ev3 and FoxHollow to Merge in Transaction Creating a Global Leader in Endovascular Device Market FoxHollow Stockholders to Receive $25.92 Per Share in Cash and ev3 Stock Transaction Anticipated to Offer Significant Revenue Synergies and Enhanced Profitability for the New Company PLYMOUTH, Minn. & REDWOOD CITY, Calif., Jul 22, 2007 (BUSINESS WIRE) -- ev3 Inc. (NASDAQ: EVVV) and FoxHollow Technologies, Inc. (NASDAQ: FOXH) today announced a definitive agreement by which ev3 and FoxHollow will merge in a $780 million cash and stock transaction. The proposed merger would create a new company with a market capitalization of approximately $1.7 billion, based on the companies' closing stock prices on July 20, 2007. This strategic combination, approved by the Boards of Directors of both companies, will create a global leader in endovascular devices with net sales in 2008 projected to be in the range of $585 to $615 million. The combination also will provide the opportunity for the new company to achieve greater critical mass with significant cost and revenue synergies. Under the terms of the merger agreement, FoxHollow stockholders will receive 1.45 shares of ev3 common stock plus $2.75 in cash for each share of FoxHollow common stock they own. Based on the companies' closing stock prices on July 20, 2007, this represents $25.92 per share of consideration to be received by FoxHollow stockholders, or a total consideration of approximately $780 million, and a premium of over 20 percent to the 30-day average trading price for FoxHollow's shares. Upon completion of the transaction, FoxHollow stockholders would own approximately 41 percent of the combined company, and ev3 stockholders would own approximately 59 percent.
ev3 and FoxHollow's combined scale will create an organization that possesses one of the largest U.S. distribution footprints in endovascular devices with one of the broadest and most technologically advanced product offerings. Upon completion of the transaction, the company's combined product portfolio will include a broad spectrum of products to treat vascular disease in both the peripheral and neurovascular markets, including atherectomy and thrombectomy, PTA balloons, stents, embolic protection devices, infusion catheters/wires, embolic coils and liquid embolics. The combined company will have direct operations or independent distributor presence in over 60 countries with more than 1,500 employees.
Jim Corbett, President and Chief Executive Officer of ev3, commented, "This combination brings together two organizations that share a deep commitment to advancing the treatment of peripheral and neurovascular disease. By combining our respective strengths, we believe we can develop innovative technologies to address the needs of endovascular specialists and their patients, while also providing significant growth opportunities for employees and shareholders."
"We know John Simpson well and look forward to working with the FoxHollow team to further advance the company's innovative technology," Mr. Corbett continued. "In his role as Chief Scientist, John will work closely with our three business groups to guide technology development."
"This is an exciting day for FoxHollow as we establish an even greater leadership position in the endovascular market," said Dr. John Simpson, Founder and Chief Executive Officer of FoxHollow. "The combined company will enhance our aggressive market building activities and accelerate our clinical and research and development initiatives in this market. By combining our strengths, we will continue to provide our customers with innovative endovascular products for patients with vascular disease."
Key Benefits of the Transaction
Greater critical mass and revenue-generating opportunities. Upon the completion of the transaction, the combined company will possess a comprehensive portfolio of peripheral vascular and neurovascular products to meet a vast majority of the needs of endovascular specialists. A combined ev3-FoxHollow will bring together two experienced sales forces with well-established physician relationships. Leveraging the combined company's expanded product portfolio, the unified sales organization will be positioned to expand revenues through numerous cross-selling opportunities. In addition, ev3's strong international presence and sales infrastructure will be utilized to increase penetration of FoxHollow's SilverHawk(TM) technology outside the United States.
Significant cost savings and enhanced profitability. The transaction is expected to generate approximate annual cost savings in excess of $40 million from enhanced efficiency of sales and marketing efforts, increased purchasing scale, sourcing and logistics efficiencies and shared administrative services. As a result, the combined company expects to generate adjusted earnings per share of $0.60 to $0.70 in 2008 and $0.90 to $1.10 in 2009 as further described in the "Guidance" section below.
Focused and expanded research and development and clinical trial programs. The operating income of a combined ev3 and FoxHollow will be significantly enhanced, creating added resources to fund ongoing, focused R&D programs, future technology innovations and clinical studies. Additionally, the combined company will be better positioned to grow through external initiatives. ev3 intends to maintain FoxHollow's existing relationship with Merck & Co., Inc., which will further enhance the combined company's opportunity to develop innovative technologies for the endovascular treatment of peripheral vascular and neurovascular disease.
Guidance
ev3 expects calendar year 2008 net sales of the combined company to be in the range of $585 to $615 million. ev3 expects adjusted earnings per share for 2008 to be in the range of $0.60 to $0.70, excluding transaction related expenses. This guidance assumes that only a portion of the anticipated revenue and cost synergies will be realized during 2008. For 2009, ev3 expects net sales of the combined company to be in the range of $700 to $750 million and reported earnings per share to be in the range of $0.90 to $1.10. Excluding all amortization expense, adjusted earnings per share in both 2008 and 2009 would be approximately $0.25 higher than the guidance provided above. The guidance above is based on pro forma, post merger, shares outstanding of approximately 107 million.
ev3's guidance currently anticipates no provision for U.S. Federal or State income taxes, and an approximately $1.0 million provision for foreign taxes. As a result of ev3's existing $468.8 million in U.S. and foreign gross net operating loss carryforwards ("NOLs"), the company does not expect to pay U.S. Federal income taxes in 2008 or the foreseeable future. In the event that ev3 deems it necessary to record a provision for U.S. Federal taxes, the company expects that the tax rate would be approximately 35 percent.
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