler, who noted that in adding Mallinckrodt, Tyco will gain entree to the pharmaceutical manufacturing market. Pharmaceuticals account for roughly 25% of Mallinckrodt's sales. Wheeler rates Tyco a buy and his firm has done some underwriting work for the company.
St. Louis-based Mallinckrodt manufactures medical-imaging products and bulk drugs. It is one of only two companies licensed to bring opium and its derivatives, the ingredients of choice for pain-relief medications, into the U.S.
For the quarter ended March 31, Mallinckrodt posted net income of $57.9 million on revenue of $659 million.
The deal comes two days after Tyco
said it had amended its earnings for fiscal 1999 and the first quarter of fiscal 2000 following a review by
Securities and Exchange Commission
The company said it will raise its earnings per share by 2 cents for fiscal 1999 and decrease earnings per share for the first quarter of fiscal 2000 by the same amount.
Tyco's acquisition of Mallinckrodt, which will be accounted for as a purchase, is contingent on regulatory review and shareholder approval. The boards of both companies have already approved the deal.