Sorin S.p.A. (Sorin), a global medical device company and a leader in the treatment of cardiovascular diseases, and Cyberonics Inc., a medical device company with core expertise in neuromodulation, announced their merger plan to create a new global leader in medical technologies with a combined equity value of approximately $2.7 billion (€2.4 billion) based on the closing price of Sorin and Cyberonics shares on 25 February.

The proposed transaction has been unanimously approved by the boards of directors of both companies. Under the terms of the transaction, Sorin and Cyberonics will combine under a newly formed holding company, "NewCo", which the parties will name prior to closing. Each Cyberonics stockholder will receive one ordinary share of NewCo for every share of Cyberonics owned. Each Sorin shareholder will receive a fixed ratio of 0.0472 ordinary shares of NewCo for every Sorin share owned. Following completion of the transaction, assuming no withdrawal rights under Italian law are exercised by Sorin shareholders with respect to the merger, Sorin shareholders will own approximately 46 per cent of NewCo, and Cyberonics shareholders will own approximately 54 per cent, on a fully diluted basis.

The proposed transaction will bring together global leaders in cardiac surgery and neuromodulation, and the combined company will also be a major player in cardiac rhythm management, especially in Europe and Japan. NewCo will have several promising opportunities focused on multi-billion dollar markets, including complementary research programs addressing heart failure, with an initial commercial launch in Europe anticipated in the coming weeks. Both companies bring minority equity investments that are complementary in different forms of sleep apnea. Sorin, in addition, has opportunities that address mitral valve regurgitation.

Andre-Michel Ballester, chief executive officer of Sorin, will serve as chief executive officer of NewCo and Dan Moore, chief executive officer of Cyberonics, will become non-executive chairman.

Commenting on the announcement, Andre-Michel Ballester said:     "I am delighted to announce this transformational merger between Sorin and Cyberonics, which we expect to create significant value for shareholders. As one company we will be able to leverage our combined strengths, capture new opportunities and create new solutions to benefit patients and healthcare professionals alike. 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."

Dan Moore said: "This transformational transaction maximizes both companies' strengths and leadership positions for the benefit of patients and our shareholders. Sorin is an ideal partner, given its heart failure programs and the ability to combine Vagus Nerve Stimulation with cardiac rhythm management technology. Sorin's well-established international operations are expected to accelerate our epilepsy growth strategy by enabling us to reach a larger number of potential new patients in the underpenetrated markets outside the US while integrating Sorin's technology expertise into future neuromodulation products. While each company has a strong track record of execution on its own, the geographic diversification, benefits of scale and strong financial profile of the combined company will create tremendous new opportunities to drive growth and build significant shareholder value."

The proposed transaction will create a global leader in the large and growing markets for cardiac surgery and neuromodulation and a leading innovator in cardiac rhythm management with a diversified product portfolio, leveraging product technologies and complementary marketing capabilities. The potential combination of product development, clinical and regulatory expertise will accelerate time to market across worldwide geographies and will leverage the combined group's extensive relationships with healthcare professionals globally, as well as patient education and awareness initiatives.

In particular NewCo will have several exciting opportunities focused on three multi-billion dollar product categories: heart failure, sleep apnea and percutaneous mitral valve. In heart failure, NewCo will have promising products with European market entry starting as early as 2015. Cyberonics recently received CE Mark approval of its Vitaria device delivering autonomic regulation therapy for the treatment of chronic heart failure and will commence a limited market launch in Europe in the coming weeks. Recently, Sorin announced the first successful implants of its Equilia Vagus Nerve Stimulation system for heart failure patients. NewCo is expected to benefit from the developing market for active implantable treatments for sleep apnea with investments aimed at the under-addressed obstructive sleep apnea (OSA) market, and also in central sleep apnea (CSA), recently launched in selected European countries. In addition, NewCo is expected to have new percutaneous mitral valve replacement/repair products with estimated initial market entry in 2017.

The combined company will have pro-forma revenues of approximately $1.3 billion, and the merger is expected to drive significant cash flow generation. The proposed transaction is expected to be cash EPS3 accretive to all shareholders from 2016.

