8 MN Public Companies Bought in 2010

Eight of the state's 100 largest public companies were sold this year, representing a substantial increase from last year when just two were acquired.

Eight of the state's 100 largest public companies were acquired this year-including giants PepsiAmericas, Inc., ADC Telecommunications, Inc., and EV3, Inc.

The number of sales represents a significant increase in local acquisitions as compared to 2009, when only two Minnesota public companies were bought.

The largest deal of the year involving a Minnesota-based public company was the sale of Minneapolis-based PepsiAmericas to Purchase, New York-based PepsiCo, Inc., for more than $3 billion. The deal was announced in late 2009 but didn't close until early 2010. Based on revenue, Minneapolis-based PepsiAmericas was one of the 20-largest public companies in the state.

Three other public companies-EV3, Inc., AGA Medical Holdings, Inc., and ADC Telecommunications, Inc.-were also sold in billion-dollar deals this year.

Plymouth-based EV3 was sold in June to Dublin, Ireland-based Covidien, PLC, for $2.6 billion. At the time of the deal, EV3's president and CEO Robert Palmisano said that the acquisition would enable the company to advance its broad platform of peripheral vascular and neurovascular technologies.

Plymouth-based AGA Medical, which just went public in late 2009, was acquired by Little Canada-based medical company St. Jude Medical for $1.3 billion. When the companies announced the deal in October, they said that the combination of their product lines will create “a clear leader in the structural heart market.” Specifically, the companies said that the acquisition would make St. Jude the only company with devices and offerings across all major structural heart categories-including structural heart defects, left atrial appendage occlusion, transcatheter aortic valve implantation, and percutaneous mitral valve repair.

Eden Prairie-based ADC Telecommunications announced in July that it agreed to be acquired by Switzerland-based Tyco Electronics for $1.25 billion. When the acquisition was announced, Tyco said that it expected the acquisition to be accretive to its earnings in the first year and that the company would likely reach its target operating margin of 15 percent in the third year after the acquisition.

Shortly after the announcement, there was some backlash when a lawsuit was filed by a shareholder who claimed that the purchase price was inadequate. Despite the suit, the deal closed in early December.

Several other smaller public-company deals also occurred in 2010, including:

  • Plymouth-based ATS Medical, Inc., was purchased by Fridley-based Medtronic, Inc., for $370 million in August.
  • Eden Prairie-based Virtual Radiologic Corporation was purchased by Providence, Rhode Island-based private-equity firm Providence Equity Partners in May for about $294 million.
  • Bloomington-based Plato Learning, Inc., was purchased by Chicago-based Thoma Bravo, LLC, in May for $143 million.
  • Bloomington-based Health Fitness Corporation was purchased by Lake Forest, Illinois-based Trustmark Mutual Holding Company for $97 million in January.

In addition to the eight deals that closed this year, Eden Prairie-based Compellent Technologies announced in December that it agreed to be acquired by Round Rock, Texas-based Dell, Inc., for $960 million. The deal is expected to close in early 2011. Phil Soran-Compellent's president, CEO, and chairman-said in a news release that the merger is “the next logical step in our goal to scale our products, channel, and team worldwide.”

John E. Brower-a principal at Minneapolis-based law firm Gray Plant Mooty who specializes in general business and transactional law-said that the surplus of public company acquisitions in 2010 is a clear sign that companies are rebounding from the recession after tightening their belts in 2009.

Brower told Twin Cities Business in late December that companies, both public and private, were so uncertain about the economy in 2009 that they were “hunkering down” and focusing on controlling costs so that they could survive.

“It's hard to do an acquisition when you just had a round of layoffs,” said Brower, whose focus is on mergers and acquisitions.

That mentality has changed in 2010, according to Brower. Brower said that there are a fair number public companies that now have a lot of cash on hand, which makes it possible to resume acquisitions.

That excess cash may be attributed to several possible factors, including savings from previous cuts, an increase in business due to the slight rebound in the economy, and conservatism.

Looking into 2011, Brower expects to see acquisition activity continue at a similar pace to 2010 or to increase.

“The companies that are doing well are probably starting to feel pretty confident that they can continue to do well, which in turn leads them to be more willing to spend cash for things like acquisitions.”

Along with the surplus in acquisitions of Minnesota-based public companies, the state lost another large company, Moneygram, Inc. After a tumultuous year in 2009, MoneyGram announced in September that it would move its headquarters to Dallas from its longtime home in St. Louis Park. The move, which did not result in any layoffs, was fueled by potential economic gains and the fact that the company was already “well rooted” in Texas.

Although the biggest deal of the year did not involve a Minnesota-based public company, it did have dramatic impact on the state's telecommunications industry. Denver-based Qwest Communications International, Inc.-which employs more than 3,300 in Minnesota-announced in April that it had agreed to be sold to Monroe, Louisiana-based CenturyLink, Inc., in a stock swap worth approximately $10.6 billion.

Shareholders from both companies approved the sale in August and the agreement now must be approved by the U.S. Department of Justice and a number of regulatory agencies. Once the merger is completed-which is expected to occur by mid-2011-Qwest will become a wholly owned subsidiary of CenturyLink.