Medtronic 2010 Annual Report Download - page 69

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Medtronic, Inc.
Company estimated total costs to complete of approximately
$80 million at the time of acquisition. The remaining costs to
complete was approximately $58 million at April 30, 2010. The
establishment of goodwill was primarily due to the expected
revenue growth that is attributable to increased market
penetration from future products and customers. The goodwill is
not deductible for tax purposes.
In connection with the acquisition, the Company began to
assess and formulate a plan for the elimination of duplicative
positions and the termination of certain contractual obligations.
The purchase accounting liabilities recorded in connection with
these activities was approximately $39 million. As of April 30,
2010, these purchase accounting liabilities have been fully utilized.
Ablation Frontiers, Inc. In February 2009, the Company acquired
privately held Ablation Frontiers, Inc. (Ablation Frontiers). Under
the terms of the agreement announced in January 2009, the
transaction included an initial up-front payment of $225 million
plus potential additional payments contingent upon achievement
of certain clinical and revenue milestones. Total consideration for
the transaction was approximately $235 million including the
assumption and settlement of existing Ablation Frontiers debt
and payment of direct acquisition costs. Ablation Frontiers develops
radio frequency (RF) ablation solutions for treatment of atrial
fibrillation. Ablation Frontiers’ system of ablation catheters and RF
generator is currently approved in certain markets outside the U.S.
The Company has accounted for the acquisition of Ablation
Frontiers as a business combination. Under business combination
accounting, the assets and liabilities of Ablation Frontiers were
recorded as of the acquisition date, at their respective fair values,
and consolidated with the Company. The purchase price allocation is
based on estimates of the fair value of assets acquired and liabilities
assumed. The purchase price has been allocated as follows:
(in millions)
Current assets $ 7
Property, plant and equipment 1
IPR&D 97
Other intangible assets 63
Goodwill 107
Total assets acquired 275
Current liabilities 19
Long-term deferred tax liabilities 21
Total liabilities assumed 40
Net assets acquired $ 235
In connection with the acquisition of Ablation Frontiers, the
Company acquired $63 million of technology-based intangible
assets with an estimated useful life of 11 years. Also as part of the
acquisition, the Company recognized, in total, $97 million and
$107 million for IPR&D and goodwill, respectively. The IPR&D was
expensed on the date of acquisition and primarily relates to the
future launch of Ablation Frontiers’ system of ablation catheters
and RF generator into the U.S. market. For purposes of valuing
the acquired IPR&D, the Company estimated total costs to
complete of approximately $3 million. The establishment of
goodwill was primarily due to the expected revenue growth that
is attributable to increased market penetration from future
products and customers. The goodwill is not deductible for
tax purposes.
CryoCath Technologies Inc. In November 2008, the Company
acquired all of the outstanding stock of CryoCath Technologies
Inc. (CryoCath). Under the terms of the agreement announced in
September 2008, CryoCath shareholders received $8.75 Canadian
dollars per share in cash for each share of CryoCath common
stock that they owned. Total consideration for the transaction, net
of cash acquired, was approximately $352 million U.S. dollars
including the purchase of outstanding CryoCath common stock,
the assumption and settlement of existing CryoCath debt and
payment of direct acquisition costs. CryoCath develops cryotherapy
products to treat cardiac arrhythmias. CryoCath’s Arctic Front
product is a minimally invasive cryo-balloon catheter designed
specifically to treat atrial fibrillation and is currently approved in
certain markets outside the U.S.
The Company has accounted for the acquisition of CryoCath as
a business combination. Under business combination accounting,
the assets and liabilities of CryoCath were recorded as of the
acquisition date, at their respective fair values, and consolidated
with the Company. The purchase price allocation is based on
estimates of the fair value of assets acquired and liabilities
assumed. The purchase price has been allocated as follows:
(in millions)
Current assets $ 24
Property, plant and equipment 2
IPR&D 72
Other intangible assets 57
Goodwill 184
Long-term deferred tax assets 61
Total assets acquired 400
Current liabilities 30
Long-term deferred tax liabilities 15
Total liabilities assumed 45
Net assets acquired $ 355