NEW YORK (TheStreet) -- Shares of Thoratec (THOR) were gaining 9.2% to $62.88 on heavy trading volume Wednesday following the announcement that St. Jude Medical (STJ) will acquire the medical instruments company for $3.4 billion in cash.

St. Jude offered to acquire Thoratec for $63.50 a share, which represents about a 10% premium over the company's Tuesday closing price.

As part of the agreement Thoratec has until August 20 to seek other takeover offers. St. Jude must pay a $30 million breakup fee if the company is able to find a better deal before the deadline.

"By combining the capabilities and leading technologies of both companies, we will be able to expand access, reduce costs and advance heart failure therapies on a global basis," Thoratec President and CEO S. Keith Grossman said.

About 4.8 million shares of Thoratec were traded by 9:39 a.m. Wednesday, well above the company's average trading volume of about 673,000 shares a day.

TheStreet Ratings team rates THORATEC CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate THORATEC CORP (THOR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • THOR 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 4.65, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 97.28% to $34.38 million when compared to the same quarter last year. In addition, THORATEC CORP has also vastly surpassed the industry average cash flow growth rate of 12.46%.
  • Compared to its closing price of one year ago, THOR's share price has jumped by 41.80%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 40.9% when compared to the same quarter one year ago, falling from $18.24 million to $10.78 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Health Care Equipment & Supplies industry and the overall market, THORATEC CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: THOR Ratings Report