NEW YORK (TheStreet) -- Cyberonics (CYBX) shares closed trading up 10.15% to $66.50 on Thursday after the implantable medical device manufacturer announced plans to merge with Italy's Sorin SpA (SORJF) in a tax inversion deal.
The merger values the two companies at about $2.7 billion, as the deal, which is expected to close in September, brings together two companies with a combined annual sales of about $1.3 billion.
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The company announced its plans for the merger following the release of its third quarter earnings results before the opening bell today.
Cyberonics reported quarterly net income of $16.5 million, or a profit of 59 cents per diluted share on an adjusted basis, on revenue of $72.1 million. Analysts on average were expecting the company to report earnings of 57 cents per diluted share on revenue of $72.1 million.
Sorin shareholders are receiving a 14.2% premium to their stock's Wednesday closing price as part of the deal.
"This is particularly exciting for our employees, who will be able to share technical expertise and innovate faster, ensuring that we serve our customers by remaining at the forefront of new product development which continues to be the foundation of our success," said Sorin CEO André-Michel Ballester.
"Put aside the irony of two companies from what would have been called soon-to-fail states making big deals here, this is a deal that creates a new medical device colossus in a very hot space. So UIL roars up 20% on the bid and Cyberonics rallies 16% on the merger," said Jim Cramer of the merger on today's Real Money Pro blog, 'Hey, I Tried To Be Negative. Honest.'.
TheStreet has further coverage of the merger here.
TheStreet Ratings team rates CYBERONICS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate CYBERONICS INC (CYBX) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CYBX's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CYBX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.54, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, CYBERONICS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CYBERONICS INC is currently very high, coming in at 92.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.52% is above that of the industry average.
- Net operating cash flow has significantly increased by 94.24% to $24.53 million when compared to the same quarter last year. In addition, CYBERONICS INC has also vastly surpassed the industry average cash flow growth rate of -21.80%.
- You can view the full analysis from the report here: CYBX Ratings Report