The merger presents the opportunity to achieve significant revenue and cost synergies. Approximately $80 million of annual pre-tax synergies are expected to be delivered by the end of calendar year 2018 as the combined company leverages an efficient corporate structure and a global operational platform with the commercial, regulatory, supply chain, R&D and manufacturing capabilities to drive growth and efficiencies.

NewCo's strong cash flow generation and robust balance sheet with essentially no net debt will enable investment in new medical technology solutions for patients and customers and provide the ability to fund future growth opportunities. NewCo will have a sound financial profile with a larger market capitalization and the opportunity to attract a wider, global investor base.

Cyberonics and Sorin currently have different fiscal year ends and report under different accounting standards and currencies. After the closing of the transaction, NewCo is expected to report on a calendar year basis, with reporting in US$ and on US Generally Accepted Accounting Principles (GAAP).

Upon closing of the transaction, the Board of Directors of NewCo will be equally balanced between Sorin and Cyberonics, with four directors designated by Sorin and four by Cyberonics. One additional Board member will be jointly selected.

NewCo will operate as three business units: Cardiac Surgery, Cardiac Rhythm Management and Neuromodulation, with operating headquarters in Mirandola (Italy), Clamart (France) and Houston (U.S.) respectively. The combined company will have a strategic presence in over 100 countries on five continents around the world with approximately 4,500 employees.

Under the terms of the proposed transaction, Cyberonics and Sorin will combine under NewCo, which will be domiciled in the UK and will apply for dual-listing on NASDAQ and the London Stock Exchange (LSE). The all-stock transaction will be implemented through two mergers, which will occur in immediate succession: first, Sorin will be merged with and into NewCo by means of an EU cross-border merger, with NewCo as the surviving company in the merger, and immediately thereafter, a wholly owned subsidiary of NewCo will be merged with and into Cyberonics, with Cyberonics surviving the merger as a wholly owned subsidiary of NewCo. At the closing of the transaction, Cyberonics shares will cease trading on NASDAQ and Sorin shares will cease trading on the Borsa Italiana (MTA).

For Sorin shareholders, the exchange ratio implies a per share valuation of Sorin that represents approximately 14.2 per cent premium to Sorin's closing share price on 25 February, 2015, the last trading day prior to the parties announcing the agreement.


The merger will trigger the withdrawal right, which can be exercised by any Sorin shareholder who does not attend the shareholders' meeting called to approve the merger of Sorin into Newco, or abstains or votes against the merger. There is no cap linked to the exercise of withdrawal rights.


The transaction is currently expected to be completed by the end of the third calendar quarter of 2015 and is subject to approval by both Sorin and Cyberonics' shareholders, the receipt of required antitrust and regulatory clearances, and other customary closing conditions. Where required by local law, including in France, Sorin will initiate a consultation on the proposed transaction with its relevant works councils, trade unions and other employee organizations. Once the works council consultation process in France is completed, the parties anticipate entering into a definitive agreement.

Mittel S.p.A. and Equinox Two S.C.A., which control Bios S.p.A. and Tower 6 Bis S.a.r.l., holding in total 25.6 per cent of Sorin's outstanding shares, have entered into a support agreement with Cyberonics pursuant to which they have agreed to vote in favor of the transaction and not to sell their shares until the closing of the transaction. Mittel S.p.A. and Equinox Two S.c.a. are expected to hold approximately 11.5 per cent of NewCo's ordinary shares following the closing of the proposed transaction. In addition, the Chairman and CEO of each of Sorin and Cyberonics have also entered into support agreements in favor of the proposed transaction.

The above undertakings will be disclosed to the public pursuant to article 122 of Legislative Decree no. 58 of 24 February, 1998 and its implementing regulations.


In connection with this transaction, Rothschild is serving as financial advisor to Sorin, and Latham & Watkins is serving as its primary legal advisor. Piper Jaffray is serving as financial advisor to Cyberonics, and Sullivan & Cromwell is serving as its legal advisor, with Legance advising Cyberonics on Italian law matters.